Under California law, bingo is supposed to be a nonprofit enterprise that raises money for charity. The amount of money generated can be significant. At the Gilman Street Bingo Hall in Berkeley, gross revenues exceeded $5.6 million in 2009. However, almost none of that money ever went to charitable causes. Most of it —$4.9 million — ended up in players' pockets in the form of cash prizes. Nearly all of the rest went to so-called "overhead" costs that may have been nothing more than profit-taking.
Last year, the City of Berkeley cracked down on the Gilman Street enterprise after a year-long investigation, and then forced the hall to close for good. The investigation revealed that the bingo hall was operated by Youth Actors Company, a group that said on its tax returns that it assisted "at risk youth by providing healthy alternatives through a year-round acting program that teaches leadership and life skills."
But during the time the group operated bingo from the Gilman hall, the Youth Actors Company never held a class or performance. The address listed for the nonprofit was a single-family residence in Pinole. And city officials said there was no evidence the money the group raised from bingo ever went to charitable activities. "What they were doing there was straight up shady," said Gregory Daniel, the Berkeley code enforcement official who led the investigation.
Daniel alleged that the Youth Actors Company was a front for its operator to make money, and that the hall was nothing more than a low-dollar gambling operation. Neighbors of the hall testified that the place drew crime to the area. In July, the city revoked the bingo permits for the two nonprofits operating at the hall. On November 16, the Berkeley City Council voted to revoke the hall's use permit, essentially shutting down Berkeley's only large-scale bingo parlor.
As a result of the investigation, Daniel and his department also helped the council revise Berkeley's bingo ordinance. Tight restrictions in the new ordinance will likely prevent large-scale bingo halls like Gilman Street from cropping up in the city any time soon.
Ulysses Cooperwood, head of Youth Actors Company, took the majority of the heat for Gilman Street's downfall. William Carpenter, another bingo operator who was running games out of the hall two days per week at the time of the investigation, also endured plenty of criticism. City officials implicated both in allegedly running the games for their own personal gain.
But Cooperwood and Carpenter don't appear to have been the real moneymakers at the bingo hall. Cooperwood said that in 2009 -- the year the hall raked in $5.6 million -- he received no more than $11,000.
Instead, interviews suggest that the true bingo profiteer may have been Robert "Bob" Casteel, an experienced operator who has a reputation in some circles for being something of a Bingo Kingpin. Casteel has had his fingers in bingo halls in Oakland and Vallejo for years, and has been accused of muscling out competitors who try to run legit games. The stakes are substantial. Bingo games can attract 400 players a night who descend on the East Bay from throughout the West Coast. Evidence suggests that Casteel may have pocketed nearly a half-million a year from the Gilman Street hall alone. Indeed, after he got his cut, there reportedly was almost nothing left over — certainly not much for charity.
Neither Casteel nor an attorney who has said he represents Casteel returned numerous phone calls seeking comment for this story. But in court documents and public testimony, Casteel has adamantly maintained that he has done nothing wrong.
Either way, his role in the Gilman Street hall seems to have gone unnoticed by the City of Berkeley, even though it may have been the first city in the East Bay to take a bite out of his bingo profits.
Records suggest that problems at the Gilman Street hall began around 2000. By that time, the McDermott Family Limited Partnership, headed by George F. McDermott, had held a permit to run bingo games at 1284 San Pablo Avenue since 1986. From then until 2007, roughly 35 different nonprofits operated bingo games out of the space. Daniel said that by the time he began investigating the hall in October 2009, it already had a thick file of complaints and citations.
Jimmy and Carolyn Carter, who run the Meal Ticket restaurant across the way from the hall, spoke at a November 2010 public hearing about their experience living and working next to the bingo hall since 2001. "Since we have been there, there has been basically nothing but problems within the last ten years out of the bingo hall," Jimmy Carter said. "At one point, there was rampant drug dealing going on. At other points, other times, there's been brawls in the parking lot, and also overloading in the parking lot."
"The police have been called ... I can't even count the number of times," Carolyn Carter added. "There have been near riots at the property over the years."
The city began issuing citations for minor offenses. In 2005, an ATM was installed inside the hall without a zoning permit. In 2006 and 2008, code enforcement received complaints that bingo games were running as late as 1 a.m. — well past the mandated 10:30 p.m. closing time.
Then one day in late 2009, Daniel got a call from a woman who said she won a $1,000 prize at the hall but that a manager made her give back the money because he told her she had the "wrong numbers." The manager was not supposed to be awarding prizes in excess of $250, according to city code. Daniel also learned that on the same night, a gun had allegedly fallen out of Cooperwood's pocket while he was working at the hall. "After that," Daniel said, "we got more aggressive about it."
