Newspaper article The Florida Times Union

FOP's Cuba Held in Racketeering Probe; Charges against Allied Veterans Organization Include Improper Use of Internet Cafe Money

Newspaper article The Florida Times Union

FOP's Cuba Held in Racketeering Probe; Charges against Allied Veterans Organization Include Improper Use of Internet Cafe Money

Article excerpt

Byline: Timothy J. Gibbons, Mary Kelli Palka & Jim Schoettler

The head of the local Fraternal Order of Police union and the commander of a St. Augustine-based veterans organization were among those caught up in a national racketeering investigation.

Union President Nelson Cuba and Jerry Bass, national commander of Allied Veterans of the World, were among those taken into custody. Also detained were Kelly Mathis, a Jacksonville attorney who represents Allied Veterans; Michael Davis, secretary for Allied; and Robbie Freitas, first vice president of the FOP.

Cuba, Freitas and Mathis were booked in Seminole County's John E. Polk Correctional Facility, according to the jail.

The union issued a statement Tuesday that said Cuba and Freitas' arrests are not tied to FOP business "but appears to be a result of their personal business relationships with Allied Veterans."

The IRS and Secret Service conducted the investigation with assistance from the Seminole County Sheriff's Office, Florida Department of Law Enforcement and sheriff's offices in Jacksonville and Volusia County.

Allegations against Allied Veterans include money laundering, using money from a nonprofit for personal gain and misrepresenting the amount donated to charities. Cuba and Freitas, both police officers, are not mentioned in a search warrant application that lays out the IRS' case to a federal judge in Oklahoma City.

Investigators applied to search 51 locations in Florida, from Yulee to Naples, according to the warrant application filed Monday in U.S. District Court in the Western District of Oklahoma. Most of the locations were current or former sites of sweepstakes centers operated by Allied Veterans.

The group operates dozens of First Coast sweepstakes centers, which have long been at the center of controversy about their legality, both locally and in Tallahassee.

The warrant application said Allied Veterans claimed it was a member of the Veterans Administration and that 70 percent to 100 percent of the profits were used for charitable purposes.

However, authorities said, the centers are actually gambling operations, with charitable purposes getting just 2 percent of the $290 million earned from 2007 to January 2012. Charities are considered to be operating effectively when they spend at least 60 percent on programs.

Instead of raising funds to benefit charities, investigators said, the primary purpose of the sweepstakes centers was to make a profit of at least $250 million for Allied, International Internet Technologies and other for-profit companies and their owners.

Investigators said the centers transferred money to Allied Management, a wholly owned subsidiary of Allied Veterans. The subsidiary then moved the money through other entities and used it for improper purchases, including buying property for former president Johnny Duncan.

Although federal law prohibits individuals from unreasonably benefiting from charities, the warrant application says Duncan received more than $1.5 million and Bass more than $250,000 from the organization. Both men also used money to purchase condos, commercial buildings and homes, including two parcels in St. Augustine. One of those properties houses Allied's headquarters at 1965 Florida 16.

Seminole County began to crack down on the sweepstakes center in 2011, and two Allied Veterans locations sued to stop from being shut down.

When the courts asked the organization to provide financial details, Bass responded by saying that Allied Veterans was getting out of the sweepstakes business and would be selling the centers.

Undercover investigators, though, found signs that showed the businesses had not been sold, such as a cashier at one location telling an agent "we did not sell the business."

According to the application, the companies running the cafes before the purported sale were the same people running them afterward. …

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