Candidate highlights opioid crisis, but donors tied to sweepstakes

The vast majority of reported donations to the campaign of Bobby Kimbrough, a Democratic candidate for sheriff in Forsyth County, come from four individuals tied to the internet sweepstakes industry, but the candidate’s signature issue is combating the opioid crisis.

Bobby Kimbrough holds all the hallmarks of a dream candidate for a Democratic Party that’s looking to ride a blue wave in November that could unseat a popular Republican incumbent in the Forsyth County Sheriff’s Office.

Like Bill Schatzman, the current sheriff, Kimbrough is a retired federal law enforcement agent who would take office as an outsider without ties to any of the various factions within the enlisted ranks. While Schatzman first won election in 2002 as a retired FBI agent, Kimbrough retired in 2016 after a 21-year career as a special agent with the Drug Enforcement Administration. Since retiring, Kimbrough has nurtured a second career as a motivational speaker, publishing books with local author Mercedes L. Miller called Surviving the Stop: Change the Atmosphere, Change the Outcome and Beyond Midnight: Quotes and Words of Wisdom to Strengthen and Empower. Kimbrough’s public figure Facebook page is replete with inspirational sayings like, “We have a chance to shape the future today. Imagine the possibilities.” And, “Knowledge is the great emancipator. Seek it. Your freedom depends on it.”

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Kimbrough’s family story holds a poignant, if tragic dimension that will make him relatable to many voters in Forsyth County: His wife, Clementine, died more than 10 years ago. In an article published in Forsyth Woman on March 1 — weeks after he filed for sheriff — Kimbrough noted that his late wife’s death certificate listed the cause of death in 2005 as “methadone toxicity.”

“While I was fighting the drug war, there was a war going on in my home; I had no idea the effect it was having under my own roof,” he wrote. “If I am completely honest (as with many whose families struggle the way my family has), looking back on that tragic day, all the signs were there, I just ignored them.”

Kimbrough wrote that at the time of his wife’s death, “Because of my ignorance of this illness, my lack of knowledge of this addiction, I was ashamed to discuss it. So when people asked me what the cause of death was, I never told them the truth. I would tell them my wife died from an aneurism.”

Kimbrough has made addressing the opioid crisis one of four planks in his campaign platform, including creating a full-time narcotics unit in the sheriff’s office.

But Kimbrough’s campaign website and social media feeds remain silent on an enforcement issue that has bedeviled North Carolina sheriffs for more than a decade: internet sweepstakes parlors. The absence of the issue from the candidate’s platform is notable because $10,000 out of $11,000 raised in total receipts in Kimbrough’s most recent campaign-finance report filed on March 6, comes from four individuals involved in the internet sweepstakes industry. For at least the past decade, the industry has operated in a legal gray area that presents challenges for local law enforcement and ample room for discretion by sheriffs. The role of sheriff’s offices in enforcement of regulations on internet sweepstakes business is illustrated by a case, Sandhill Amusements Inc. v. Sheriff of Onslow County, that reached the NC Court of Appeals. In Sandhills, the county sheriff and district attorney wrote a letter to the sweepstakes operators warning that their equipment could be seized as evidence and the owners could be charged criminally. Sandhills Amusements Inc., in turn, sued the sheriff’s office. The court of appeals affirmed a lower court ruling enjoining the sheriff’s office from taking enforcement action against the sweepstakes businesses in Onslow County. As an indication of the ambiguity surrounding the industry, a blog post on the case by the UNC School of Government has drawn two comments from police detectives in the past 12 months seeking clarification on whether establishments seeking to open in their jurisdictions are legal.

Four individuals, who each put up $2,500 to finance Kimbrough’s campaign, also participated in a coordinated effort by internet sweepstakes operators to contribute to the 2012 campaigns of the three most powerful Republican politicians in the state: Senate President Pro Tem Phil Berger, then House Speaker Thom Tillis and future Gov. Pat McCrory. David P. Hagie of Mocksville, who is among the donors to the Kimbrough campaign, was interviewed by a State Board of Elections investigator about efforts to coordinate contributions to the Berger, Tillis and McCrory campaigns in hopes of obtaining legislation favorable to the industry.

Kimbrough could not be reached for comment for this story. His campaign manager, Cynthia E. Hagie said on Sunday that Kimbrough was traveling out of state to visit a friend who suffered a massive stroke. Cynthia Hagie, who is David Hagie’s sister, said she recruited Kimbrough to run for sheriff and solicited campaign contributions on his behalf.

