Department of Public Protection
Charitable Gaming Trial Ends in Convictions

Press Release Date:  Tuesday, March 11, 2008  
Contact Information:  Jim Carroll, 502-564-7760  

   A trial in U.S. District Court in Bowling Green in which a former Bowling Green VFW post commander and his girlfriend were accused of misappropriating money from a charitable gaming operation has ended in guilty verdicts on most counts.

    Donald Mudd, 65, was convicted on all counts after a nine-day trial that ended late Thursday. He was charged with diversion of charitable gaming funds, two counts of mail fraud, one court of conspiracy to impede an Internal Revenue Service (IRS) investigation and arson. His girlfriend, Martha Towe, 53, was convicted of diversion of charitable gaming funds, two counts of mail fraud, two counts of structuring transactions and one count of conspiracy to impede the IRS. She was acquitted of aiding and abetting arson.

     “The Office of Charitable Gaming (OCG) takes very seriously its responsibility to ensure that gaming operations are followed to the letter of the law,” said Henry Lackey, executive director. “We hope that a conviction like this will send a message that the small percentage of people who seek to divert funds will likely get caught and will be held accountable.”

    Prosecutors said Mudd and Towe skimmed money from the gaming operation of VFW Post 1298 in Bowling Green, then Mudd attempted to hide their activities by burning down the post building in 2003.

       The suspicious nature of the fire and complaints about financial irregularities from VFW post volunteers prompted an extensive investigation involving the U.S. Bureau of Alcohol, Tobacco and Firearms, the IRS and OCG.  

    OCG investigators concluded that Mudd and Towe pocketed at least $50,000 intended for the VFW post from pull tab sales. 

     The two are free on bond and a sentencing date has not yet been set.
     VFW Post 1298 voluntarily surrendered its charitable gaming license after Mudd was arrested. The post subsequently changed leadership and has had its license restored.

     More than 800 charitable organizations sponsor gaming in Kentucky, with gross receipts totaling $527 million. OCG is charged with ensuring such gaming complies with state laws. Last year, OCG conducted 161 investigations. The office is part of the Department of Public Protection in the Environmental and Public Protection Cabinet.