Veterans Charity Investigated for Alleged Illegal Gambling

Allied Veterans of the World denies housing illegal gambling stations in storefront cafes.
5:21 | 05/07/13

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Transcript for Veterans Charity Investigated for Alleged Illegal Gambling
Slot machines are not usually associated with charitable contribution the clues right there in the one armed bandit nickname but. Tonight we explore an alleged gambling scam that may remind you to think twice before choosing a charity involved slots. And US veterans and piles of money tonight ABC's Matt Gutman wades into a group of alleged do gooders. -- -- You don't typically associate the sometimes shadowy world of gambling. With the charity it's allied veterans of the -- -- and but the -- -- -- named allied veterans of the world authors seem to do just that. It was a tax exempt nonprofit. Apparently created for vets in need helping other veterans and seniors in need. Get health services but the charities accused of housing illegal gambling stations in store front Internet cafes like this one. By using these alleged virtual slot machines and other games the company raked in 300 million dollars for six years. They shining beacon of their cause was the allied veterans center. -- and -- loving and volunteered to come out of retirement to go into the business of helping veterans it is home to 28 vets like Brett. Who suffer traumatic brain injuries in Iraq -- and on the streets. You know. -- out -- little money has her hotel room night by night -- talking here. Funded with money from -- allied veterans of the world the center opened a year ago but it was only last month when the loving say. -- received the disturbing news. -- couple -- got hit back and they had they say the money will run out here. By the end of this month because authorities claim this home for vets was built on a house of -- and the fact. They used you. You people were -- So what -- more or your -- authorities say it worked allied veterans operated Internet cafes. Which allegedly also doubled as gambling centers with. Illegal slot machines prosecutors say that not rocket motor cruising through. -- -- the companies -- kickbacks topped four officers of the company. The co conspirators exploited veterans. To -- their own pockets with the illicit proceeds. In one of the biggest gambling raids in the country's history. Federal state and local agencies arrested 57 people connected to allied veterans of the world. And they raided three safety deposit boxes and sees more than half a million dollars in cash from various officers of the company. Nightline sat down exclusively with the alleged mastermind Jacksonville lawyer -- Mathis you -- had no responsibility for any of the actions. Of your clients. I'm saying I'm innocent of all of the charges they've levied against me. I acted as a lawyer representing the -- clients and representing their interest. Just as I represent the interest of all my clients. Matt this -- -- months digging up a loophole that. Allow the company and dozens of its affiliates to legally operate the alleged gambling parlors in five states but the second part of your work for them as legal counsel was to tell them. What the minimum amount was that they could pay now that they can get away with paying virtually -- that's second charity now the second part of my work was to get them a legal opinion. Does the loss at an animal. And it does it and it doesn't. Apparently with the help of that loophole the company made 300 million dollars as a non profit and gave less than 2%. To charity. According to authorities. Allied veterans of the world says its machines were lawful sweepstakes games not slot. Machines they -- machines they -- had approved to operate by proper state authorities. The company says it give away billions to veterans and other organizations. But investigators insist that. That largess was just a fraction of the nonprofits -- -- At that time allied veterans of the world seemed legitimate it even -- a future lieutenant governor of Florida. Jennifer Carroll acting as its -- pitch woman. -- -- veteran who served during the gulf war I personally know how hard it is for service members of the apart from their family. Amidst the controversy after the arrest -- -- stepped down as lieutenant governor but denied any complicity in the alleged scheme. In his statement to ABC news she claims the company duped her into believing it was legitimate. And she said she had no knowledge of their internal. We're financial operations. Does anybody their responsibility except for did the government what you're missing rulings -- -- missing man. -- -- -- -- How much money allied veterans put into establishing that sent her I've been told it's it's well all for a million dollars that they put. If they had not engaged. -- this activity. That wouldn't exist at all -- guys area. The concern among veterans groups is that the allied veteran arrests will now drive -- away from legitimate veterans' charities like the loving. What. Do you do with 28. -- I mean what we. Believe that these people -- -- -- -- The victims of a losing -- For Nightline I'm Matt -- -- --

This transcript has been automatically generated and may not be 100% accurate.

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