“Personally, I could care less about internet sweepstakes,” Cynthia Hagie said. “My family and so many friends have been impacted by opioid addiction. We recruited, begged Bobby to run for sheriff. It’s very personal for him, too. It’s very personal for me and for my brother and other people who have donated to the campaign.”

David Hagie and another donor, Kim Childress, are both listed in the campaign finance report as residing at a Farmington Road address outside of Mocksville, in Davie County.

The other two donors, Richard J. Phillips and Mary Stone of Clemmons, are identified in the report as being self-employed through H&P Business. The company’s annual filing describes it as “computer intertainment.”

The State Board of Elections investigation, which resulted in no criminal indictments when it concluded in 2015, revealed the role of four prominent law firms and a massive flow of campaign dollars from the internet sweepstakes industry. The investigation found that Harry J. Kaplan, a partner at McGuireWoods law firm, hosted a “roundtable discussion” for clients in several industries to meet then-candidate McCrory on Feb. 23, 2012. Among those at the meeting was Gardner Payne, an internet sweepstakes operator and former lobbyist at the law firm. The election watchdog group Democracy North Carolina found that within eight days, the McCrory campaign received a total of $32,000 from sweepstakes industry donors, including $4,000 contributions from David Hagie, Kim Childress and Richard J. Phillips.

Similarly, Kaplan and Payne met with then-House Speaker Tillis on May 10. Within six days of the meeting, the Tillis campaign received $60,002 from sweepstakes donors, including $4,000 contributions from Hagie, Childress and Phillips.

And on Sept. 11, Kaplan and Payne met with Senate President Pro Tem Berger. Within a month, the Berger campaign received a total of $26,000 from sweepstakes donors, including $4,000 from Hagie.

William George, one of the donors, was quoted in a 2013 Associated Press story as saying that Hagie collected the checks from him and other sweepstakes operators. The AP reported at the time that the donors “sought a new law that would reverse” a 2010 legislative ban “and legalize the games,” quoting George as saying, “We didn’t give them the money because we liked them. We just knew they were powerful people up in Raleigh and they could get done what we wanted to get done. You give them money and they’re supposed to do what they say they’re going to do.”

A trust in the name of Chase Burns, an Oklahoma businessman who owns International Internet Technologies — which licensed software to the sweepstakes operators, David Hagie among them— gave $274,000 to North Carolina candidates in the 2012 election, making it the largest single donor that year, according to Democracy North Carolina.

The State Board of Elections investigation found that Burns’ company paid the Winston-Salem law firm Grace, Tisdale & Clifton a total of $7.8 million from October 2009 through March 2013. The agency reported that Burns mailed campaign checks to Grace, Tisdale & Clifton, and that sweepstakes operators that contracted with Burns’ company would also deliver checks, payable to North Carolina political committees, to the law firm for distribution to the candidates. The sums of money spent to influence lawmakers and keep lawyers on retainer provides a sense of how much industry leaders were willing to spend to protect their investments and the extraordinary profits that could be yielded from operating the games.

A 2009 letter from Michael A. Grace, a member of the law firm, highlights the magnitude of Burns’ investment in North Carolina, as well as the substantial overlap between industry practices and law-enforcement concerns. Noting Burns’ concern that the law firm’s bills for hourly services “were becoming quite large,” Grace proposed a monthly retainer of $195,000.

“I have had to spend the majority of my time for the last year on enforcing IIT’s injunctions to the exclusion of other matters, and this has significantly impacted my ability to take on new work,” Grace complained to Burns. “The legal issues and legal knowledge required in this matter are unique. Likewise, obtaining an injunction against state law enforcement is rare and required a detailed understanding of the facts and the complex legal issues involved.”

Outlining Grace, Tisdale & Clifton’s work to keep Burns’ company out of legal trouble, Grace wrote, “Those issues have included enforcements of criminal statutes, seizures of property, zoning and land use regulation, and have resulted in meetings with prosecutors, law enforcement and zoning officials. We have also worked consistently with lawyers, investigators and experts from across the country to assist you with federal and state regulatory and compliance issues within North Carolina.”

In 2013, Burns was among 57 people indicted as part of an alleged conspiracy to use operate a fraudulent veterans charity in Florida, along with numerous law-enforcement officers including the president and vice president of the Fraternal Order of Police in Jacksonville, Fla. The state eventually dropped 205 felony counts against Burns, including racketeering and money laundering, in exchange for his no-contest plea on two counts of assisting a lottery, according to a Florida Times-Union report. The case concluded in 2015 with only one defendant, a Jacksonville lawyer, receiving a six-year sentence.

