On the morning of May 21, 2008, police from a half-dozen state and local agencies, organized by Texas Attorney General Greg Abbott’s office, burst into a series of gambling parlors spread across five Texas cities. As one team fanned out to search the businesses’ corporate headquarters in Dallas, officers noticed a yellow sticky note attached to the computer keyboard of the company’s CEO.
Lavishly funded by an Austin gaming entrepreneur and buttressed by generous political campaign contributions to top state officials, Aces Wired opened its first gaming parlor in 2005. Its executives were convinced they had discovered a loophole in Texas’s gaming laws that would allow the company to operate its slot machine-like “eight-liner” games legally because players were rewarded with redeemable points rather than cash. Three years later, police and state lawyers concluded otherwise.
Written on the Post-it note, police recognized the name and phone number belonging to a veteran Fort Worth Police Department vice officer. A few miles away, the same officer, Ed Adcock, was helping raid an Aces Wired’s gambling parlor.
As investigators would later discover, Adcock was working two jobs: as a vice officer, and on behalf of Aces Wired where he was earning $6,750 a month to share his expertise and, prosecutors alleged, his inside police department knowledge — including a tip-off the morning raid was coming. Three months ago, a Tarrant County state district judge sentenced Adcock to four years in prison for leaking the information; he is serving time at the Wheeler prison unit in Plainview.
Now, the prominent Austin attorney who signed the police officer’s checks on behalf of the gambling company stands criminally charged with bribery. Stephen Fenoglio is a major figure in the state’s gaming scene, particularly charity bingo. Over the years, he has testified in front of legislators as a witness nearly 50 times, state records show. (Neither Fenoglio nor his attorney, Mark Daniel, returned phone calls for this story, though Daniel told a Fort Worth TV station the charges were “a misguided missile.”)
The case against Fenoglio, scheduled for trial next month, represents the final dangling thread in the Aces Wired saga, and it is a reminder of the broad reach and long tail of a company that blazed a brief, but showy path through many of the state’s power corridors. Aces Wired directly touched Attorney General Greg Abbott, Gov. Rick Perry and Lt. Gov. David Dewhurst, who collectively received more than $300,000 in political contributions from its executives. It spared no expense assembling a team of a half-dozen high-powered lobbyists and former federal prosecutors to represent the company’s interests.
It fed tens of thousands of dollars more to key lawmakers whose support it sought. When, six weeks after state and local police shut down Aces Wired and criminally charged its executives, Fenoglio appeared in front of the House Committee on Licensing and Administrative Procedures to defend the company, he still found a hospitable reception. “Thank you for trying to do something in Texas within the parameters of the law,” said Chairman Ismael “Kino” Flores, D-Palmview, who received $8,000 in Aces contributions between 2006 and 2008.
At the same time, the company’s fate demonstrates the limitations of law enforcement’s response to even the biggest illegal gaming operations. Following the raids, Abbott boasted that the Aces Wired investigation represented “the largest coordinated gambling prosecution in Texas history.”
Yet, while the operation halted the company’s operations and collected $1 million in forfeited cash, it yielded extremely modest results in the courtroom.
Aces Wired executives Kenneth Griffith, Knowles Cornwell and Jeremy Tyra each pleaded guilty to a single misdemeanor crime. They paid a $4,000 fine, served no time and agreed to two years of deferred adjudication, meaning any record of a conviction would be erased after that time. All three were sentenced to probation — unsupervised — and community service, which was waived.
“They got an extremely sweet deal,” said Michael Heiskell, Adcock’s attorney. Because the charge the men plead to, hindering apprehension, isn’t gambling related, the executives were allowed to quickly and legally rejoin the gaming business. Today, they run Four Corners, a corporation that includes state government-licensed bingo supply companies. They didn’t respond to a message left at the company.
Originally charged with a half-dozen gambling-related offenses, the company’s Austin founder, Gordon Graves, pleaded guilty to a single low-level felony charge, tampering with evidence, for his part in hiding Aces’ gaming equipment in anticipation of the police raids. Like his colleagues, his criminal conviction was cleansed after two years.
He still consults with his family business, which is tied to Four Corners. Recently, Graves, who declined to comment on his involvement with Aces, has quietly resumed his generous political donations; late last year he wrote a $20,000 check to Dewhurst, state filings show.
Law 'purposefully vague'
Prosecutors’ inability to secure meaningful penalties for gambling violators is in part the doing of state legislators. Despite years of legal wrangling and enforcement operations like the Aces Wired case, the laws that describe what is considered legal gaming and what isn’t are still surprisingly vague, making criminal cases challenging to mount.
“It is one of the most convoluted statutes in existence in Texas law,” said former Williamson County District Attorney John Bradley.
“I think it would be fair to say the law is purposefully vague, because the people running these machines want it that way,” said Shannon Edmonds, government relations director of the Texas District and County Attorneys Association. “They make a lot of money and invest it wisely at the state capital.”
Fighting illegal gaming hall owners has become so frustrating that in recent years some local jurisdictions, mostly in South Texas, have begun quietly accepting them inside their borders, collecting tens of thousands of dollars in fees from operators instead of raiding them.
Three months ago, state legislators passed two new laws allowing Harris and Willacy counties to locally regulate game rooms. Officials claimed it would give them more law enforcement tools. “They were so blatant,” said Willacy County Judge John Gonzales Jr. “They were paying out cash in the open.”
