Jackson Free Press

ORLANDO, Fla. (AP) — Florida's lieutenant governor resigned and nearly 60 other people were charged in a scandal involving a purported veterans charity that authorities said Wednesday was a front for a $300 million gambling operation.

The organization, Allied Veterans of the World, runs nearly 50 Internet parlors with computerized slot machine-style games, which have come under scrutiny in Florida but are in a gray legal area.

Even so, investigators said the charity was a fraud and executives gave precious little to veterans while lavishing millions on themselves, spending it on boats, beachfront condos and Maseratis, Ferraris and Porsches.

Florida Attorney General Pam Bondi called the alleged scam "callous" and "despicable" and said it "insults every American who ever wore a military uniform."

Lt. Gov. Jennifer Carroll was not among those charged but resigned a day after she was questioned by investigators.

The public relations firm she co-owned, 3 N&JC, did work for St. Augustine-based Allied Veterans. A Navy veteran who served in the Gulf War, Carroll also appeared in a TV ad in 2011 promoting the organization's work on behalf of veterans and their families.

Authorities refused to discuss any ties between the 53-year-old Republican and the investigation. Her aides had no comment.

Carroll said in a statement Wednesday that neither she nor the public relations firm was targeted in the probe, and she stepped down so that her ties to the organization would not be a distraction for Republican Gov. Rick Scott's administration.

The investigation involved 57 arrest warrants and 54 search warrants issued in Florida and five other states: South Carolina, Georgia, Alabama, Nevada and Pennsylvania. As of midafternoon, 49 people had been arrested. Allied Veterans' 49 parlors in Florida were raided and shut down.

Authorities said they seized about 300 bank accounts containing $64.7 million, as well as sports cars and other property.

Bondi said that when charges are formally filed next week they will include racketeering, conspiracy, money laundering and possession of slot machines.

"It is shameful that Allied Veterans of the World allegedly attempted to use the guise of charitable organization to help veterans in order to lend credibility to this $300 million gambling scheme," she said.

A telephone number listed for Allied Veterans was disconnected. Emails to an address on the group's website were not returned. The address Allied listed as its headquarters appeared abandoned, the long, gray cinder-block building bare inside.

Gerald Bailey, commissioner of Florida's Department of Law Enforcement, said the arrests are only the first wave of the investigation and the second wave will look at the "large sums" of money spent on lobbying and donations to political campaigns. He would not give details.

Allied Veterans was founded in 1979 and evolved from a charitable organization that ran bingo games and held bake sales for veterans to a group suspected of widespread illegal gambling around Florida, according to an Internal Revenue Service affidavit. The IRS pronounced the charity a fraud.

One of those arrested, Jacksonville lawyer Kelly Mathis, was identified by authorities as the mastermind of the scheme. He allegedly made about $6 million from the operation.

A woman who answered the phone at Mathis' law firm said no one was available to talk about his arrest.

From 2007 to early 2012, investigators said, they found evidence of nearly $6 million in what appear to be charitable donations by Allied Veterans. That was only about 2 percent of the more than $290 million made from gambling during that period, they said.

Most of the money went to for-profit companies and the operators of Allied Veterans, authorities said.

To play games at one of the Internet cafes, a customer gets a prepaid card and then goes to a computer. The games, with spinning wheels similar to slot machines, have names such as "Captain Cash," ''Lucky Shamrocks" and "Money Bunny." Winners go back to a cashier with their cards and cash out.

Each of the locations had rows of computers and a big sign that read: "This is not a gaming establishment." On the walls were photos of company executives making donations and letters of recognition from some of the charities that supposedly benefited.

Prosecutions of similar electronic gaming parlors have had mixed results in Florida courts, with owners saying they fall under a sweepstakes law, much like a fast-food restaurant's contest. Prosecutors have said they are slot machines, which are illegal except at the South Florida horse and dog tracks and American Indian casinos.

In Anadarko, Okla., the owner of International Internet Technologies, a company accused of supplying the cafes with software, was arrested along with his wife. Chase Egan Burns, 37, and Kristin Burns, 38, face charges including racketeering and conspiracy.

International Internet Technologies made $63 million from the Florida operation from 2007 to 2010, according to the IRS.

"What we do is legal," Chase Burns told The Oklahoman on Monday.

Carroll served 20 years in the Navy, working as a jet mechanic before retiring as a lieutenant commander. She was elected Florida's first black lieutenant governor in 2010, winning office as Scott's running mate. She is also a former executive director of the Florida Department of Veterans' Affairs.

A married mother of three, Carroll has a son who plays for the Miami Dolphins.

Carroll became embroiled in a short-lived scandal last year when a fired staffer claimed that she walked in on Carroll and a female aide in a compromising position. Carroll denied that.

She became the brunt of late-night talk show hosts after she told a TV station that black women who look like her "don't engage in relationships like that." She later apologized for any implication that black lesbians are unattractive.