Going Big Time With Bingo : Alcoholism Program: Too Lucky for Its Own Good?

Before it became a nonprofit corporation, the Cooper Fellowship was simply Jack A. Blackburn and five or six other men sharing living expenses at a rented Santa Ana home on Cooper Street.

In two years, the “fellowship” was transformed into a $27-million gross, strictly cash operation financing one of the state’s richest alcoholism-recovery programs by operating perhaps the state’s most lucrative bingo game.

After paying bingo winners, the organization brought in $8.3 million in revenue, according to its tax reports and accountant.

But on its road to success, Cooper Fellowship has attracted the attention of state licensing authorities, the state attorney general’s office and Los Angeles County district attorney’s investigators.

City, county, state and federal public records show that:

- In its first year, the Cooper Fellowship spent only a fraction of its $3.6-million income directly on services for recovering alcoholics. The balance was used to acquire property, pay off loans to start up its bingo games, pay bingo expenses or was placed in bank accounts.

- Cooper Fellowship gave one description of its operation to the Internal Revenue Service to be recognized as a charity, then gave a conflicting version to a state regulatory agency. As a result, the group avoided licensure and regulation by the state.

- The fellowship operated halfway houses for months in residential areas without obtaining necessary zoning approval. In Santa Ana, the City Council overruled recommendations of city planners and the city Planning Commission and granted the fellowship the necessary variances in 1984.

- The fellowship also persuaded Hawaiian Gardens City Council members in September, 1983, to approve a bingo permit, despite the Los Angeles County Sheriff’s Department’s recommendation against it. (A condition of the permit provides the city with 1% of gross bingo revenues, or about $288,885 so far.)

- And now Blackburn, 48, Cooper Fellowship’s founder and executive director, is being prosecuted by the Los Angeles district attorney’s office, and the group’s finances are under review by the state attorney general’s office.

Since shortly after its incorporation, Cooper Fellowship Inc. has been exempt from paying income taxes as a charity, qualifying it to run its immensely profitable bingo games. It has also remained beyond the control of state licensing authorities, escaping scrutiny, unannounced inspections and state standards of care.

To qualify his organization as a charity, Blackburn filed an application for tax exemption with the IRS on Jan. 17, 1983, saying, “The fellowship provides a program of recovery for alcoholics . . . which includes detoxification, room and board as well as individual counseling.”

‘Just a Rooming House’

Despite that, by October, 1984, the fellowship was telling state inspectors that it provided no detoxification, group or individual counseling, care or supervision and, in fact, was “just a rooming house,” officials said.

After unannounced inspections, state officials maintained as early as March, 1983, that the fellowship was breaking the law by operating a residential alcoholism recovery house without a license and threatened civil or criminal action.

“We had been led to understand that they were going to apply for a license,” recalled John Grant, the Community Care supervisor.

Despite its later representations to state officials, the fellowship’s own documents and government inspection reports show that Cooper Fellowship provided many services and made many requirements of its resident alcoholics leading state officials to determine that care was being provided and a license required.

For example, Antabuse, a medication used in the detoxification of alcoholics, was stored and “controlled by the facility,” according to a state inspector’s report. The presence of Antabuse is “an indicator that care is provided . . . if it is centrally stored in the facility,” Grant said.

Group Meetings Listed

The documents also show that there were provisions “for group meetings, and individual therapy and counseling facilities . . .” and that overnight passes had to be “cleared by Jack B. (Blackburn) in person.”

The rules stressed: “We at Cooper Fellowship have a program and you are required to comply.”

But by September, 1984, Cooper Fellowship “denied all that, saying this is just a rooming house, so to speak,” Grant said. Next, Grant said, fellowship officials asked state officials what specific activities required a license.

After that--despite what Cooper Fellowship had told the IRS--the fellowship convinced the state that no detoxification or group or individual counseling were provided, and that the fellowship was putting a halt to other practices that, if continued, the state believed would require a license.

Grant wrote to the fellowship’s attorney on Oct. 31, 1983, that “. . . so long as Cooper Fellowship does not provide care, licensure would not be required.”

License ‘Not Required’

Although the fellowship is not licensed, said Ronald Davis, one of Cooper Fellowship’s attorneys, “that doesn’t mean that we don’t run a program. That means that we don’t run a program that requires a license by the state of California.”

By avoiding state licensing, Cooper Fellowship is not required to meet standards of care or permit officials to make unannounced visits and conduct confidential interviews of recovering alcoholics.

Fellowship spokesman William J. (Bill) Thom said that if residents were subjected to such interviews, “this program would not be successful. They (recovering alcoholics) would not come.”

While Cooper Fellowship officials insisted that their operation did not need a license, the policy of the state was to deny a license to rehabilitation programs run by a person with a criminal conviction.

“Anyone convicted of any crime other than a minor traffic violation, we would deny” a license, Grant said.

Blackburn was convicted in 1981 of conspiracy and laundering campaign contributions. At that time, he was treasurer of Colonial Manor, another alcoholism halfway house that ran bingo games. The laundered contributions went to a recall campaign against two Anaheim City Council members who favored curbs on bingo.

On Jan. 1 of this year, jurisdiction of recovery homes was transferred to the state Department of Alcohol and Drug Programs. Nine months later, on Sept. 5, that department mailed Blackburn an application for licensing at his request, according to officials.

Under new “emergency” regulations, a criminal conviction was no longer an automatic bar to a license.

The application was requested while Cooper Fellowship considered whether to get a license to qualify for “third-party payments,” such as insurance coverage, fellowship attorney Rudolfo Montejano said. But the fellowship later decided against seeking the license because “there was no perceived benefit,” Montejano said.

The fellowship says that most of the money it takes in at its nightly bingo games in a rented Hawaiian Gardens hall is paid in winnings.

