All along, Hest Technologies painstakingly tried to walk a fine line between legal sweepstakes games and illegal gambling.
On Friday, state and federal authorities decided that the line had been crossed.Senior executives of the Haltom City sweepstakes video game company and the operator of an "alleged" charity have been arrested. The company headquarters and their homes were searched, the Texas attorney general's office said.The executives face felony gambling, money-laundering and organized-crime charges, the attorney general said.The wide-ranging investigation includes cooperation from Tarrant and Anderson counties, the IRS, the FBI and authorities in California, Massachusetts and Virginia.The arrests come about eight months after the Star-Telegram examined Hest's business practices, including mounting legal challenges and criticism that the games are addictive and can lead to the same results as problem gambling.Hest's dealings with a charity also raised questions after the newspaper uncovered financial irregularities at the nonprofit organization.Organized-crimechargesAmong those arrested were Hest President Chris Canard, 44, his wife, Shannon Canard, 41, and Robert Houchin Jr., 36. All were being held in the Tarrant County Jail on suspicion of engaging in organized crime, promoting gambling, keeping a gambling place and possessing a gambling device. Each person's bail is set at $28,000.Another executive, Andrea Geist, 53, was booked on the same accusations, but her bail was set at $4,500. She was no longer in jail late Friday.Authorities also searched the home of a fifth executive, Robert Houchin Sr., who is Chris Canard's father-in-law, attorney general spokeswoman Lauren Bean said.Charity operator Dalace-Skye Duvall, 52, was in custody Friday in the Dallas County Jail, but arrest information was not immediately available.Duvall's charity, Skyeward Bound Ranch, is closely tied to Hest. Records show that Duvall gave the IRS and the Bankruptcy Court widely conflicting accounts about his compensation from the charity, the newspaper found.QuestionabledocumentsAssistant Attorney General David Glickler, who is leading the investigation in Tarrant and Anderson counties, said video sweepstakes promoters often try to circumvent anti-gambling laws by claiming to sell a lawful service, such as time at an Internet cafe.The goal is to induce gamblers to participate in an "illegal electronic sweepstakes."Hest's reasoning was that the sweepstakes prizes were no different from winning $5,000 from a Procter & Gamble sweepstakes.Chris Canard previously said the company's games were precisely designed to create a gambling environment while staying inside the law. Canard said the company never lost a legal battle over the legality of the machines."We've crafted our system ... to not only meet those requirements but also put in place business rules encoded in the software that prevent ... fraud from happening," he said.Duvall's Skyeward charity has been in partnership with Hest since at least 2010. Duvall, who said he is a former cage fighter and gymnast, said he didn't know how much money Hest gives the charity.But the Star-Telegram found discrepancies in Duvall's charity filings to the IRS and his personal bankruptcy documents.Charity documents show that in most years, Duvall received no compensation from the charity. Yet on a 2006 bankruptcy form, Duvall listed a gross monthly income of $7,438 as director of Skyeward Bound Ranch.Creating even more confusion was that the charity brought in just $2,500 in revenue that year, IRS documents show. Bankruptcy documents from 2007 indicate that at one point that year Duvall was averaging income of more than $10,000 a month from Skyeward Ranch. The charity raised $32,000 that year.Duvall told the newspaper last year that he only recently started getting paychecks from the charity."I didn't for 16 years except for ... $261. But it's not a significant amount of money," he said.The attorney general will prosecute the cases in conjunction with the Tarrant and Anderson county district attorneys. The case involved the cooperation of the Tarrant County Sheriff's Department, the Dallas Police Department, and the U.S. Secret Service and other federal agencies.Last year, state Sen. Rodney Ellis, D-Houston, told the newspaper that video sweepstakes need to be reined if legal loopholes were being exploited."If there is gaming going on in this state, it needs to be legal, it needs to be regulated, and the state should receive the revenue it needs to properly fund education, healthcare and public safety," he said.Darren Barbee, 817-390-7126Twitter: @DarrenBarbee
Part 2: Questions raised about charity linked to North Texas video sweepstakes company
Critics call video sweepstakes a bad bet
Gambling raids target machines using software from Haltom City company
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