An ongoing battle waging between the City of Gilroy and an “Internet cafe” the state Attorney General has called an “illegal gambling operation” took another turn shortly before 4 p.m. Aug. 22 at 1325 First St. in Hecker Pass Plaza.
After being shut down by the GPD, Department of Justice and Morgan Hill Police Department in a late-night search and seizure Aug. 1, the “tele-connect” company known as Liberty PCS filed a lawsuit against the City and reopened last week, ready to fight for what the business’s District Manager Harry Frank is calling his First Amendment rights to stay open.
The GPD responded last week with its equivalent of “I don’t think so,” storming the store a second time and confiscating everything all over again during a second search warrant issued through a Superior Court judge.
“If they keep opening, that’s what they’re gonna get,” resolved GPD Chief Denise Turner as approximately 12 to 15 officers from the DOJ and the GPD’s Anti-Crime unit detained and questioned the roughly 20 customers sitting at computers inside the store.
Following the same protocol as last time, officers emptied out the entire building, or “basically anything that can be used to facilitate illegal gambling,” explained GPD Sgt. Pedro Espinoza.
That means GPD confiscated a second round of electronics and furniture, including tables, chairs, computers and a safe in the back of the building. The original 41 computers – or slot machines – taken during the first search warrant remain in possession of the GPD, which sent letters to Liberty PCS about their intent to destroy the machines within 30 days of the raid. Sgt. Pedro Espinoza says the same thing will happen with the second cache of computers.
Officers also spoke with all the customers during the search warrant, asking them if they had actually used Internet, fax or calling services during their visit. Patrons were not arrested unless they had outstanding warrants or were caught with drugs. A total of six were arrested Aug 22: Two for outstanding warrants; one for a weapons-related violation; and three for narcotics-related crimes, according to Espinoza. Multiple undercover officers were in the area at the time of the second raid, Espinoza confirmed.
Some customers, after being questioned by the GPD and permitted to leave, wandered out of the store with miffed expressions on their faces.
“Why are they going after us?” asked Liberty PCS patron Manuel Ruiz. “Go after the owner. Not us.”
Another woman named Ruby, who declined to give her last name, said the fact that Liberty PCS appeared to be open and operating legally in broad daylight was misleading to its customers.
“It made it seem like it was OK for us to come and play,” she said, squinting with confusion at the scene behind her.
Being detained and questioned by officers was “just not right,” she added.
Sitting in the back of a GPD patrol car, 35-year-old Brian Lowery admitted that he does “have a criminal history” but didn’t see what was wrong with people patronizing Liberty PCS. Lowery said he frequents the Internet cafe “when I get board.”
Some Hecker Pass Plaza shop owners say they’re getting tired of Liberty PCS and its frequent customers, which includes many “known felons,” drug addicts and compulsive gamblers, according to the GPD.
“All the neighbors don’t like them. They’re a nuisance,” said Eddie Ammari, glancing warily across the counter.
Ammari is the owner of the Rock Zone, a smoke shop and tattoo parlor which has been in the Hecker Pass Plaza for 19 years and sits just next door to Liberty PCS.
“We hear from our customers that it’s not good for them to be around here,” added employee Andrea Paugh.
After the GPD shut it down three weeks ago, Espinoza said Liberty PCS was able to reopen under the “guise of being an Internet service cafe” because “they have a business license to operate as such.”
Following the reopening, GPD detectives continued their investigation and allegedly found the same illegal gambling activities were still taking place, Espinoza said.
GPD Capt. Kurt Svardal underlined the main objective of taking out the people at the top of the Internet cafe operation.
“We’re working towards the identity of people who are behind this,” he said.
Liberty PCS’s suit filed Aug. 9 in the San Jose Superior Court is for an “unlimited amount” of money, and in its 12-page complaint, the company accuses the City for causing an income loss of $15,000 per day for the 14 days the store’s doors were closed after the first search warrant, as well as $130,000 in seized equipment – a total of $380,000 in loss and damages.
The complaint’s main demand, however, is for a judge to declare Liberty PCS a legal business in the City of Gilroy.
In December 2012, Attorney General Kamala Harris proclaimed Internet cafes illegal in the state of California. Frank believes that announcement – which was sent out statewide from Harris in a letter to all local law agencies – is a conspiracy.
“I don’t know if the DOJ really believes we are illegal. I think it’s more a cover, so they can continue to go in and take our stuff,” Frank said previously. He did not return additional requests for comment for this story.
At Liberty PCS, 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.
Another of Frank’s tele-connect operations, Urban PCS in Watsonville, was shut down by Watsonville Police a couple weeks ago and has since re-opened.
Reporter Carly Gelsinger contributed to this story.
**********
Original story
Just three weeks after the Gilroy Police Department raided Liberty PCS – an Internet café on First Street that the state Attorney General has called an “illegal gambling operation” – the store is back open for business and suing the City of Gilroy for tens of thousands of dollars.
“You can’t just shut down a business because you don’t like it,” said Harry Frank, district manager of Liberty PCS.