But after paying bingo winners, Cooper Fellowship has raised about $8 million in revenue for charitable uses over the past two years, giving it one of the largest incomes of any alcoholism residential recovery program in California.

Small Portion for Program

Yet only a fraction of unlicensed Cooper Fellowship millions appears to be spent directly on recovering alcoholics, according to its financial statements, audits, the organization’s tax returns and interviews with fellowship officials.

For example, after deducting bingo winnings, Cooper Fellowship showed $3.6 million in revenue on its 1984 IRS tax report. Only $548,722 of that went for “program services rendered” for “alcohol recovery and rehabilitation.”

Thom, the fellowship spokesman, said the program’s recovering alcoholics benefit from all the money spent by the fellowship.

“Anything spent for acquiring facilities or retirement of debt would accrue to the benefit of the residents,” Thom said.

About $1 million in revenue was used to buy houses on and near Cooper Street, with most of them acquired by the foundation from Cooper Fellowship founder Blackburn, former Vice President Robert A. Ellis and former business manager Larry Davis, or from Thomas D’Alessandro, a Santa Ana real estate broker.

D’Alessandro, Ellis and two other men also loaned Cooper Fellowship $198,000 in 1984--money used for bingo start-up costs.

Misdemeanor Charges

D’Alessandro faces misdemeanor charges of having an illegal financial interest in the bingo games based on his $82,500 loan to the fellowship, which was repaid in 1984. D’Alessandro did not return several telephone calls from The Times.

Thom said that before bingo revenue began to grow, Cooper Fellowship was unable to buy property in the corporation’s name.

“So guys who were friends of Jack’s--residents--just had (houses purchased) in their names and it was considered part of the whole and the (mortgage) payments were made out of the common kitty,” Thom said.

Later, Cooper Fellowship acquired title to the property and paid off the existing mortgages, he said. But Thom stressed that none of the middlemen in the transaction, including Blackburn, profited from the sales.

The 120 beds provided by Cooper Fellowship are badly needed in Orange County, where officials say there are few homes for recovering alcoholics.

Halfway Houses Built

While its licensing dispute dragged on, the fellowship quietly converted six single-family Santa Ana homes to halfway houses. It operated for months without approval until city inspectors discovered numerous building-code violations.

There will soon be as many as seven additional houses used by the group at undisclosed locations in Orange and Los Angeles counties. Thom said city officials are not being told the locations because of almost certain opposition by neighbors to the halfway houses.

Fellowship attorney Ronald Davis recently refused to disclose addresses of fellowship halfway houses, partly to ensure residents’ confidentiality. But he also said that “we don’t want some bureaucrat” insisting that the houses need permits.

“We know the only way in which to develop a facility,” Davis said, “is to buy a piece of property and fill it up (with recovering alcoholics), then come forward to the city and say this is what we’ve been doing.”

Of nine halfway houses the fellowship operates in Los Angeles and Orange counties, only the six houses in the 400 block of North Cooper Street have zoning variances. City officials are unaware of the fellowship’s use of or plans for the other houses, Thom said.

‘They Don’t Know’

“That’s the beautiful part,” Thom said. “They don’t know and that’s how we gain acceptance of our neighbors” before zoning approval by city officials.

If approval were to be sought before setting up halfway houses, neighboring residents would oppose them, Thom said.

In Santa Ana, the Planning Commission voted 5 to 2 on Jan. 9, 1984, to deny the fellowship a permit for its halfway houses.

Nevertheless, four months later, the City Council overruled the decision, granting a permit by a vote of 6 to 0.

Three council members and a campaign committee that supported a fourth councilman received a total of $1,050 in contributions from Blackburn and Thom, whom Cooper Fellowship financial statements show was paid $10,400 by the charity in 1984. Council members told The Times that the money did not affect their votes.

Attorney Montejano, with a reputation as the premier lobbyist in matters before the City Council, represented Cooper Fellowship.

Early Notice of Bingo

While it took city zoning and state licensing officials some time to discover Cooper Fellowship, law-enforcement authorities took early notice of the fellowship’s lucrative bingo operations.

The state attorney general is reviewing Cooper Fellowship’s finances in the wake of a stinging audit by the state Registry of Charitable Trusts earlier this year that found, among other things, inadequate controls to guard against skimming of cash.

Misdemeanor criminal charges are pending against Blackburn; Thom, a former Anaheim mayor who does “community relations” for the charity; and three other men, alleging that they were paid illegally from bingo proceeds or illegally held financial interests in the bingo operation. If convicted, they could be sentenced to six months in jail and fined $1,000 to $10,000.

When California voters legalized bingo in 1976, said Deputy Atty. Gen. William S. Abbey, who is reviewing the Cooper Fellowship operation, “the representation that was made to the public (was) that these bingo games . . . are just for the purpose of supporting charities, small local charities, in the sense of bingo games at the Catholic church. Our (the attorney general’s office) interpretation would be that charities shouldn’t have to rely solely on bingo to pay for (their) program costs. Otherwise, bingo becomes the tail wagging the charitable dog.”

Blackburn Declined Interview

Blackburn declined through his attorney to be interviewed for this story, citing the pending criminal charges.

Following a January, 1985, state audit of fellowship finances, Deputy Atty. Gen. James D. Cordi told the charity that its “inadequate records of its cash receipts” violated the state Corporation Code.

“A serious practical consequence,” Cordi wrote, “. . . is that it is very difficult to control attempts by anyone with access to bingo receipts to skim cash.”

Martin Levine, Cooper Fellowship’s accountant, told The Times, however, that “the only thing possibly going on here is one volunteer (bingo worker) giving wrong change or purposely keeping something. The extent that that may be going on is insignificant.”