(NEW YORK) -- Gambling is one of America's favorite pastimes. People who hit the slot machines or play on one of the thousands of online gambling websites help fuel an industry that rakes in tens of billions of dollars each year.
But the shadowy world of gambling is not often associated with a charity.
The Allied Veterans of the World, a tax-exempt, non-profit charity, seemed to have been created to help needy veterans.
But it is currently caught up in one of the biggest gambling raids in United States history. In March, state and local officials arrested 57 people connected to Allied Veterans of the World, seizing slot machines and records from Allied Veterans of the World gambling centers across the state, as well as 80 vehicles and vessels, 170 properties and 260 bank accounts estimated in the tens of millions of dollars.
The company is accused of housing illegal gambling stations in storefront cafes. Aside from accepting donations, investigators said the company allegedly raked in $300 million over six years through profits from virtual slot machines, computer sweepstakes and other online gambling games.
The Five STAR Veterans Center, formerly called The Allied Veterans Center in Jacksonville, Fla., which houses 24 veterans who suffer from traumatic brain injuries after serving in Iraq, was funded with money from Allied Veterans of the World.
The center's CEO Len Loving is a grizzled former Marine colonel who runs the place. His wife Suzie Loving keeps the books. The couple had volunteered to come out of retirement to go into the business of helping veterans.
The center opened a year ago, but last month, the Lovings said authorities told them the funding would run out by the end of next month because it was tied to illegal gambling money.
The center recently changed its name to disassociate itself with Allied Veterans.
Here's how authorities said the alleged scheme worked: Allied Veterans operated Internet cafes, which allegedly also doubled as gambling centers with illegal slot machines. But the charity maintains these were not slot machines but a legal computer sweepstakes.
Prosecutors said the non-profit laundered the proceeds through for-profit companies, who sent kickbacks to the top four officers of the company.
Police allege the mastermind behind the operation is a Jacksonville lawyer named Kelly Mathis.
"[Mathis] is the registered agent for virtually every aspect of this enterprise," said Seminole County Sheriff Don Eslinger. "He instructed, he was the face of the organization, and we believe he was clearly the mastermind, and we can demonstrate this."
In an exclusive interview with ABC's Nightline, Mathis denied all wrongdoing.
"I'm innocent of all of the charges they have levied against me," he said. "I acted as a lawyer representing these clients, and representing their interest, just as I represent the interests of all my clients."
Mathis, a former president of the Jacksonville Bar Association and a pillar of the community, claimed he was not an officer in the Allied Veterans company and the only money he made through them was from legal fees.
But Mathis proudly admits spending months digging up a "sweepstakes" loophole that allowed the company and dozens of its affiliates to legally operate the alleged gambling parlors in six states. Mathis said he believes his clients' activities in the Internet gambling business were legal.
"When they came to me six, seven years ago, they asked me, 'how do we operate a legal sweepstakes operation?' I told them I didn't know, but I would research, and I would find out," he said.
"The second part of my work was to give them a legal opinion: Does the law set a minimum [amount that had to be paid back to charity]," Mathis added. "And it doesn't."
With the help of that loophole, the Allied Veterans company allegedly made $300 million as a non-profit and gave less than 2 percent of that to charity, according to authorities. Following the Allied Veterans fallout, the state of Florida last week banned such parlors with slot-like games.
When Nightline reached out to former Allied "Commander" Johnny Duncan, one of the 57 people arrested in the gambling probe, for comment, his attorney said in the statement that the gambling parlors were legal and vetted by "a team of 10 lawyers over six years."
Duncan's attorney went on to say that "Allied Veterans gave away millions to veteran and other organizations" and had been approved to operate by the Florida Department of Agriculture, which oversees these charities. But officials in the Department of Agriculture told Nightline they had began investigating the company two years ago.
The Lovings said Allied Veterans gave the center $1.5 million from 2011 to 2012. Allied Veterans also had given an additional $700,000 to various East Coast veterans administration facilities from 2004 to 2011, according to a Veterans Administration spokesman. But investigators said that the charity was just a fraction of the non-profit's income.
Despite the allegations, Mathis defended Allied Veterans' actions.
"I don't know how much money Allied Veterans put into establishing that center [in Jacksonville]," he said. "I've been told it's well over a million dollars that they put -- if they had not engaged in this activity that wouldn't exist at all."
Prior to the investigation, Allied Veterans of the World had a successful reputation and had future Florida Lt. Gov. Jennifer Carroll acting as its paid pitchwoman. She even appeared in their commercials.
After the arrest sweep, Carroll stepped down as lieutenant governor but denies any complicity in the alleged scheme. In a statement to Nightline, she claims the company "duped" her into believing it was legitimate and that she had no "knowledge of their internal or financial operations."
But now the concern among veterans groups is that the Allied Veterans scandal and subsequent arrests will scare donors away from legitimate veterans charities. While the Allied Veterans of the World was the Allied Veterans' Center's biggest benefactor, Len Loving said the center continues to operate on the support of other local military and civilian charities.
"We're trying to find a way to break away from [Allied Veterans] to divest as quickly as possible," he said. "But we don't know what will happen to us."
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