To others, though, it was just another sign of authorities’ tacit embrace of the games. Hidalgo County District Attorney Rene Guerra said his county declined to join its neighbor to be included in the legislation, which he described as a vehicle for the counties to collect new tax money.
The game rooms “are illegal — they’re illegal as hell,” Guerra said. “Some of the people who go to Austin are gutless.”
In recent years, many state-licensed bingo halls, facing declining or stagnant revenue from a game considered to be old-fashioned and boring — at least compared with higher-stakes gambling — have attempted to use eight-liner and other questionably legal gaming schemes to supplement their incomes. Despite numerous legal cases, however, the Texas Lottery Commission’s administrative rules describing what is legal and not remain ambiguous — or even unwritten.
Six months ago, the agency attempted to revoke the bingo license of two North Texas bingo halls and fine them nearly $2 million for installing apparently illegal eight-liner machines. But after hearing the case, an administrative law judge instead recommended only a minimum penalty for the Golden Belle and Brazos bingo halls, blaming state regulators for their inaction.
“The Commission has failed to adopt rules on this issue (and has had fifteen years to do so),” Judge Michael O’Malley wrote. “If the Commission would adopt rules, ad hoc adjudication … could be avoided, and the rules would provide licensees with a clear definition of a game of chance.”
Officer blurred line in jobs
During the case, both bingo halls were represented by Fenoglio, whose name can be found on many, if not most high-profile legal discussions involving charitable bingo across the state. At the Texas Lottery Commission, which regulates the $750 million-a-year enterprise, his expertise is such that the governor-appointed commissioners occasionally call on him to help untangle laws and rules and to participate in the making of new ones.
“He is very knowledgeable about bingo,” acknowledged Phil Sanderson, the recently retired director of the commission’s Charity Bingo Operations Division. Fenoglio is a regular visitor to the Legislature, where he meets with policymakers on behalf of hundreds of nonprofits that sponsor the game of chance.
Fenoglio’s billing statements for Aces show many hours spent preparing testimony and talking points for legislators. Court documents indicate he first approached Adcock on behalf of the company in 2007; Adcock began receiving monthly payments from him that December.
A 25-year veteran of the Fort Worth Police Department, Adcock retired at the end of February 2008, although he stayed on as a reserve officer in the department’s vice unit through September of that year, occasionally participating in police operations. While some of the officer’s work for Aces was unrelated to his police job — traveling around the country to research gaming — his billing statements to Fenoglio indicate much of it blurred the line between his day job and his moonlighting.
On Jan. 17, 2008, he billed an hour for “attempt to contact San Antonio PD vice.” Two weeks later, Adcock wrote an email to a Dallas police officer: “Hey — Just got wind of Aces Wired opening … in your fair city. If you need info on them, give me a yell.” A week after that, he billed Fenoglio another hour for “report on possible investigation by DPS Intel.” A March 13 email from Cornwell to Fenoglio contained a list of names and asked, “Would you have Ed review these names as potential undercover agents.”
During his trial this spring, Adcock contended his superiors knew of his outside work for Aces, even inviting him to participate in the investigation into the company. Tarrant County prosecutors dismissed that claim in court.
“There’s no way the Fort Worth Police Department would have let him anywhere near the investigation if they’d known of the connection,” Assistant District Attorney Lloyd Whelchel said.
Police suspected a mole was reporting their internal plans back to Aces Wired, and circumstantial evidence appeared two days before the raid, according to prosecutors and court documents. Arlington police, who’d been staking out an Aces gaming room, noticed dozens of the company’s gaming machines being trucked away. Department of Public Safety troopers followed the truck to a warehouse, where they found bills of lading for nearly 450 machines that had been moved in recent days and were headed to Oklahoma.
A camera secretly installed outside Aces’ Dallas headquarters to observe company executives also recorded computers and documents being removed the weekend before the raid. When police arrived, employees were waiting for them, court records show. An email found at an Aces parlor in Corpus Christi instructed staff to move equipment in anticipation of the police arrival.
After initially denying that he fed police information to Fenoglio and Aces, Adcock eventually admitted that he did at least once. On the morning of the raid, “I attended a warrant briefing … held by DPS officials. After the briefing I went to the parking lot to my personal vehicle to get my equipment and I called Steve Fenoglio,” he wrote in a statement.
Adcock pleaded guilty only to misusing information — not getting paid for it. “Adcock received no benefit for his crime,” Heiskell, his attorney, wrote in a presentencing statement.
That means prosecutors will have to work to prove Fenoglio specifically paid the police officer for tipoffs. “They’re going to have a hard time,” predicted Heiskell.
Whelchel said he’s confident. “When you look at the checks paid to Adcock by Fenoglio, it is clear who he was working for,” the prosecutor said.
Court documents suggest Aces executives weren’t strangers to the issue. An exhibit entered into evidence at Adcock’s trial was a Dec. 12, 2007, billing statement in which Fenoglio charged the company for 4.7 hours of work including “legal research on Penal Code Chapter 36” — the state statute addressing bribery and corrupt influence.
This story continues ongoing scrutiny of government by Eric Dexheimer, a Statesman investigative reporter since 2007. His previous coverage has included in-depth examinations of bingo regulation and the state lottery, as well as revealing how local governments profited from illegal gambling.