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Fraternal groups sue county over tip jar proceeds

March 17, 1997

By GUY FLETCHER

Staff Writer

A controversy over interpretation of Washington County's tip jar gambling regulations - a conflict potentially worth hundreds of thousands of dollars a year in gaming proceeds donated to charity - has led many local fraternal organizations to sue the county.

In a suit filed in Washington County Circuit Court, 23 clubs and organizations alleged that the County Commissioners and the county Gaming Commission have "arbitrarily" assessed payments against clubs from their tip jar proceeds. The suit asks that the clubs be reimbursed an unspecified amount of money.

An attorney representing the Gaming Commission has denied the allegation.

"I think the suit has very little merit. In fact, I wouldn't hesitate to call it frivolous," said attorney William M. Schildt.

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Washington County Commissioner Ronald L. Bowers agreed, calling it "a frivolous lawsuit that deals with greed."

"I'm extremely disappointed for the sake of the community that this would be an issue at this point in time," Bowers said.

The debate, and the suit, centers on the definition of the term "gross profits."

Currently, the gaming law requires nonprofit fraternal organizations to donate 10 percent of gross tip jar profits. Half of that amount can be made directly by the clubs, in both cash and in-kind services. The other half goes to the Gaming Commission, which disburses gaming funds to nonprofit organizations and fire companies.

In July, the total required donation goes up to 15 percent. Next year, the amount will increase to 20 percent.

Club officials have argued that gross profits should be defined as the amount of money the clubs make after both payouts and the cost of the jar are subtracted.

"All we're asking is to be treated fairly," Washington County Club Association President Junior Cunningham said Monday.

"The county is making us pay on expenses which are not a profit of any kind and we think this is unfair and not allowed under the law," Cunningham said.

County officials and Schildt have maintained that the law, which was passed by the General Assembly last year, is clear in its definition that only payouts can be subtracted in determining gross profits.

A part of the gaming law reads: "In this subsection, `gross profits' means the total proceeds from the operation of a tip jar, less the amount of prizes or money winnings distributed."

"I think the meaning of gross profits is very clear," Schildt said.

"I'm looking at what they're able to keep," Bowers said, referring to the clubs. "I think that with being able to keep 80 percent that should suffice."

But the suit alleges that because the cost of the jar is paid before the "operation of the jar," the clubs should be allowed to deduct the cost before determining gross profits.

Charities would lose at least $200,000 a year under the clubs' interpretation of the law, a study by the Gaming Commission's staff found last year.

Gaming Commission Chairwoman Sue Tuckwell declined to comment on the suit, but acknowledged the controversy over gross profits.

"I know the whole issue of gross profits has been contentious, but there's still a lot of money being made (by the clubs) regardless of the definition," she said.

Gaming Commission member Paul Muldowney said the panel recently began discussions about proposing changes that would streamline the regulatory process for the clubs, including removing the "administrative nightmare" of calculating in-kind donations.

But the suit changes that, said Muldowney, who now favors keeping the existing regulations in place.

"It's best for us to act like we're being sued," he said.

County Commissioners President Gregory I. Snook said he has been out of town the last few days and wants to read the lawsuit before he comments on it.

Staff writer Ellen Lyon contributed to this story.

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