In a series of raids this fall, SLED agents seized more than 400 video gambling machines, saying they are illegal. Those machines join 1,300 previously seized that judges have declared illegal since the death of video poker in July 2000. SLED has been the busiest in Lexington County, where it has seized 249 illegal machines since July 2000.

Regulators say illegal cash payouts are not back in a big way. And gone are the playing cards of the old video poker machines.

But, since September, state police have stepped up their seizures of machines, adding to the 1,300 sitting in warehouses that judges have declared illegal since the death of video poker in July 2000.

And pro-gaming forces are getting more types of new-generation machines declared legal — at least temporarily — by winning an increasing number of fights in court.

Opponents fear a return to widespread, legalized gambling. That, they say, could drive the state back a decade to when video poker interests developed into $3 billion-a-year bullies strong enough to help sway elections.

“They’re waiting for us to turn our backs,” anti-poker lawyer Richard Gergel said of the renewed push by the industry.

“The gambling industry is like a collection of cockroaches after an atom bomb,” he said. “They’re always back trying to get into business.”

People in the gaming trade say they are trying to build a thriving industry by developing a legal game that will attract players and draw them away from the new state-sanctioned lottery.

They say they just want legal machines that bring in customers with cash to spend.

A State newspaper review of court cases and interviews with more than a dozen pro- and anti-industry forces found an increasingly strong industry fueled by:

• Guerrilla-style court strategies by machine owners to exploit local police and judges unfamiliar with complex gaming laws

• Actions in court by elected prosecutors — including the state attorney general — that allowed games to remain legal, at least temporarily

• Courtroom wins in Allendale and Berkeley counties that bar police from seizing two different games, allowing the spread of those machines. State regulators are appealing both.

• Rulings from local magistrates and two state circuit court judges that groups of machines are legal. S.C. law says machines must be ruled on one at a time.

• A Goose Creek-based company’s introduction of what it says is a tamper-resistant computer chip for its latest $3,500 machine, which it hopes to sell nationwide. The company argues the chip helps make all of its Chess Challenge II machines identical and allows a judge to declare all Chess Challenge IIs legal at once.

PUSHING THE LEGAL ENVELOPE

SLED has stepped up its raids for illegal machines in the past three months. Since July 2000, agents have seized 50 different games in more than half of the state’s 46 counties.

In a series of raids this fall, SLED agents seized more than 400 machines they say are illegal.

Regulators say they are standing guard against sophisticated machines that trump a player’s skill and decide a game’s outcome by mathematical chance. That makes the machines illegal.

“Everybody’s trying to find THE machine, a legal game,” said Stacy Drakeford, SLED’s chief gaming enforcer. “We’ve been fighting it for three years.”

Machine owners say players win merchandise or free plays — not cash — on games with folksy names such as Fruit Holder, Gone Fishin’, Jungle King or Truckstop.

The cousins of poker machines remain popular in convenience stores, bars, and private and public clubs.

State records show there have been 14,163 licenses issued for amusement games. But the records don’t distinguish between games with video screens and those that are simply electronic, such as pinball.

When video poker was king, 37,000 machines dotted the state.

An S.C. Supreme Court ruling outlawed video poker after the largely unregulated industry introduced gambling casinos and bare-knuckle politics that raised enough money to help topple Gov. David Beasley, who vowed to kill the industry.

Though today’s machines look different from video poker, many familiar poker bosses are involved in 2003’s gentler gaming.

Warren Holliday in the Lowcountry, Jimmy McDonald from the Grand Strand and Fred Collins of the Upstate have video machine licenses.

All declined interviews with The State.

THEN AND NOW

The industry once produced revenue equal to almost half the state’s annual budget.

Today, the state takes in $2 million yearly in video game fees — about 3 percent of the $60 million a year that taxes on video poker raised.

Two huge State Law Enforcement Division warehouses full of machines seized since mid-2000 show that wagering on electronic gaming remains popular. But no one knows how much wagering is going on.

SLED records show undercover agents have made 107 cases charging illegal payouts since video poker was outlawed, Drakeford said.

Yet SLED has gotten 824 gambling complaints it could not prove, Drakeford said.

Gambling critics, including Sen. Wes Hayes, R-York, believe that wherever there is a machine, there is gambling.

Machines are ruled illegal by courts because their computers are rigged so that a player’s skill has little to do with winning.

“The only thing different (from video poker) is the icons change,” Drakeford said. “It’s still the same thing.”

Police don’t bother machines that judges have ruled games of skill. That coveted stamp of approval is what prompts the court battles — machine by machine.