Cooperwood had started managing bingo at the Gilman hall in February 2008 under a permit for a nonprofit named the Phyliss Elena Parker Foundation. Tax forms indicate that money from the Georgia-based foundation went to scholarships for kids. Then in July 2009, Cooperwood brought in the Youth Actors Company.
It was an idea he had from his own experience with acting classes, Cooperwood said in an interview. The city's accusation that the group was merely a front for his personal gain "simply isn't true," he said. When the city revoked his permit in July 2010, the Youth Actors Company was still struggling to get off the ground, he added. He claimed he had been scouting places to rent for classes and to put on performances. "We were definitely working toward that goal," he said.
Cooperwood also said that he donated $10,000 of the $11,000 net profit from 2009 to the nonprofit Inter-city Services, a Berkeley-based workforce training group. Rent and other overhead ate up the rest, he said.
Cooperwood said his intent was never to run bingo seven days per week on behalf of Youth Actors Company. In January 2010, Carpenter and his nonprofit, East Bay Charities, entered the Gilman Street scene to operate bingo two days per week. When Carpenter applied for a permit at the hall, he was simultaneously running a game in Hayward for the same nonprofit.
Daniel said he fielded complaints about both operators handing out prizes that exceeded the city's $250 limit. Code enforcement sent Carpenter and Cooperwood letters informing them that they were violating city code. Cooperwood replied with letters of his own, quoting state law that sets prize limits at $500, and said that offering anything less could drive the hall out of business.
Competition for bingo players in the East Bay is fierce, and pricing is key. "You must be able to get a base" of customers, Cooperwood explained. He conceded to offering prizes over the city's limit, but said that without offering those prizes, Gilman Street would have no competitive edge over bingo halls at Foothill Square and Durant Square in Oakland. Nearly everyone was handing out $1,000 door prizes, he said. "We weren't doing anything so unusual, so out there, so outrageous," he said. "The only thing I was looking for was an even playing field."
Cooperwood said that if anything is outrageous, it's the accusations that have been tossed around about guns and drugs at the hall. He also said the hall brought much-needed business to local business owners. Even Carolyn Carter acknowledged in an interview that the now empty storefront of the Gilman hall isn't great for their business.
The Gilman Street hall built a loyal following of regular bingo patrons that were treated like family, Cooperwood said. In an effort to keep the hall open, Cooperwood presented Daniel with a petition from these players, including names, addresses, and phone numbers.
But Daniel used the information to dig deeper into his investigation. "We just started calling people," he said. The players quickly revealed what Daniel already suspected: the hall's zoning violations were plentiful. And now he had proof. "They were just spilling beans left and right," he said.
The further Daniel got into his investigation, the more he began to understand the stakes. On any given evening of the week, the Gilman Street hall was packed with between 300 and 400 gamers, he said. "We had no idea how huge the bingo subculture is," Daniel said. "There were people coming here from Reno to play bingo."
There was big money to be made from that kind of following. But Cooperwood said he didn't see very much of it, adding that that this was one important fact that the City of Berkeley failed to recognize. "Bingo is such a strange creature," he said. "Most city officials don't know anything about it."
After payouts to players, he said, most of the money went to rent for the facility and the "card minding" machines — electronic machines that allow patrons to play hundreds of bingo cards at once. The monthly rent for the facility and the machines totaled $52,000, which Cooperwood said all went to local bingo mogul Bob Casteel. In other words, by the end of 2009, bingo games at the Gilman hall, according to Cooperwood, raised $11,000 for charity and grossed $624,000 for Casteel.
In 2007, the McDermott family informed the City of Berkeley in a letter that Casteel would be acting on behalf of the McDermott Family Limited Partnership relating to anything "bingo" at the Gilman hall. David Koski, a self-proclaimed representative for the McDermott family, said at a November 2010 public hearing that the McDermotts brought in Casteel because they had been having some trouble at the hall. And Casteel, Koski said, had ten years of experience operating bingo halls around the East Bay.
Casteel is the bingo operator — essentially the landlord — for both the Foothill Square Bingo Hall in East Oakland and 777 Bingo, a large hall in Vallejo. "We wanted somebody who had verifiable credentials that had run bingo in other areas of the Bay Area that knew what they were doing," Koski said. "The only thing that the McDermott Family Limited Partnership was doing was collecting rent from Mr. Casteel."
