published Saturday, March 2nd, 2013

Killian case shows federal gambling charges rare

Mike Killian
Mike Killian
Photo by Ben Benton.
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SOUTH PITTSBURG, Tenn. — The federal gambling charge that former South Pittsburg Mayor Mike Killian agreed to plead guilty to this week is rare in eastern Tennessee and highlights how Killian's government position likely contributed to FBI scrutiny.

In the past decade, 11 people have been charged in six cases with federal gambling crimes in the Eastern District of Tennessee. Two people were charged in connection with running poker tables, and eight were charged with betting on animal fights.

Only one person was charged with involvement in video poker machines. Part of the charge against Killian centers around such gambling machines. But he's charged under federal law related to public integrity.

In January FBI agents raided Killian's business, the Lotto Mart at 519 E. 12th St., here. They also hit the Lil Store in Sequatchie, Tenn., and Richard City Food Market in Richard City, Tenn.

Court documents unsealed Wednesday revealed that Killian has agreed to plead guilty to one federal count of illegal gambling in connection with the Lotto Mart raid and other gambling operations. He faces up to five years in prison and a $250,000 fine.

A March 14 hearing for Killian has been canceled, according to court records, and no other date had been posted as of Friday.

The earlier case involved Albert Shepherd in Cocke County, who ran more than a dozen video poker machines in 10 locations in and around the county from 1997 to 2005, according to court documents.

Shepherd pleaded guilty to a single count of gambling and was sentenced to 30 days' confinement, four years probation and a $2,000 fine.

Longtime prosecutor and 20-year 12th Judicial District Attorney Mike Taylor was hard-pressed to recall the last time a poker machine was seized in his jurisdiction.

Taylor's district covers Marion County and five other counties.

He said he relies on local police chiefs and sheriffs to bring him complaints, and few have come.

"That's not to say they're not there," Taylor said. "I would hear rumors from time to time that Mike Killian had poker machines over the years."

Marion County Sheriff Bo Burnett declined to comment about Killian's case. South Pittsburg Police Chief Dale Winters did not respond to calls for comment.

Given the rarity of federal gambling cases, especially involving poker machines in recent years, Taylor doubted that gambling caught federal attention.

"I suspect it's obvious; I don't think the FBI came over to bust him for some poker machines," Taylor said.

When asked about Killian's charge in South Pittsburg on Friday, several residents simply said he was a good mayor who helped the community.

•••

The Shepherd case was handled by prosecutors in the Eastern District U.S. attorney's office.

But because Killian's brother is Eastern District U.S. Attorney Bill Killian, that office recused itself, and prosecutors with the U.S. Department of Justice's Public Integrity Section in Washington, D.C., took up the case.

The section deals primarily with public officials and corruption cases, according to the DOJ website.

Department spokeswoman Rebekah Carmichael could not give specifics on how the investigation into Mike Killian began but said such cases start in many ways, sometimes from citizen tips or out of other investigations.

Mike Killian was elected mayor of South Pittsburg in 2004. He did not seek re-election last year.

According to court documents:

• From 1988 until January 2013, he "managed and financed an 'outlaw' lottery," based on legal lotteries in Tennessee, Georgia and Illinois profiting by as much as $50 to $60 a day.

• From 2002 until 2008 he ran a sports betting operation with a partner referred to as "Person A" in court documents. The operation generated $45,000 revenue a year, split between the two partners.

• From 2004 until December 2012, he operated illegal video poker machines at his South Pittsburg convenience store, the Lotto Mart.

Poker machines have operated in the past as a near-open secret.

Knox County District Attorney Randy Nichols recalled a large-scale federal prosecution of David "Tex" Hill in the early 1990s.

Hill was prosecuted for running a $1 million-a-year poker machine business at bars, convenience stores and restaurants from 1987 to 1992 in multiple counties around Knox County.

After a trial in 1996, Hill was found guilty of operating an illegal gambling business and sentenced to nearly five years in prison and a $25,000 fine.

Nichols said when the machines were more prevalent, he sometimes would get tips from a beer truck delivery man or other such people who might spot a machine in the back of a bar or other location.

While some might see gambling as a victimless crime, Nichols said the large amounts of cash that come with it led to other crimes and corruption.

But even when there were more machines, it was often difficult to prove who the owners were and prosecute them. Usually the police would destroy the machines, putting that location out of business.

Both Nichols and Taylor speculated that Internet gambling and the legal Tennessee Lottery have likely led to less use of the machines.

about Todd South...

Todd South covers courts, poverty, technology, military and veterans for the Times Free Press. He has worked at the paper since 2008 and previously covered crime and safety in Southeast Tennessee and North Georgia. Todd’s hometown is Dodge City, Kan. He served five years in the U.S. Marine Corps and deployed to Iraq before returning to school for his journalism degree from the University of Georgia. Todd previously worked at the Anniston (Ala.) Star. Contact ...

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