At 10 p.m. on Aug. 1, along with assistance from the Department of Justice and the Morgan Hill Police Department, a three-month covert investigation by the GPD came to a head when 25 officers stormed into Liberty PCS, confiscated the company’s equipment and shut down the business.
But the self described “tele-connect” company is ready to fight for what Frank is calling his First Amendment rights to stay open, and is now armed with a San Francisco-based lawyer, Scott Emblidge of Moscone, Emblidge, Sater & Otis.
Liberty PCS’s suit filed Aug. 9 in the San Jose Superior Court is for an “unlimited amount” of money, and in its 12-page complaint, the company accuses the City for causing an income loss of $15,000 per day for the 14 days the store’s doors were closed, as well as $130,000 in seized equipment – a total of $380,000 in loss and damages.
The complaint’s main demand, however, is for a judge to declare Liberty PCS a legal business in the City of Gilroy.
“Such a declaration is necessary and appropriate at this time so that Liberty may understand its rights and duties without being subjected to the arrest and incarceration of its employees, the further loss of property, and/or loss of its livelihood,” the complaint reads.
In December 2012, Attorney General Kamala Harris proclaimed Internet cafes illegal in the state of California. Frank believes that announcement – which was sent out statewide from Harris in a letter to all local law agencies – is a conspiracy.
“I don’t know if the DOJ really believes we are illegal. I think it’s more a cover, so they can continue to go in and take our stuff,” Frank said.
The company’s original 41 computers – or slot machines – remain in possession of the GPD. The GPD has sent letters to Liberty PCS about their intent to destroy the computers within 30 days of the raid.
Meanwhile, at 1325 First St. in the Hecker Pass Shopping Center Plaza, people – many “known felons,” drug addicts and compulsive gamblers, according to the GPD – are flocking back to play Vegas-style games at Liberty PCS.
But Frank denies that customers come to the store for anything but low-priced phone cards and a fun sweepstakes experience.
“I don’t believe that we attract gamblers,” he maintains.
But if the store’s business plan is legal, as Frank insists it is, authorities say it intricately dances around the law.
At Liberty PCS, 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.
Frank says because the customer walks away with the phone card they purchased regardless of the outcome of the casino games, the store is not a gambling den.
But the GPD insists the business’s clientele purchase excessive amounts of phone cards they never intend to use, just to amass gaming credits.
Police Chief Denise Turner said the GPD is carefully studying Liberty PCS’ complaint, but she was tight-lipped about plans for the future.
“I’m anxious to read what they have to say. But I can’t say what we are going to do yet,” she said.
She did say that in the meantime, police plan to saturate the area with patrols to keep criminal activity down.
“Any area with high potential for crime, we will patrol more,” she said.
Similar battles between Internet cafes and local governments have cropped up all over the country.
The American Gaming Association has come down hard against what it calls a $10 billion, unregulated, untaxed gambling café industry.
AGA Executive Director Judy Patterson said Frank’s claim for $15,000 per day in lost income proves to be especially damning.
“There is no way they could make that much just selling phone cards,” Patterson said.
Patterson said it’s common for these allegedly illegal operations to re-open and sue the police – the business owners crying about their First Amendment rights – but ultimately, none of these types of cases win.
“Every state that has looked at it has banned it. Florida, North Carolina, Pennsylvania, Ohio, Mississippi – these illegal places spring up, they spread, they play cat-and-mouse with the police. They go away eventually, but they don’t go quietly,” she said.
The AGA doesn’t have an estimate of how many Internet cafes are in California, but Patterson guesses it’s more than 1,000.
“I think California is going to be the next big battleground,” she said.
California’s issue in dealing with the problem is that despite the DOJ’s outright ban on Internet cafes, the state’s fragile budget does not allow for enforcement, leaving it in the hands of local governments.
“These places tend to pop up in communities that don’t have the resources to enforce the law,” Patterson explained.
LeeAnn McPhillips, risk manager for the City, declined to comment.
Frank said Liberty PCS “attracts” people who are unemployed by offering once-a-month resume building classes in the store.
While Frank was adamant that no compulsive gamblers patronize Liberty PCS, he also added: Even if he recognized someone who frequents the store everyday – spending mass amounts of money on phone cards and in turn, spending hours upon hours playing Casino-type games – he would not intervene.
“If someone buys our product or buys computer time, I’m not going to kick anyone out of our business. How people spend their money is up to them. That’s one of the great things about how this country is supposed to be run,” he said.
Another of Frank’s tele-connect operations, Urban PCS in Watsonville, was shut down by Watsonville Police last week, and has already re-opened.
“All over the state this is happening, despite our best effort to educate our cities and counties. They are acting out of ignorance,” Frank said.
Down in San Bernardino County, an Internet café – Internet Palace in Hesperia – is facing a criminal trial by jury Sept. 3.
Frank said that Internet Palace uses “identical” casino-style software as Liberty PCS. Both stores purchase the software from Canadian-based Pong Marketing Inc., which according to the DOJ, specializes in designing software to circumvent state gambling laws.
“When we win that trial, and we will, we expect to be left alone,” he said.