As the bingo operator, Casteel was acting as a middleman, collecting rent from Cooperwood and then paying some of it to the McDermotts, while pocketing most of the rest. Koski said at the public hearing that the McDermotts received $14,000 a month from Casteel. So if both Cooperwood and Koski are telling the truth, Casteel's cut from Gilman Street came to about $38,000 a month – or about $456,000 annually.
Koski said that Casteel was also in charge of choosing nonprofits to operate out of the hall. Although the letter said he officially began this duty in 2007, interviews and public documents suggest that he had a hand in it long before that.
City documents show that a nonprofit, Kids Education Development Scholarships (KEDS), began operating bingo out of the Gilman hall as early as 2004. That same year, KEDS also ran bingo games at Casteel's Foothill Square Bingo Hall. In October 2006, a group called Transitional Living Collaborative (TLC), also started operating out of the Gilman Street hall. Around the same time, this group was also operating out of Casteel's 777 Bingo hall in Vallejo.
In 2008, several Vallejo charities sued Casteel, TLC, and two other nonprofits, alleging that they were running a scam that enabled Casteel to collect exorbitant rents from the bingo games. Tax forms showed that TLC was based out of one of Casteel's offices in Oakland, and then later shared a post office box in Moraga with a few other nonprofits that also rented from Casteel. TLC supposedly provided relief to victims of Hurricane Katrina. But in testimony, a representative for the nonprofit who also admitted she was Casteel's employee couldn't recall a single instance where TLC donated any funds to that cause, according to the lawsuit. "In essence," the legal documents alleged, "Mr. Casteel controls all aspects of the multimillion-dollar cash bingo industry in Vallejo."
The charities also alleged that Casteel had cornered a monopoly on the local bingo market by not allowing them an opportunity to cash in on potential bingo proceeds for legitimate charitable activities. The charities alleged that suppliers said they had been told by associates of Casteel that he would cut them off if they sold to his competitors. The charities also claimed that Casteel's operation lowered bingo "buy-in" charges on the nights they ran games in an effort to siphon off their customers. Attorneys for Casteel and the other defendants argued in court that the allegations were false and lacked evidence.
In the end, the Vallejo charities lost the case on a technicality. The judge ruled that they didn't have legal standing to sue Casteel.
Yet none of the numerous allegations made by the Vallejo charities against Casteel came up in Berkeley's investigation of the Gilman Street hall. Daniel said he only spoke with Casteel once during his investigation. In that conversation, Daniel said that Casteel alleged that Cooperwood was running a "lawless" operation. Daniel said that when he asked Casteel how he could allow illegal activities to occur at a hall he was supposedly managing, Casteel's response was that he had no idea about it at the time it was happening.
Casteel also never appeared at any of Berkeley's hearings on bingo. Daniel said he never spoke to a representative for the McDermott family, who essentially handed over bingo management to Casteel.
However, Daniel did say that he spoke to Frank Ennix, an attorney claiming to represent both Casteel and the McDermotts. Ennix did not return calls for comment for this story, but Daniel said that when he talked to Ennix, the attorney tried to make a deal to prevent Daniel from revoking the bingo hall's use permit. But Daniel wouldn't budge. "I told him in August," Daniel said, "'We're shutting you down.'"
When Casteel took the podium in Oakland's city council chambers during public comment at a December 2008 meeting, he spoke confidently and rationally, with hands planted firmly on either side of the stand. He wore a sports coat and peered over a pair of oval-shaped spectacles at now Mayor Jean Quan and other members of the public safety committee. His short, dark grayish hair was slicked back, his face, clean-shaven.
Casteel was complaining about proposed changes to the city's bingo ordinance that the council committee was scheduled to vote on at the meeting. The proposal included a host of detailed regulations concerning the amount of rent that could be paid by charities at the halls. "The underlying implication of a lot of the questions that were raised in here is that somehow, bingo people are dishonest," Casteel said, pausing. "If you look at the bottom line, these charities have exceeded expectations — they've raised the bar and created higher expectations."
Casteel alleged that Barbara Killey, who is now retired but at the time oversaw the city's bingo operations, hadn't worked hard enough with bingo hall operators, like himself, to hammer out a compromise before submitting the proposed changes to the council. But Killey responded that she had indeed tried to open a dialogue with the operators and that they had dodged her most important questions.
"Even the categories of information that we were requesting were not showing where funds were really going," she said at the meeting. One example that really stood out, she said, was the excessive rents. "Durant Square charges in excess of $50,000 per month, and Foothill Square, which is Mr. Casteel's facility, approximately $70,000 per month to the two organizations there."