Many “are dressed up as games of skill, but really they are games of chance,” said Robert Cook, an assistant S.C. attorney general. “They are controlled largely by computer software.”

MISSING VIDEO POKER

Many South Carolinians say they miss video poker.

Bert Kerwin of Allendale County longs for the money video poker once brought him.

The three poker machines he had in his Bert’s Fast Stop & Pawn Shop in Fairfax contributed about a quarter of his profits.

Now, “I’m 55 years old, and I’m working almost 80 hours a week,” Kerwin said. “My wife’s 55, and she’s working 50 hours, and ... she’s got a house to take care of.

“I’m struggling to make ends meet,” said Kerwin, who also finds himself in the middle of the state’s most contentious video gaming court fight.

Kerwin reflects the opinion of gaming supporters who argue that “pinheads” in Columbia killed the poker cash cow. Now, everyone — including state government — is suffering, he said.

Since 2000, the state has suffered three years of budget shortfalls and job cuts.

“I live in the poorest county in the state, and it’s tough to make a living here,” Kerwin said.

Mike Smith, 41, of Lexington County has been in the video gaming business about 12 years.

His M&M Amusements buys machines from suppliers, then places them in small businesses. M&M and the businesses split the take 50-50.

Smith also is reeling from the loss of income from the 100 poker machines he once had.

“It’s probably between 60 and 65 percent less than what we were doing when we had the poker machines,” Smith said. “We just had to pick up more locations ... to make up the slack.”

M&M now has about 30 video game machines. But about 25 percent of the businesses that housed poker machines have closed, making it hard to find new locations, Smith said.

And SLED is busy in Lexington County, where it has seized 249 illegal machines since July 2000, almost 100 more than in any other county.

OUTGUNNED

Like video poker, today’s gaming industry is in and out of court.

Its sporadic legal victories — some significant, industry critics say — start quietly in small courtrooms across the state.

SLED and the attorney general’s office, the state’s primary gaming regulators, find themselves playing catch-up.

And their ranks have been thinned by budget cuts.

SLED has about 60 fewer agents than it did two years ago and has had to cut back the number assigned to gaming cases.

The attorney general has three lawyers to argue cases. They have handled 30 cases since video poker was banned.

Court cases often are filed without the knowledge of the outgunned regulators, said Cook, who has become the primary courtroom adversary of gaming-industry lawyers.

By law, gaming cases are supposed to start in the courtrooms of the state’s 310 county magistrate judges — who don’t have to be lawyers and are near the bottom of the judicial ladder.

In some parts of the state — in Spartanburg, for example — magistrates are familiar with arcane gaming laws that date to the Depression era.

They also know to call on the state’s handful of experts to testify about the complexities of computers that in milliseconds can change the outcome of a game before a player can notice.

The icons on Chess Challenge II, for example, change at the rate of 12 to 16 images per second.

Judges hear testimony about “random number generators,” “morphed images” and mathematic probabilities — all part of deciding whether a game is legal, if based on skill, or illegal, if based on chance.

TESTING THE COURTS

Other judges and local police know little about gambling laws because they see so few cases.

That’s where games are running up victories.

Since summer, state regulators have fought two cases that favored different games.

Those cases illustrate the industry’s courtroom guerrilla tactics aimed at expanding video gaming, the S.C. Baptist Convention and other critics said.

“If they develop a machine that’s on the right side of the law, then they can come back on a large scale,” said Joe Mack, who fought video poker for the state’s largest religious denomination.

Gergel, the anti-poker attorney, agrees.

“That’s been the pattern of the gambling industry: They assault government on every level.”

For example, attorneys for gaming companies filed their cases before state judges who either have ruled for gaming interests in the past or had replaced a judge who was friendly to gaming cases.

The machine with the most success in court in being declared a legal game of skill is Chess Challenge, developed by Castle King, based in the Berkeley County town of Goose Creek.

Castle King is owned by Holliday — once the state’s sixth-largest poker operator — and Al DeLeon, brother of former poker operator Michael DeLeon.

Castle King spent $2 million developing its Chess Challenge games, said Steve Schmutz, one of Castle King’s lawyers.

The first version, Chess Challenge I, sold by the hundreds.

It also prompted a 14-month legal battle that went to the state Supreme Court. Castle King ultimately pulled the machine from the market Sept. 15 in a settlement with regulators.

In that case, the company leapfrogged the magistrate. Charleston Circuit Court Judge Victor Rawl then declared all Chess Challenge I machines legal and protected them from seizures.

Rawl previously had ruled federal law permitted video poker gambling on sea cruises from state ports.

