United States Attorneys Office - Western District of North Carolina

DEPARTMENT OF JUSTICE

UNITED STATES ATTORNEY GRETCHEN C.F. SHAPPERT
WESTERN DISTRICT OF NORTH CAROLINA

FOR IMMEDIATE RELEASE
FRIDAY, AUGUST 3, 2007

CONTACT: SUELLEN PIERCE
704.338.3120
FAX 704.227.0264

TWENTY-TWO DEFENDANTS INDICTED IN CONNECTION WITH ILLEGAL WESTERN NORTH CAROLINA GAMBLING BUSINESS
Henderson Amusement, Inc. Owners and Employees and Others Charged in Federal Indictment ASHEVILLE, NC - Henderson Amusement, Inc., a South Carolina corporation owned by brothers James Otis Henderson, also known as Jamie Henderson, and Barron Sloan Henderson, also known as Barry Henderson, with offices in Inman and Spartanburg, SC, along with a host of employees and others, have been indicted in U.S. District Court for the Western District of North Carolina on numerous charges, including conspiring to conduct an illegal gambling business involving the operation of video poker machines in North Carolina, in violation of NC law. The federal indictment alleges that the Henderson brothers, some of their employees, and others, conducted a lucrative illegal gambling business in the Western District of North Carolina in 15 counties by making cash payouts on hundreds of video poker machines.

According to the indictment, during the course of the conspiracy, which allegedly took place from about October 1, 2000 and continued up to the present time, the illegal gambling business took in more than $5 million in proceeds. The indictment also alleges that in order to facilitate the illegal gambling business, the defendants paid money to law enforcement officers for their assistance and endeavored in numerous ways to obstruct the federal grand jury investigation, which is ongoing.

Today’s announcement is made by United States Attorney Gretchen C.F. Shappert for the Western District of North Carolina; Nathan T. Gray, Special Agent in Charge of the Federal Bureau of Investigation (FBI) in North Carolina; Charles Hunter, Special Agent in Charge, IRS Criminal Investigations in North and South Carolina; Robin Pendergraft, Director, North Carolina State Bureau of Investigation, and Michael D. Robertson, Director, NC Division of Alcohol Law Enforcement. In addition, substantial assistance in the investigation to date has been provided by the Sheriffs’ Offices of Buncombe, Cleveland, and Rutherford Counties and the Police Department of Shelby, North Carolina.

James Otis Henderson, of Inman, South Carolina, and Barron S. Henderson, of Lyman, South Carolina, and a total of eleven others have been arrested on conspiracy and other charges, some of which were initially rolled out in federal criminal complaints filed on Monday, July 30. The charges in the bill of indictment filed on Thursday, August 2, supersede the charges in the various criminal complaints. Eleven of the defendants (22 individuals have been charged altogether) have been afforded detention hearings today, conducted by Federal Magistrate Judge Dennis L. Howell of the Western District of North Carolina at the U.S. Courthouse in Asheville, North Carolina. One defendant had an initial appearance on July 31, 2007, in the Northern District of Florida and has been released with orders to appear at the U.S. Courthouse in Asheville on Friday, August 3, 2007. The Henderson brothers’ co-defendants, as published in the bill of indictment, which was filed under seal on Thursday, August 2 and unsealed this morning are:
HENDERSON AMUSEMENT, INC.
with offices in Inman and Spartanburg, South Carolina
JERRY PENNINGTON, also known as J.P., Kings Mountain, NC
JEFFREY LEE CHILDERS, Forest City, NC
HAROLD STEVE HARTNESS, Charlotte, NC
WILLIAM W. BROWN, Jacksonville, FL
KATHY STEPHEN, Shelby, NC
MARTY MARVIN BABB, Inman, SC
MICHAEL RAY ELLIOTT, Inman, SC
RANDALL W. GILES, Woodruff, SC
IMRAN ALAM, Asheville, NC
GUY KENNETH PENLAND, Asheville, NC
RONNIE EUGENE DAVIS, also known as “Butch” Davis, Asheville, NC
DEXTER WAYNE WINFIELD, JR., Shelby, NC

The indictment remains sealed as to seven other defendants. Each defendant is charged in the indictment, filed August 2, 2007 in the Western District of North Carolina, with one count of conspiracy to conduct an illegal gambling business. Additionally, each defendant (with the exception of Defendant Hartness) is charged with unlawfully conducting an illegal gambling business involving the operation of video poker machines in violation of North Carolina law. Two defendants, James Henderson and Jeffrey Lee Childers, are charged with conspiracy to commit bribery and with bribery. Four defendants, Barron S. Henderson, Harold Steve Hartness, Marty Marvin Babb, and Michael Ray Elliott, are charged with conspiracy to commit witness tampering and Barron S. Henderson, Harold Steve Hartness, and Michael Ray Elliott are charged with witness tampering. Ten of the defendants are charged with conspiracy to obstruct justice, and 15 of the defendants are charged with conspiracy to commit money laundering. The conspiracy counts relating to conducting the illegal gambling business and obstructing justice each carries a maximum statutory penalty of five years imprisonment and a $250,000 fine, or both. Conspiracy to commit witness tampering carries a maximum statutory penalty of ten years imprisonment and a $250,000 fine, or both. Conspiracy to commit money laundering carries a maximum statutory penalty of ten years imprisonment and a fine of either $250,000 or twice the amount of the money laundered. Kathy Stephen, William Brown, Randall Giles, Marty Marvin Babb, and others are charged with individual counts alleging grand jury perjury. The indictment includes a Notice of Forfeiture and Finding of Probable Cause that Defendants Henderson Amusement, Inc., James Otis Henderson, Barron Sloan Henderson, Jeffrey Lee Childers, and Ronnie Eugene Davis forfeit to the United States all of the property involved in the offenses with which they are charged in the indictment, and all property traceable to such offenses. Real property listed in the Notice of Forfeiture includes addresses in Waco, North Carolina; Kings Mountain, NC; Grover, NC; Rutherfordton, NC; Brighton Kingston Plantation, Horry County, South Carolina; and numerous real properties in Spartanbrug County, SC.

