http://business.timesonline.co.uk/article/0,,9070-1526380,00.html
Betting against the odds
By Rhys Blakely, Times Online
Jay Cohen feels he's been dealt a bum hand.
A self-described "nice Jewish boy from New Jersey", who studied nuclear engineering at Berkeley before becoming a trader at the Pacific Stock Exchange, he went from running a successful gambling website in Antigua to spending 17 months in a United States jail after being convicted for daring to allow Americans to bet online.
"It all started in April 1997 when a very positive piece about my company, the World Sports Exchange (WSE), appeared in the Wall Street Journal," he says. "The next month I received a letter from the major US sports leagues, telling me to shut down. Soon after that, the US Attorney's Office was chasing me."
Mr Cohen's business partners are now fugitives and remain in the Caribbean, facing arrest if they set foot on American soil. Mr Cohen chose to return because he felt that the charges against him were "laughable".
"I was running a highly respected, highly successful and legal business in a foreign country," he says. "On that basis I returned from Antigua and surrendered to the FBI. After that, they basically set the dogs on me."
After his release from the Nellis prison camp – which, ironically, is in Las Vegas - he is now on probation. But despite being convicted in a New York federal courtroom in 2000 for violating the US Wire Act, the nemesis of many a white-collar criminal, he could be on the brink of winning a significant moral victory.
The Cohen saga has become part of a sprawling World Trade Organisation Case brought by the tiny island of Antigua – which granted WSE a licence – against the United States. The Antiguan Government contends that the US is illegally preventing online gambling companies domiciled on the island from trading.
It is a classic David versus Goliath story. Tiny Antigua, with a population of only 68,000, cannot even afford to keep a representative at the WTO's headquarters in Geneva. But it has held its own against the world's largest economy, which is also the world's largest gambling market. At the crux of Antigua's case is the argument that by denying it access yet running a massive gambling industry of its own, the US is illegally discriminating against foreign companies.
According to a 1991 list of industries that must be open to free trade, the recreation and entertainment sectors are fair game, the island state claims. Moreover, Sir Ronald Sanders, Antigua's chief foreign affairs representative, and others have argued that it was no less than the Washington-based World Bank that advised Antigua to move into internet industries to diversify its fragile economy.
A WTO panel agreed and last year awarded the case to Antigua. In response, the US trade representative, Robert Zoellick, described the ruling as "deeply flawed" and launched an appeal, the outcome of which is due any day now.
Fighting the Antiguan case, the US cited the WTO's landmark 1995 General Agreement on Trade in Services, which it said gave it the means to block offshore gambling. Besides the obtuse WTO technicalities (is a ban the same thing as a zero quota?), the US has also claimed that online gaming is different to the conventional sort because it involves a greater "moral" danger.
Antigua's legal team* refuses to concede. "When it is standing in front of the WTO, the US has a moral aversion to gambling," says Mark Mendel, Antigua’s lead council. "But otherwise, it does not and the case just doesn't stack up."
Even in a small, laid back place like Montana there are poker rooms where you can go to play in return for the house taking a rake, he points out. On America’s Indian reserves, which operate in some regards like miniature sovereign states, gambling is allowed. You can buy a lottery ticket over the internet in Nevada - America's mid-west playground where, in fact, just about anything goes.
Meanwhile, the US Army operates casinos on its bases abroad - reserving the right to do so even where local laws prevent gambling. This is despite evidence suggesting that personnel couped up on military bases are up to three times as likely to develop serious gambling problems as civilians. John Kindt, a professor of business and legal policy at the University of Illinois at Urbana-Champaign, last year said the slot and video poker machines offered at military bases*"are known as the crack cocaine of gambling, creating new addicted gamblers".
It has also been suggested that banning online gambling opens it up to organised criminals. Six alleged members of the New York-based Gambino crime family last month pleaded
guilty to a $650million (£345m) internet and telephone fraud racket.
Other supporters of online gambling point to cases such as that of Susumu Kajiyama, the so-called "Emperor of Loan Sharks", who was arrested and charged with organised crimes involving several leading Las Vegas casinos. The case focussed on how Kajiyama maintained accounts with Caesars Palace's foreign agent in Tokyo, exploiting a system that bridges national frontiers.
Mr Mendel concedes that many of his arguments resort to the claim that each form of gambling – conventional or online – is as bad as the other. "If it's raised as being possible through the internet - under-age gambling, money laundering, you name it - we've already got it in spades," he says.
"The US sees evils in its own industry but is prepared to accept them. What basis has it got to stop us?"
People close to the case suggest that there are three reasons why the United States is resisting internet gaming. First are the interests of the established sports and gaming industries – the source of that first letter to Mr Cohen.
Second, there is the "moral fervour" issue.
Third, there is the political aspect. If Antigua wins the case, the United States trade representative – probably Mr Zoellick’s successor – will have to enforce the ruling and pull the country's legislation into conformity. Internet gambling is not issue that most congressmen, who work hard to present themselves as wholesome family men, want to be associated with.
The resources behind that anti-online lobby are huge. Internet search engines, including Google and Yahoo, have been ordered to block Antiguan gambling sites by the US Justice Department. The same body has forced major financial institutions including Citibank, Chase Manhattan and Bank of America, and media companies including Infinity Broadcasting, Clear Channel Communications and Bravo, to turn away business from gambling corporations.
Given the odds, vested interests and legal resources stacked against it, it has come as a surprise to many that Antigua has progressed as far as it has. The question on the brink of being raised is just what sort of a threat could a nation of the size of Antigua hope to pose against the mighty US - even if the appeal goes its way?
"At the end of the day we cannot allow conclusary statements by US officials to formulate international law," says Mr Mendel.
"At the same, the US is a massive net beneficiary of the WTO and the way that it operates. Does it want to risk bringing down the whole structure?"