Rawl also ruled in favor of Chess Challenge. Regulators worked for a year to overturn his decision, and the video gaming company agreed to take the machine off the market without a ruling that it was illegal.

Chess Challenge II followed and is now at the center of the state’s most hotly contested video game case.

CHESS GAMBITS

A state judge in Allendale said Chess Challenge II was legal and barred police statewide from seizing it.

That triggered extraordinary moves last week by SLED Chief Robert Stewart.

He hired a private attorney and asked the Supreme Court to reverse the Allendale decision. What’s more, Stewart asked the justices to issue an order preventing any S.C. judge from issuing further rulings that affect whole lines of machines.

The Supreme Court might hold a hearing on SLED’s request or issue a decision without one.

The case began Sept. 23 in Kerwin’s Allendale store.

Kerwin said he had never done business directly with Castle King until a company salesman offered to place the games in his store and split the take.

Sheriff Tom Carter said his 12-officer department got an anonymous phone call that two illegal video poker machines were being delivered to Kerwin’s store.

In Carter’s 13 years with the department, he can recall only one other video gaming case.

The sheriff said his deputies were busy that Tuesday, so he went to the store, arriving as the machines were being unloaded.

He immediately took the machines to Allendale County Magistrate Carl Love for a ruling.

Carter said the video company seemed ready for the court case.

“If they were going to be challenged, they were set up to respond,” he said.

Jonathan Altman, one of the lawyers representing the Goose Creek company, said although Castle King already had a lawyer who lived nearby on retainer, the case landed in Allendale County by chance.

“It could have happened anywhere,” Altman said.

Carter was outmatched in court. “I didn’t know how to put up a case,” he said. “I didn’t know about the law. I was really out of the loop.”

Love, who heard the case, “was in the dark as much as I was,” Carter said. Love declined a telephone interview with The State and has not responded to a written request for case records.

Neither SLED nor the attorney general’s office knew what had happened.

If notified, they could have offered expert testimony that Chess Challenge II is illegal, SLED Chief Stewart said. And they could have told the Allendale judge that a Charleston magistrate had ruled the same game illegal just five days earlier.

While the state was not prepared for the Allendale hearing, the local Castle King lawyer was.

Woodrow Gooding presented evidence from a national gaming expert who had reviewed Chess Challenge II, offered statements from players who said it was a game of skill and presented a sworn statement from Charleston-based Solicitor Ralph Hoisington that the game is legal.

Judge Love ruled Chess Challenge II legal within 15 minutes, Carter said.

A BIGGER WIN

The next step, the appeal to state court, would be crucial.

Allendale County is in the judicial circuit of a new state judge, Perry Buckner.

In February 2000, Buckner succeeded Gerald Smoak, who on his last day before retiring June 30, 2000, defied the Supreme Court’s ban of video poker, set to take effect the next day.

Smoak ruled Lowcountry poker baron Henry Ingram’s machines were exempt from seizure.

SLED and then-Attorney General Charlie Condon quickly got Supreme Court Chief Justice Jean Toal to rally other justices by telephone. She signed an order on her kitchen table overturning Smoak.

Buckner got the Chess Challenge II case from Allendale when the local solicitor, Ralph Murdaugh, appealed Love’s ruling.

But Murdaugh did not introduce evidence against the machine in court, records show.

Murdaugh said in an interview he did not realize until the last minute how weak his case was, though he had a month to prepare it.

The prosecutor asked Buckner to reject his appeal, citing among other things that he had talked to “someone in whom I have great confidence and faith,” and that person told him the machines were legal, according to a court transcript.

Murdaugh did not identify that person to the court and would not name the person for The State.

Buckner ruled Chess Challenge II legal.

Murdaugh, chief prosecutor for 17 years in the state’s five southernmost counties, said he since has tried to overturn Allendale magistrate Love and believes Chess Challenge II is illegal.

THE TOP PROSECUTOR

When SLED learned what happened in Allendale, it asked state Attorney General Henry McMaster to appeal Buckner’s decision.

Court records show McMaster was not initially aggressive about appealing the Allendale case and also later cut SLED from the case.

An examination of court documents shows McMaster:

• Asked for a rehearing, the slowest appeal route because judges rarely reverse themselves

• Asked the state appeals court on Dec. 3 to make SLED part of the case and speed it to the Supreme Court

• Withdrew that request the next day and appealed only on behalf of Sheriff Carter.

The last move prompted Stewart to rush to the governor for help before the appeal deadline lapsed.

On Dec. 5, the deadline to file, Gov. Mark Sanford’s chief attorney, Henry White, submitted the same legal action McMaster had withdrawn the day before, making SLED part of the appeal again.

