UPDATED: ‘Sweepstakes cafe’ not welcome in Gilroy

Gilroy and Morgan Hill police officers handcuff customers of Liberty PCS  during a search and seizure of the illegal gambling business in the Hecker Pass Plaza Shopping Center. Customers were handcuffed during the search as a precaution to keep them in pl

In a late night stealth operation, about 25 officers from several local and state law enforcement agencies shut down an illegal gambling venue masquerading as an Internet sweepstakes cafe on First Street in Gilroy Aug. 1, confiscating everything in the store, arresting three people and snapping handcuffs on dozens of others.
Almost all of the venue’s 41 computers – or slot machines – were occupied by approximately 40 customers at 9 p.m. when officers raided the building, telling everyone to put their hands in the air. Several customers sobbed as officers handcuffed them and searched their pockets; others retained icy stares. Their computer screens glowed behind them with games such as Keno and “Lucky 7’s.” The business, called Liberty PCS, offers roughly 60 games with prizes ranging from $1 to $4,000.
It claims to be a “teleconnect” company touting services to customers such as Internet browsing, faxing, copying as well as retail products, namely calling cards and phone accessories.
But those things were just a front for what the business is really all about: Gambling, according to the Gilroy Police Department.
Located at 1325 First St. in the Hecker Pass Plaza Shopping Center, Liberty PCS belongs to a growing pool of so-called “sweepstakes cafes” deemed unlawful in California by Attorney General Kamala Harris, who in December sent out a law enforcement advisory on the issue.
“The message is that we don’t want this in our community,” surmised GPD Sgt. Joseph Deras in the parking lot of Liberty PCS’s storefront, in a moment away from the commotion inside.
The GPD lead the raid, with the help of the Department of Justice and the Morgan Hill Police Department.
Customers were not arrested unless they had outstanding warrants or were caught with drugs. Those arrested were Nelson Garcia, 38 of Gilroy, for an outstanding vandalism warrant, Robert Barbosa, 53 of Gilroy, for possession of a controlled substance, and Steven Shores, 47 of Gilroy, for possession of marijuana for sale.
The two on-duty employees – who wore shirts that said, “ask me about phone time” – were not arrested either. They were interviewed and photographed and the case has been sent to the Santa Clara County District Attorney’s Office for review.
GPD Chief Denise Turner and City Administrator Tom Haglund were also present, looking on as the search warrant was executed.
The “retail” store – owned by a man named Alfred Byrne with a Vallejo-based corporate office – opened in late 2012 and was shut down for one day in February by the City’s code enforcement officers. Liberty PCS re-opened a day later after the City’s investigation found the store to be compliant with its business license.
Byrne was not present Thursday night, but the GPD will go after him for questioning. The Dispatch was unable to obtain contact information for him, but Liberty PCS District Manager Harry Frank spoke on his behalf.
“We will beat this. We will be back open and the City is well aware of this. This was an illegal raid, and police knew it. Our sweepstakes business is protected by the First Amendment of the Constitution,” Frank said.
In a letter to the Dispatch, store manager Shaina Romero added: “One hundred percent of our revenue comes from the sale of products such as phone cards, Internet access and cell phones. We give customers free entries into a sweepstakes when they purchase products.”
The evening of Aug. 1, rows of handcuffed gamblers – police handcuffed customers to keep them in place before officers questioned and released them – agonized over the evening’s surprise turn of events.
One gambler lamented her decision to try her luck at Liberty PCS that night.
“I should not have come. I should have stayed in bed and rested for work tomorrow,” said the middle-aged Wal-Mart employee, who declined to give her name. “I didn’t know it was illegal, you know?”
Phyllis Candelaria of Gilroy recounted the scene when police raided the store.
“Everybody was in shock. I was like, ‘What is going on? Are they looking for me?’ And they shouted ‘Police! Don’t Move!'” Candelaria said.
Joe Ackerman, 51 of Morgan Hill, was fidgety and agitated. He said he felt the ordeal was unnecessary.
“I picked the wrong night to come here,” Ackerman said.
Ackerman said he has won just once at Liberty PCS, and that he hasn’t seen anyone else in the store win either.
“Very few people win here, let’s be serious,” he said.
Officers spoke with every single customer, asking them if they had actually used Internet, fax or calling services that evening. Everyone said no, according to Deras, flipping through one of the questionnaires to give an example of the proof showing folks were there to get lucky – not make photo copies or surf the web.
As the evening drew close to midnight, officers from the Department of Justice began to haul the four dozen, 24-inch flat screen monitors into a moving van. Officers emptied the entire building, even calling in the Gilroy Fire Department to help remove a safe that was bolted to the floor in the back office.
Since March, the GPD has had their eye on Liberty PCS, and on at least six occasions, they sent undercover officers to scope out the venue according to Deras.
“The officers paid to play numerous casino style games,” Deras explained. “During their visits, none of the clients in the business were ever seen accessing the Internet, a fax machine or other service.”
He added that “known felons” patronized Liberty PCS in addition to other characters seen loitering in or around the business who “were involved in nefarious activities.”
Surrounded by cedar trees on the picturesque west side of Gilroy, the Hecker Pass Plaza Shopping Center has been home to more than one legally questionable business, most notably the now-defunct MediLeaf medical marijuana dispensary in 2010. Other businesses in the strip mall include a liquor store, a tattoo parlor and Togo’s Sandwiches. The shopping center was formerly home to Simply Romance, a sex toy and lingerie shop. Hecker Pass Plaza is owned by trustees Mike and Kulwinder Atkar of San Jose, according to City records. The Atkars could not be reached for comment.
GPD received “numerous” complaints from community members who voiced their “displeasure of such a business operating in Gilroy,” according to Deras. One citizen even pleaded with GPD to take action against Liberty PCS “because his father was frequenting the business and losing all of his money and paychecks there,” police say.
The gimmick at Liberty PCS wasn’t too hard for police to unveil. Customers buy phone cards or other phone-related merchandise and receive 100 sweepstakes “credits” or “entries” for every dollar they spend. The credits can then be used to play casino-style games on computers in the cafe and staff members redeem winnings in cash.
The California Bureau of Gambling Control defines a “gambling” venue as one that operates with three components: Consideration, price and chance. Liberty PCS had all of these elements, Deras said.
In May, when the Dispatch first broke the story on controversy surrounding Liberty PCS, the company’s agent, G. Scott Emblidge, described the operation as “strictly retail” according to Revenue Officer Irma Navarro from the City’s Finance Department.
The only types of legal gambling in the state are tribal casinos and licensed card rooms with no slot machines, such as Garlic City Casino at 40 Hornlein Court in downtown Gilroy, according to the DOJ.
Whereas tribal casinos are “regulated by the gaming guys” to ensure the slot machines are calibrated, operated legally and can’t be rigged for cheating, “these places are not regulated by anybody,” Deras explained. “(Internet cafes) can manipulate the machines however they want.”
Turning towards the store and indicating to the swathe of customers sitting in chairs with their hands behind their backs, Deras added that all of them could technically be arrested on misdemeanor charges.
But that wasn’t GPD’s main goal.
“We’re here to deal with the business owners,” Deras said.
In a GPD press release sent out Friday morning, Deras also warned: “Internet Cafes are becoming a significant problem in our region. The Gilroy Police Department will be aggressive in ensuring these businesses are in compliance with local, state and federal regulations where applicable. Anyone with additional information is urged to contact Det. Ray Gonzales of the Anti-Crime Team at (408) 846-0350.”

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