Betting against the odds
By Rhys Blakely, Times Online
Jay Cohen feels he's been dealt a bum hand.
A self-described "nice Jewish boy from New Jersey", who studied nuclear engineering at Berkeley before becoming a trader at the Pacific Stock Exchange, he went from running a successful gambling website in Antigua to spending 17 months in a United States jail after being convicted for daring to allow Americans to bet online.
"It all started in April 1997 when a very positive piece about my company, the World Sports Exchange (WSE), appeared in the Wall Street Journal," he says. "The next month I received a letter from the major US sports leagues, telling me to shut down. Soon after that, the US Attorney's Office was chasing me."
Mr Cohen's business partners are now fugitives and remain in the Caribbean, facing arrest if they set foot on American soil. Mr Cohen chose to return because he felt that the charges against him were "laughable".
"I was running a highly respected, highly successful and legal business in a foreign country," he says. "On that basis I returned from Antigua and surrendered to the FBI. After that, they basically set the dogs on me."
After his release from the Nellis prison camp – which, ironically, is in Las Vegas - he is now on probation. But despite being convicted in a New York federal courtroom in 2000 for violating the US Wire Act, the nemesis of many a white-collar criminal, he could be on the brink of winning a significant moral victory.
The Cohen saga has become part of a sprawling World Trade Organisation Case brought by the tiny island of Antigua – which granted WSE a licence – against the United States. The Antiguan Government contends that the US is illegally preventing online gambling companies domiciled on the island from trading.
It is a classic David versus Goliath story. Tiny Antigua, with a population of only 68,000, cannot even afford to keep a representative at the WTO's headquarters in Geneva. But it has held its own against the world's largest economy, which is also the world's largest gambling market. At the crux of Antigua's case is the argument that by denying it access yet running a massive gambling industry of its own, the US is illegally discriminating against foreign companies.
According to a 1991 list of industries that must be open to free trade, the recreation and entertainment sectors are fair game, the island state claims. Moreover, Sir Ronald Sanders, Antigua's chief foreign affairs representative, and others have argued that it was no less than the Washington-based World Bank that advised Antigua to move into internet industries to diversify its fragile economy.
A WTO panel agreed and last year awarded the case to Antigua. In response, the US trade representative, Robert Zoellick, described the ruling as "deeply flawed" and launched an appeal, the outcome of which is due any day now.
Fighting the Antiguan case, the US cited the WTO's landmark 1995 General Agreement on Trade in Services, which it said gave it the means to block offshore gambling. Besides the obtuse WTO technicalities (is a ban the same thing as a zero quota?), the US has also claimed that online gaming is different to the conventional sort because it involves a greater "moral" danger.
Antigua's legal team* refuses to concede. "When it is standing in front of the WTO, the US has a moral aversion to gambling," says Mark Mendel, Antigua’s lead council. "But otherwise, it does not and the case just doesn't stack up."
Even in a small, laid back place like Montana there are poker rooms where you can go to play in return for the house taking a rake, he points out. On America’s Indian reserves, which operate in some regards like miniature sovereign states, gambling is allowed. You can buy a lottery ticket over the internet in Nevada - America's mid-west playground where, in fact, just about anything goes.
Meanwhile, the US Army operates casinos on its bases abroad - reserving the right to do so even where local laws prevent gambling. This is despite evidence suggesting that personnel couped up on military bases are up to three times as likely to develop serious gambling problems as civilians. John Kindt, a professor of business and legal policy at the University of Illinois at Urbana-Champaign, last year said the slot and video poker machines offered at military bases*"are known as the crack cocaine of gambling, creating new addicted gamblers".
It has also been suggested that banning online gambling opens it up to organised criminals. Six alleged members of the New York-based Gambino crime family last month pleaded
guilty to a $650million (£345m) internet and telephone fraud racket.
Other supporters of online gambling point to cases such as that of Susumu Kajiyama, the so-called "Emperor of Loan Sharks", who was arrested and charged with organised crimes involving several leading Las Vegas casinos. The case focussed on how Kajiyama maintained accounts with Caesars Palace's foreign agent in Tokyo, exploiting a system that bridges national frontiers.
Mr Mendel concedes that many of his arguments resort to the claim that each form of gambling – conventional or online – is as bad as the other. "If it's raised as being possible through the internet - under-age gambling, money laundering, you name it - we've already got it in spades," he says.
"The US sees evils in its own industry but is prepared to accept them. What basis has it got to stop us?"
People close to the case suggest that there are three reasons why the United States is resisting internet gaming. First are the interests of the established sports and gaming industries – the source of that first letter to Mr Cohen.
Second, there is the "moral fervour" issue.
Third, there is the political aspect. If Antigua wins the case, the United States trade representative – probably Mr Zoellick’s successor – will have to enforce the ruling and pull the country's legislation into conformity. Internet gambling is not issue that most congressmen, who work hard to present themselves as wholesome family men, want to be associated with.
The resources behind that anti-online lobby are huge. Internet search engines, including Google and Yahoo, have been ordered to block Antiguan gambling sites by the US Justice Department. The same body has forced major financial institutions including Citibank, Chase Manhattan and Bank of America, and media companies including Infinity Broadcasting, Clear Channel Communications and Bravo, to turn away business from gambling corporations.
Given the odds, vested interests and legal resources stacked against it, it has come as a surprise to many that Antigua has progressed as far as it has. The question on the brink of being raised is just what sort of a threat could a nation of the size of Antigua hope to pose against the mighty US - even if the appeal goes its way?
"At the end of the day we cannot allow conclusary statements by US officials to formulate international law," says Mr Mendel.
"At the same, the US is a massive net beneficiary of the WTO and the way that it operates. Does it want to risk bringing down the whole structure?"