The allegations contained in the indictment describe a conspiracy wherein HENDERSON AMUSEMENT, INC., its owners, employees, and others, conspired to conduct a large and lucrative illegal gambling business in the Western District of North Carolina by making cash payouts on hundreds of video poker machines in violation of the laws of the State of North Carolina. According to the indictment, HENDERSON AMUSEMENT, INC., JAMES OTIS HENDERSON, and BARRON SLOAN HENDERSON, operated video poker machines in numerous Western North Carolina counties beginning by October 1, 2000, and continuing at least through March 2007. Those counties allegedly involved Buncombe, Burke, Caldwell, Catawba, Cleveland, Gaston, Haywood, Henderson, Jackson, Lincoln, Macon, Polk, Rutherford, Swain, and Transylvania Counties, all of which are situated within the Western District of North Carolina. As part of the alleged conspiracy, certain HENDERSON employees had the responsibility of finding new locations (“stores”) at which the video poker machines could be placed, and to negotiate with store owners to establish what percentage of the net profits the HENDERSONS and the store owners would each receive. The indictment outlines and alleges an elaborate scheme under which the gambling business was conducted, which involved the keeping of careful records as to each “store,” regular visits to each “store” by HENDERSON employees at which time the machines were checked and money collected from the machines, a plan whereby jackpot payouts would be covered, and an individual bank account at Regions Bank in Spartanburg, South Carolina into which HENDERSON employees made cash deposits gleaned from their “store” visits and from which the HENDERSON brothers drew funds to engage in monetary transactions of a value greater than $10,000. The indictment further alleges that in order to facilitate their illegal gambling business certain of the defendants entered into a scheme to pay bribes to and obtain assistance from law enforcement officers who were, at the times, agents of county government and of the State of North Carolina. Finally the indictment alleges that in an effort to obstruct the federal Grand Jury’s investigation of the HENDERSON organization and its operations, several of the HENDERSON employees knowingly testified falsely before the Grand Jury about the material facts.

If convicted, the defendants face a maximum sentence of five years and $250,000 on the conspiracy to conduct an illegal gambling business count (Count One of the bill of indictment) alone. The conspiracy to obstruct justice count also carries a maximum statutory penalty of five yeas and $250,000, or both. Conspiracy to commit witness tampering carries a maximum statutory penalty of ten years imprisonment and a $250,000 fine, or both. Conspiracy to commit money laundering carries a maximum statutory penalty of ten years imprisonment and a fine of either $250,000 or twice the amount of the money laundered. Additionally, each witness tampering count carries a maximum statutory penalty of ten years imprisonment and a $250,000 fine, or both, and each Grand Jury perjury count carries a maximum statutory penalty of five years and $250,000, or both.

The case is being investigated by the FBI, the IRS Criminal Investigation Division, the North Carolina SBI, and the NC Division of Alcohol Law Enforcement, with cooperation from a number of local Western North Carolina law enforcement agencies. The prosecution is being handled for the government by Assistant United States Attorneys Richard L. Edwards and Corey Ellis of the U.S. Attorney’s Office for the Western District of North Carolina in Asheville.

The details contained in the indictment are allegations. The defendants are presumed to innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

In a separate, but related indictment, also filed in U.S. District Court in Asheville on Thursday, August 2, Harold Steve Hartness, 58, of Charlotte, has been charged with one count alleging conspiracy to commit witness tampering and three additional counts alleging witness tampering in connection with the investigation conducted by federal and state law enforcement agents and the Federal Grand Jury of the U.S. District Court for the Western District of North Carolina into another illegal gambling business which involved the use of video poker machines. According to the indictment naming Hartness as single defendant, it is alleged that as part of the investigation into an illegal gambling business various witnesses received subpoenas to testify before the Grand Jury, and that Hartness and a co-conspirator met with each of these witnesses and coached them as to the false answers they should give before the Grand Jury. The indictment further alleges that on dates certain, and before the Grand Jury, these subpoenaed witnesses did, in fact, testify falsely about materials facts. If convicted, Hartness faces a maximum statutory penalty of ten years imprisonment and a $250,000 fine, or both, on each of the four counts of the indictment.

The details contained in the Hartness indictment are allegations. The defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.