SACRAMENTO – On July 30, 2015, Capital Sweepstakes Systems, Inc., a corporation headquartered in Loomis, and Kevin Freels, 41 of Loomis, pleaded guilty to conducting an illegal gambling business related to internet sweepstakes cafes.  As part of its  plea agreement, Capital Sweepstakes agreed to forfeit more than $1.5 million in profits generated through its illegal gambling business and agreed to $700,000 in civil penalties and costs paid to resolved the state’s suit.

The settlement resolves allegations that Capital Sweepstakes violated state laws governing illegal gambling and unfair competition.  In addition, Capital Sweepstakes is barred from conducting any kind of sweepstakes operations in the state for 10 years.

“Capital Sweepstakes profited by targeting low-income communities, misrepresenting their slot-machine style operations as legal enterprises and creating magnets for crime,” said Attorney General Harris. “My office is dedicated to combating and dismantling illegal and unregulated gambling operations statewide. I thank our Gambling Task Force and the Bureau of Gambling Control for their tireless investigative work.”

This case stems from a joint investigation conducted by the Federal Bureau of Investigation (FBI) and the California Department of Justice, Bureau of Gambling Control that included extensive undercover work and multiple search warrants being served on Capital Sweepstakes’ California operations.  Additionally, cash and accounts totaling more than $3,000,000 were seized in the investigation.  

Software developers like Capital Sweepstakes design software systems that create interactive gambling-themed games that they represent as lawful promotional sweepstakes for play at sweepstakes cafés, but they constitute illegal gambling under state law. 

“As Department of Justice special agents have discovered, these internet  cafes that offer illegal gambling are often trouble spots in the community, associated with other crime and nuisances,” said California Statewide Law Enforcement Association (CSLEA) President Alan Barcelona.  “DOJ special agents, along with Alcoholic Beverage Control agents, have teamed with local law enforcement officers to rid neighborhoods of these illegal operations.  This guilty plea and settlement sends a very loud message.”

Sweepstakes gambling enterprises are a nationwide problem and are estimated to earn over $10 billion a year.  Attorney General Harris recently filed an amicus brief in the California Supreme Court in support of several cases that the Kern County District Attorney’s Office brought against sweepstakes gambling operations.  The Supreme Court ruled unanimously that these sweepstakes gambling operations are illegal.  

Freels and Capital Sweepstakes Systems Inc. are scheduled to be sentenced on November 5, 2015.  Capital Sweepstakes faces a maximum statutory penalty of five years’ probation and a $500,000 fine.  Freels faces a maximum statutory penalty of five years in prison and a $250,000 fine.