Austin executive pleads guilty in gambling inquiry

Gordon Graves, the Austin millionaire who rolled the dice in 2005 when he founded a gambling enterprise of uncertain legality, agreed on Monday to plead guilty to a single felony charge of tampering with evidence as part of a sweeping deal to end three separate criminal prosecutions against his company, Aces Wired.

As part of the agreement struck in a Nueces County courtroom, three other Aces executives pleaded guilty to misdemeanor charges of hindering apprehension. The company also agreed to forfeit a little less than $1 million in cash and more than 350 game machines seized in a massive statewide raid on Aces' operations coordinated by the Texas attorney general's office in May 2008.

None of the Aces executives will spend any time locked up. Graves, 72, agreed to pay a $10,000 fine and to accept two years of deferred adjudication, during which he promised to stay out of the 8-liner business — so-named because of the potential number of tic-tac-toe-shaped winning combinations available to players. If he follows the conditions of the agreement, the third-degree felony charge will be dropped in 2011.

Aces Wired President and CEO Ken Griffith, Executive Vice President Knowles Cornwell and Vice President Jeremy Tyra also will pay $4,000 fines. Three of Aces' corporate subsidiaries will hand over another $30,000 in fines as part of the deal.

The case against Aces involved more than a half-dozen state and local law enforcement agencies and brought prosecutions against the company in Nueces, Bexar and Tarrant counties, which made it "the largest coordinated gambling prosecution in Texas history," according to a written statement from the attorney general's office. The various agencies will split the money forfeited by Aces.

An inductee of the Lottery Industry Hall of Fame and former chief executive of Multimedia Games Inc., an Austin-based gambling products company, Graves began Aces Wired to exploit a gray area in state gambling laws. Instead of rewarding players of its slot-machinelike devices with cash, which is illegal, Aces used a debit-cardlike system called "amusement with prize," in which customers accumulated points they could later redeem for merchandise.

Aces said that because the prizes weren't actual money, the system was legal. But prosecutors contended the cards were the same as cash.

"The card has a monetary value, and you can't tell me otherwise," said Adriana Biggs, chief of the Bexar County district attorney's White Collar Crime Division.

Graves was not available for an interview, but in a written statement he said he agreed to the plea bargain to spare his company and employees further prosecution.

"We believed that the amusement with prize electronic system was designed to comply with the spirit and letter of Texas's gaming laws. The Attorney General and state prosecutors felt differently. Thus, just as the captain of a ship is responsible for the actions of its crew, I accept responsibility and want to protect employees who innocently conducted business on behalf of the company," the statement said.

Stephen Fenoglio, one of a half-dozen attorneys hired by Aces to fight the charges, said another reason for the settlement was that Aces was running out of money. "The company had spent over $2.6 million in legal fees," he said. "There was a concern they would run out of money before they finished the legal battles."

Many 8-liner parlors are opened — and closed by police — across the state every year. Most are small, shadowy, mobile operations that run under law enforcement's radar.

Aces, by comparison, operated aggressively in the open. Its stock was publicly traded. Its parlors were well-lit and clean. The company advertised on giant highway billboards; for a while, it was a sponsor of the San Antonio Spurs.

Graves, who has other business interests, also contributed hundreds of thousands of dollars to influential politicians, including Attorney General Greg Abbott, Lt. Gov. David Dewhurst and Gov. Rick Perry.

Aces Wired opened its first gambling center in El Paso in late 2005 and four more the next year in Fort Worth, Killeen, Corpus Christi and Copperas Cove. It later opened centers in San Antonio and Amarillo. In public filings, the company foresaw sprinkling Texas with more than 60,000 of its machines. Graves also contemplated buying a dog track to place some of the machines.

In March 2007, however, Abbott released an opinion that Aces's prize system constituted illegal gambling. "It was very painful," Graves said at the time. "Like a wrecking ball."

Attorney general's opinions are advisory, and the company continued operating, maintaining that its games met the letter of state law. However, Bexar, Nueces and Tarrant counties, along with the state attorney general's office and several other counties, launched a massive undercover investigation into the company's operations. Fourteen months later, law enforcement officers swept into the company's 8-liner parlors in Corpus Christi, Fort Worth and San Antonio and shut them down.

Lawyers for the company complained that police overreached on the raids, confiscating records and bank accounts that had little to do with Aces operations. Bexar County agreed to return more than $100,000 it had confiscated from a bank account controlled by a company officer's wife, who had her own business.


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