David Hagie noted in a federal court filing that from 2008 to 2012, he operated up to 100 internet cafes under a restraining order issued by a Guilford County superior court judge and upheld by the state Court of Appeals. After the state Supreme Court’s ruling in Hest Technologies LLC v. North Carolina in 2012, Hagie said numerous North Carolina sweepstakes operations maneuvered around a prohibition by not showing a banned “fun and entertaining display” in the process of revealing sweepstakes prizes in the games.

Cynthia Hagie told Triad City Beat that three out of the four donors to the Kimbrough campaign, including her brother, “have not been involved in sweepstakes for about four years.”

“After they made the games illegal,” Cynthia Hagie said, “pretty much everybody closed up shop…. My brother just decided: Let’s call it a day.”

A motion by David Hagie to recover $150,000 seized by the Department of Homeland Security at Charlotte-Douglas International Airport in October 2015 indicates otherwise.

According to a forfeiture complaint filed by US Attorney Jill Westmoreland Rose, Transportation Security Administration officers discovered bulk currency in a bag belonging to a Winston-Salem man named Carl Dockery who was about to board to flight to Las Vegas. Dockery told a Charlotte-Mecklenburg police detective and an Homeland Security Investigations special agent that he had a reservation to gamble at the Wynn Hotel and Casino. Based on Dockery’s statement that he had booked the flight the night before, the detective suspected that Dockery was a money courier involved in currency smuggling. The two law enforcement officers decided to hold the money for investigation into illegal gambling operations.

According to the US attorney’s motion, “Dockery stated that he and David Hagie co-owned a company called ‘DPH Vending’ that operated four internet sweepstakes parlors in various locations across North Carolina. When informed by Detective Brown that internet sweepstakes are illegal in North Carolina, Dockery replied, ‘Yeah, but they are coming back.’”

The feds further alleged that the Homeland Security special agent ran a swab from the currency through a Smiths Detection Ion scanner that tested positive for cocaine. While the special agent conducted the scan, the police detective received a phone call from an unknown number. It was an “irate” David Hagie claiming that the money belonged to him and had been wrongfully seized.

Identifying himself as “an avid gambler” in response filed in December 2016, Hagie confirmed that he and Dockery operated four internet café businesses together. While on this particular occasion Dockery was placing a bet on a Major League Baseball playoff game, Hagie said on many occasions when he had traveled to various legal gambling locations, he “had traveled with sums far exceeding the amount of monies seized on this occasion.”

Hagie said he had met Dockery at a service station off Interstate 40 in Mocksville to give him the $150,000 in cash. Hagie’s response indicated that he typically kept large sums of cash in his house, elaborating “that the claimant has not always deposited winnings from previous gambling junkets in depository institutions and keeps on hand sufficient cash to make future trips such as the October 7, 2015 trip.” The response also said “that in order to have cash available to pay off claims from customers engaged in the claimant’s sweepstakes, the claimant kept very large sums of cash in his home for that purpose,” while defending the legality of the earnings. Hagie made no mention in the deposition of any intention to discontinue his involvement in internet sweepstakes operations.

The lawyer representing Hagie in the matter was Michael A. Grace, who had worked for Chase Burns.

Ultimately, in a consent order finalized in June 2017, the government agreed to return $149,150 to Hagie. The consent order doesn’t explain why the full $150,000 wasn’t returned. The document indicates that the government “determined that the totality of circumstances in the instant case warrant a resolution of this matter regarding the one-time violation” of federal law prohibiting an unlicensed money transmitting business.

In his response, Hagie acknowledged it wasn’t the first time the federal government had seized money from him. He said $235,000 was taken off him at Piedmont Triad International Airport in May 2009. In another incident, local and federal law enforcement officers obtained a search warrant for his home and seized $210,000. In both cases, he said, all the money was returned to him.

Hagie complained that the previous seizures forced him to resort to withdrawing money from a bank.

“That during the period of time the Drug Enforcement Agency held money seized from claimant as set out herein above,” the response reads, “the claimant had to withdraw additional money from the bank to cover the potential sweepstakes winning claims form your claimant’s customers and to continue to have funds available to travel to and from Las Vegas and the Bahamas for gambling.”