It is just after 7:00 p.m. at East Oakland's Foothill Square bingo parlor, and at least 150 people occupy the hall's sea of banquet tables. Most find their way here weekly or even nightly. They wear game faces and wield arsenals of bingo-themed accessories: colored daubers, blinged-out seat cushions, and sizable rolls of cash. Some will drop $500 dollars tonight. Others will invest only the minimum $15. In both cases, they're hoping for a return on their investment. But if they lose, at least they know their money is going to a good cause.
California law requires that bingo games be run by nonprofit organizations that donate their profits to charity. And from the looks of things at Foothill Square, that's what's happening here. Polaroids of smiling children line the walls, and a banner overhead credits the smiles to the parlor's two nonprofit bingo operators, Kids Educational Development Scholarships and Breast Cancer Development and Research Society. Rows of framed letters on city letterhead sing the two groups' praises. "We truly appreciate Kids Educational Development Scholarships' continued generosity and we thank you for helping us," reads one from the Children's Hospital in Oakland.
But what most players here don't know is that little of their money is going to charity. Instead, it goes straight into the pockets of a few savvy entrepreneurs who are making big money on charitable bingo. According to federal tax returns and City of Oakland reports, only about 3 percent of Foothill Square's revenue ever finds its way to charity. After prizes are doled out, most of the remaining revenues end up with the parlor's operator or the vendors who provide it with supplies and equipment.
Since its long-gone days as grandma's favorite pastime, bingo has evolved into a serious money-making machine. When California's current regulations became law in 1976, bingo games were mostly small, low-stakes operations in church basements and high school gyms. Then operators discovered that bigger venues, more frequent games, and new gaming technology could produce larger revenues, and a host of giant facilities entered the field. Where low-stakes weekly games yield annual revenues in the tens of thousands of dollars, larger nightly operations can rake in tens of millions.
Genuinely charitable bingo operations still exist, but they're being crowded out of the field by a new class of profit-oriented parlors. Loopholes in the law line up to accommodate for the industrious. But sometimes the industrious push the envelope. An illegal bingo operation can be hard to spot, but there are definite warning signs, according to "Dr. Bingo," Ronald Rickey, who consults to charities with gaming operations. If an operator's costs resemble their revenues, if their tax forms are full of holes, or if their "volunteer" staff has actually been working there for years, their motivation may not be charitable. California law requires bingo operations to be staffed by unpaid volunteers. But, as Rickey observes, "I can't think of anyone who would want to spend all of their time and energy on running bingo without getting some kind of compensation."
Bingo has become a cash cow for "cottage industry" entrepreneurs because no federal guidelines dictate how charities must spend their money. Operators can pocket as much as 99 percent of their income and still be considered legitimately "nonprofit." Not surprisingly, just as large parlors began cropping up all over California, a host of new "nonprofits" also emerged, citing bingo as their sole fundraising activity. These tend not to resemble your average Rotary Club. Instead, they are foundations that act like a middle-man, collecting money and then doling it out to charities of their choice. Sometimes these charities are linked to the operator of the bingo parlor, in possible violation of the law.
Legitimate charities that once relied on bingo for fundraising are suffering from competition of this type. But some are fighting back. In 2006, a consortium of small nonprofit groups in Vallejo sued their landlord, Robert Casteel III, who operates bingo parlors in Vallejo and Oakland. The nonprofits accused Casteel and his Cornucopia Ventures of illegally enriching themselves by passing bingo proceeds through a handful of fake charities under his control. Although the case was dismissed before the charges were resolved, the lawsuit sheds light on several aspects of Casteel's Oakland operation at Foothill Square.
Welcome to the world of charitable bingo, which often isn't very charitable. But paltry donations are just the start of the story. Public records also show that Oakland's largest bingo operations all exceed the state's monthly cap on overhead costs, report very different finances to the city of Oakland and the Internal Revenue Service, and operate electronic equipment that will soon be illegal. These offenses appear to violate federal and state laws and city ordinances. But that doesn't seem to matter, because enforcement agencies seldom pay attention to the seemingly innocuous game of bingo.
That's why Judith Brown decided to take matters into her own hands.
Brown's nonprofit organization, the Vallejo Music Theatre, fell into bingo in 2002 when it decided to buy a historic downtown building for a performance space. Retrofitting costs would be high, and managing director Brown knew the theater couldn't afford the project without a reliable fundraising source. So when her acquaintance Gregory Brennan offered to run twice-weekly bingo games at Casteel's Triple Seven bingo parlor, Brown jumped at the chance.
Brennan knew about bingo through his acquaintance with Casteel, who not only leases bingo parlors but also manages a battalion of companies involved in insurance, spas, real estate, and bail bonds. The links between Casteel's Vallejo and Oakland operations first came to light in reporting by Alex Gronke on the web site Novometro.com.
The theater rented out the parlor two nights a week and initially paid Casteel $1,100 per night, Brown said in a recent interview. Everything went smoothly for a while. But the more money the theater made, the more its rent crept up, until Brown alleged in court that he was charging the charities in his hall up to $2,600 per night in rent.
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