McMaster joined SLED’s appeal Friday. He said it’s “nonsense” to say he tried to delay getting the Chess Challenge II ruling to the Supreme Court, which had already reversed a judge in the Chess Challenge I case.

McMaster said his office has worked hard to contain the industry and has been winning cases.

Removing SLED from the appeal was an attempt to fix a technical mistake made by his staff attorneys, McMaster said.

The appeal should have been filed on the sheriff’s behalf, McMaster said; his staff attorneys made a mistake when they appealed only in SLED’s name.

Asked why he didn’t appeal both for Sheriff Carter and SLED, McMaster said, “We could have done that.” He did not explain why he did not.

McMaster said he knew SLED wanted the Chess Challenge II decision appealed. But he said SLED did not ask to be a party to the case.

Stewart contradicts that.

He said he not only asked the attorney general’s office to bring in SLED, but he resisted when McMaster reversed his own staff member’s actions.

In a Nov. 7 letter to McMaster that was obtained by The State, Stewart wrote, “I am requesting that your office assist SLED by appealing this decision as expeditiously as possible.” The letter asks for a fast-track filing to the Supreme Court.

When he found out SLED was being removed from the appeal, Stewart said, he asked McMaster, through his staff, to reconsider.

“They called me back and said they had passed the message (to McMaster), and I was told they (were) still withdrawing me,” Stewart said.

Even before his courtroom skirmishes with the attorney general, Stewart enlisted sheriffs around the state to press McMaster to move quickly.

After a call from Stewart, the S.C. Sheriffs’ Association wrote to all 46 sheriffs Nov. 20, seeking their help.

Last week, Stewart took the unusual step of getting permission from the State Budget and Control Board to spend $10,000 to hire a private lawyer to appeal the Allendale case.

Stewart chose Gergel, the lead lawyer in the federal lawsuit that many observers credit for pressuring video poker into accepting a new law that resulted in the death of the behemoth industry.

(Gergel, of Columbia, had not been hired by SLED when he was interviewed for this article.)

Even before the fight in Allendale, Chess Challenge’s developers had begun building a legal case for the machine.

Solicitor Hoisington, the elected prosecutor in Charleston and Berkeley counties, said Michael DeLeon asked him to review the first Chess Challenge machine while Hoisington was a private attorney.

After he was elected solicitor, Hoisington took a tough stance against video gaming. He issued a list of games he viewed as illegal but didn’t include Chess Challenge. He added that game later, letters from his office show.

However, the prosecutor later filed a sworn statement in support of the game’s legality. He said he did that to avoid the time-consuming process of being deposed by Castle King lawyers.

“I do not believe that I was roped into any kind of position on Chess Challenge I,” Hoisington told The State. “Even though I have a duty to uphold the law, I have to say if something is not a crime.”

Castle King used Hoisington’s sworn statement to defend Chess Challenge II in the Allendale case.

A DIFFERENT MACHINE

Castle King lawyer Altman said the company first marketed Chess Challenge I after getting an opinion from Condon’s office that said the machine was legal.

But the opinion states that it approved only a prototype. It noted the game easily could be altered to become illegal.

Altman calls the second-generation game, Chess Challenge II, “an entertainment device ... a (prize) redemption machine.”

“I’m unaware of any game in South Carolina or elsewhere in the country that operates like Chess Challenge II,” he said.

“It plays true,” he said, referring to games that allow a player’s skill to determine the outcome.

The company worked with Taiwan-based worldwide gaming giant IGS to design computer boards that would differentiate its machine from those of competitors, Altman said. The company hopes to market Chess Challenge II in other states if it is declared legal here, he said.

Breaking the law is not the goal, Altman said.

“It doesn’t do Castle King any good to spend time, effort and money to develop a game that doesn’t meet the legal standard,” he said.

THE OLD PLAYBOOK

Competing gaming companies are mimicking the success of Chess Challenge II.

Within a week of Buckner’s Oct. 29 ruling that the machine was legal, a Berkeley County magistrate declared another game, called Safari, legal.

As in Allendale, state regulators were not notified of the hearing. Magistrate Edward L. Sessions heard only from an expert for the Charleston-based Mims Amusement Co..

Mims’ lawyer, Jim Griffin, said the company wanted the machine seized as a test case.

Sessions’ ruling cites Judge Buckner’s decision and also banned police from seizing other Safari games in Berkeley County.

Griffin said Mims watched what happened with Chess Challenge in Allendale, then rushed its plan into place in Berkeley.

Reach LeBlanc at (803) 771-8664 or cleblanc@thestate.com.