Underground Video Gambling Industry Costing Maryland More Than $15 Million Annually In Uncollected Taxes

January 2006 / Abell Reports / Community Development, Criminal Justice and Addiction

Research also shows that in Baltimore City and Baltimore County machine operators are underreporting their income by more than $63,000,000 a year.

Millions of tax dollars are lost annually from an underground slot machine industry in Baltimore City and County, with nearly 3,500 video gambling devices scattered in hundreds of bars, convenience shops, gas stations and liquor stores where gamblers are awarded their winnings from bartenders and clerks, instead of slots in the machines. From Dundalk to Towson, from Hampden to Belair Edison, this unregulated industry has more video gambling machines operating illegally than Delaware’s Dover Downs has operating legally. Though slot machine gambling is illegal in Maryland, Baltimore’s slots industry operates with the
sanction of local government – under the guise that the machines are for “amusement only.”

Because the State does not acknowledge formally that it is in the gambling business, no legislation has been created to prevent convicted felons, tax evaders or forfeited corporations from running the industry, which often goes hand in hand with bookmaking, sports betting, drug dealing and other illegal enterprises. For example, one longtime vending company owner, Joseph J. Stonik, operates 101 video gambling machines as of the writing of this study despite an unsettled $1.1 million tax lien against one of his vending companies. Another vending owner, Gilbert Sapperstein, head of Star Coin Machine Company, with 144 registered video gambling machines, pled guilty in May 2005 to conspiracy, bribery, and theft of $3.5 million from the City’s school system and public works department.

This study presents an accounting of the number of the machines located in these jurisdictions and evidence that the devices bring in an estimated gross annual income ranging between $91 million and $181 million. The study also concludes that the industry is underreporting its income to tax collectors by $63 million to $153 million a year. Further, the study documents that the industry has flourished virtually unchecked, despite a criminal investigation in 1984 (“Operation Quartermatch”), which concluded that video gaming machine owners were cheating on their taxes by underreporting millions of dollars in income. Since then, no government agency or political body has stepped forward to fix the system.