She’s Not Bluffing. Kim Ogg Calls Area Poker Clubs’ Bet their Operations are Legal

Two Houston area poker rooms and their owners have been called to show their legal cards in a fight to shut down their operations and convict their operators of felonies. Other area poker rooms are on notice – local law enforcement is betting they can shut down and lock up those who have gone all-in on a questionable legal theory allowing them to operate.

As was widely reported in the Houston area yesterday, police executed search and arrest warrants at two poker clubs. Nine people were arrested, including five alleged owners. This was the result of a lengthy investigation according to the Harris County District Attorney press release and the filing of parallel civil suit.

While criminal charges are pursued by the Harris County District Attorney’s Office, the Harris County Attorney filed a nuisance lawsuit yesterday seeking injunctions against a Galleria area poker club and its alleged owners. That lawsuit stated that arrest warrants for five individuals and a search warrant for the club were signed a few days earlier. Evidently, this was a coordinated effort.

The civil suit also reveals public information from a lawsuit between some of the owners was a source for the investigation. This is not unusual. Public documents in civil cases are often rich fodder for law enforcement and other investigators.

The criminal charges against the owners currently include the first-degree felony offense of Money Laundering. The range of punishment is 5 – 99 years or life in prison and up to a $10,000 fine, though up to ten years of community supervision may also be a possibility.

Ultimately, these prosecutions could depend upon whether the gambling was illegal. Built into several of the gambling offenses in the Texas Penal Code is an affirmative defense owners and operators may have relied upon to protect their operations.

Both the “Gambling” and “Keeping a Gambling Place,” statutes state that it is an affirmative defense to prosecution if (1) the gambling occurred in a private place, and “(2) no person received any economic benefit other than personal winnings; and (3) except for the advantage of skill or luck, the risks of losing and the chances of winning were the same for all participants.” See Tex. Pen. Code §§ 47.02 and 47.04. To be successful, a defendant has to prove all three elements by a preponderance of the evidence.

The first challenge is whether a poker club is a private place. Under the law, a “private place” is “a place to which the public does not have access, and excludes, among other places, streets, highways, restaurants, taverns, nightclubs, schools, hospitals, and the common areas of apartment houses, hotels, motels, office buildings, transportation facilities, and shops.” See Tex. Pen. Code §§ 47.01. By requiring a paid membership not all may be willing to pay, one may argue that these clubs were no longer accessible to the public, and thus a private place. However, that is not the only hurdle.

The lynchpin of any defense may be whether the fees allegedly charged or concessions sold these clubs comply with the requirement that “no person received any economic benefit other than personal winnings.” This language does not limit the economic benefit to the players themselves, and persons can generally include entities. The legal importance of the fact that the business is making money off of the fees, food, and drink sold to the players is likely the most contentious element. The prosecution may emphasize that these clubs exist to make money off gamblers, not some other activity that the gambling is incidental to – e.g. a friendly poker game in a country club locker room.

If the owners and operators relied on a legal interpretation or advice, they may have other defenses or they may simply lack criminal intent, which their open and notorious operation suggests.

Finally, one may argue that the statute is unconstitutionally vague.

This is a bet the local authorities appear willing to take. After all, in a criminal case, the Defendants have to prove their affirmative defense. And considering they’re charged with first degree felonies, the stakes can’t get any higher.