The two operators made it explicit that they didn't want the information widely shared, she said. Casteel's attorney had objected to the city looking at Casteel's Foothill Square financial records, Killey continued, and told the city that commercial rents are not controllable by jurisdictions. "So I have not felt that they were interested in working on the proposal," Killey said. While she spoke, Casteel stood behind her with lips pursed, clutching a mess of papers to his chest.
Councilwoman Pat Kernighan said at the meeting that it sounded to her like a "racket," but that there's nothing the council could do if it's not illegal. Killey pushed for the council to set a limit on overhead that charities would have to pay, or at least require the landlords to show that they are charging fair-market rent at the halls.
For her part, Quan appeared to be the fiercest critic of the bingo operations. "Out of $15 million that's coming mostly out of low-income people in East Oakland," she said, "only about half a million, or 3 percent, is going back to any kind of charitable institution."
In 2009, city officials finally approved a watered-down revision of the city's bingo ordinance that requires landlords of bingo halls to submit their financial documents to city officials. Officials said they hoped this requirement would cap the amount of overhead the nonprofits were paying. The proposed revised ordinance implied that city officials would be looking into whether nonprofits were paying fair-market value for rent.
Casteel appeared at a July 2009 public safety committee meeting to oppose this revision, too. "The purpose of this, of course, is to assert some kind of local control over the amount of rent that's charged," Casteel said at the meeting. He also said he charged 21 cents per square foot less than what the landlords charge at the Durant Square bingo hall – his competition. In addition, Casteel told council members that it would be a violation of California civil law to impose any form of commercial rent control. "This will result in litigation if it's pursued," he warned.
But Killey said that the revised ordinance would help allay concerns about not enough bingo money going to charity. "Certainly we're not permitting bingo for private gain," she said.
The new ordinance went into effect in August 2009. But since then, not much has changed in Oakland's bingo scene.
Nonprofits running bingo in Oakland are still paying sky-high overhead charges. The only thing that has changed is that one of the nonprofits that had been operating out of Casteel's Foothill Square hall, Breast Cancer Development and Research Society (BCD&R), which also has ties to him, is no longer operating bingo games there. Instead, Kids Educational Development Scholarships (KEDS), which ran bingo games at Gilman Street and also is linked to Casteel, now operates out of his Foothill Square hall seven days a week.
Daniel's year-long bingo hall investigation and follow-up actions in Berkeley occurred at light-speed compared to Oakland. And with their revised ordinance, Berkeley city officials have effectively shut down the possibility that the city will host another large-scale bingo parlor in the near future. Nonprofits that have proven to be well-established in the Berkeley community can apply for a permit to run bingo games as a supplementary form of fund-raising. But there will be no more bingo parlors run by elusive nonprofits that don't necessarily conduct charitable activities and instead dole out bingo proceeds for "overhead" costs.
The fortitude of Berkeley's revised bingo ordinance relies on a key provision that limits nonprofits from spending more than $2,000 of the bingo game proceeds on overhead costs. The rule looks a lot like a state law that requires the overhead cap for certain nonprofits – specifically, those that don't make political contributions. For Berkeley, the rule applies to every nonprofit looking to run a bingo game.
Of course, this particular provision existed in a similar form before the recent revisions. But it wasn't enforced. Daniel said that's all about to change. "We're going to enforce the entire ordinance," he said, "and we're going to enforce it aggressively."
Tougher restrictions and more oversight of Oakland's bingo operating nonprofits also might reveal potential illegal activities that could force the city to shut down its bingo halls. For instance, BCD&R Society donated $5,000 total to former state Assembly Speaker Fabian Nunez in 2005 and 2006. According to state law, nonprofits operating bingo are not supposed to donate to politicians or political interests unless they spend just $2,000 or less of their bingo proceeds on overhead charges. Community Charities, which operates out of the Durant Square bingo hall, donated over $15,000 to a charity that allegedly disbanded years before those donations were made.
But unlike Berkeley, Oakland appears less willing to see its bingo halls go down. That's at least in part because even with high overhead, bingo can be a big moneymaker for charities. Just 3 percent of the total revenues from a large-scale bingo operation can mean hundreds of thousands of dollars for charity. Plus, nonprofits running games out of Oakland's bingo halls have donated to the public schools and the Police Activities League. According to tax records, BCD&R Society donated $50,000 in 2008 to then Mayor Ron Dellums' summer jobs program.
Which is why Berkeley isn't banning charitable bingo altogether. Daniel said that the city will begin vetting nonprofits for new permits soon. But this time, he promised, the city will be watching its bingo operations very closely. "We have a chance to get this right," he said, "and we're going to make sure we get it right."