by Matt Richtel
The New York Times
U.S. law enforcement officials routinely seize money that they suspect is connected to activities like money laundering, terrorism or drug running. But in early April, federal marshals seized $3.2 million from Discovery Communications, the television and media company, in an aggressive effort to crack down on a new target: Internet gambling. The money initially belonged to Tropical Paradise, a Costa Rica-based Internet casino operation that in October paid Discovery for television spots to advertise an online poker room, ParadisePoker.com.
According to court documents, the government seized the funds and told Discovery, which is based in Silver Spring, Maryland, that it could be party to an illegal activity by broadcasting such advertisements.
Federal prosecutors contend that online gambling sites are illegal, but the offshore casinos fall outside their jurisdiction. So for nearly a year, the government has been trying to curb the sites' activities by investigating and pressuring American companies that provide services to offshore gambling sites on the theory that they are "aiding and abetting" those operations.
The effort had largely involved seeking information from American companies, including major broadcasters, Web portals and industry consultants. But the seizure of funds markedly escalated the government's attack. The move has raised strong criticism from constitutional experts, media industry executives and people involved with offshore casinos. They say the government is relying on an untested legal theory in taking action against American companies and employing tactics more typically used against organized crime. "This is not drug money or terrorist money," said Rodney Smolla, dean of the University of Richmond School of Law. "The fact it is being treated as such shows a crusader's zeal against offshore gambling."
The possible message being sent, legal experts said, is that any American company that does business with an offshore casino, including software makers and consultants, could be in danger of having proceeds from that business seized.
"This is a strategy of intimidating anybody who is in the chain of commerce," said Lawrence Walters, an attorney who works with offshore Internet casinos, as well as software companies that do business with the casinos. The Justice Department declined to comment on the case or other investigations in this area.
Tens of millions of Americans place bets over the Internet, wagering on sporting events and on casino games like virtual blackjack, roulette and poker.
But the casinos are located outside the United States, typically in Costa Rica or the Caribbean, or in Britain. The operations are licensed and legal in those locations.
The legality of online betting is a complicated matter in the United States. The government asserts that the federal Wire Act prohibits all Internet casinos, but courts have been divided on the matter, legal scholars said.
Individual states also have laws that prohibit any gambling enterprises that they do not formally authorize.
The World Trade Organization in March issued a preliminary ruling that said the United States was violating free trade obligations by prohibiting online gambling operations.
The New York Times
U.S. law enforcement officials routinely seize money that they suspect is connected to activities like money laundering, terrorism or drug running. But in early April, federal marshals seized $3.2 million from Discovery Communications, the television and media company, in an aggressive effort to crack down on a new target: Internet gambling. The money initially belonged to Tropical Paradise, a Costa Rica-based Internet casino operation that in October paid Discovery for television spots to advertise an online poker room, ParadisePoker.com.
According to court documents, the government seized the funds and told Discovery, which is based in Silver Spring, Maryland, that it could be party to an illegal activity by broadcasting such advertisements.
Federal prosecutors contend that online gambling sites are illegal, but the offshore casinos fall outside their jurisdiction. So for nearly a year, the government has been trying to curb the sites' activities by investigating and pressuring American companies that provide services to offshore gambling sites on the theory that they are "aiding and abetting" those operations.
The effort had largely involved seeking information from American companies, including major broadcasters, Web portals and industry consultants. But the seizure of funds markedly escalated the government's attack. The move has raised strong criticism from constitutional experts, media industry executives and people involved with offshore casinos. They say the government is relying on an untested legal theory in taking action against American companies and employing tactics more typically used against organized crime. "This is not drug money or terrorist money," said Rodney Smolla, dean of the University of Richmond School of Law. "The fact it is being treated as such shows a crusader's zeal against offshore gambling."
The possible message being sent, legal experts said, is that any American company that does business with an offshore casino, including software makers and consultants, could be in danger of having proceeds from that business seized.
"This is a strategy of intimidating anybody who is in the chain of commerce," said Lawrence Walters, an attorney who works with offshore Internet casinos, as well as software companies that do business with the casinos. The Justice Department declined to comment on the case or other investigations in this area.
Tens of millions of Americans place bets over the Internet, wagering on sporting events and on casino games like virtual blackjack, roulette and poker.
But the casinos are located outside the United States, typically in Costa Rica or the Caribbean, or in Britain. The operations are licensed and legal in those locations.
The legality of online betting is a complicated matter in the United States. The government asserts that the federal Wire Act prohibits all Internet casinos, but courts have been divided on the matter, legal scholars said.
Individual states also have laws that prohibit any gambling enterprises that they do not formally authorize.
The World Trade Organization in March issued a preliminary ruling that said the United States was violating free trade obligations by prohibiting online gambling operations.
