The War Against Online Gambling
The US Department of Justice has consistently maintained that online gambling is illegal. In a letter to US broadcast organisations dated 11 June 2003, John G.Malcolm, the Deputy Assistant Attorney General, Criminal Division,of the United States Department of Justice wrote;
"Notwithstanding their frequent claims of legitimacy, Internet gambling and offshore sportsbook operations that accept bets from customers in the United States violate Sections 1084, 1952, and 1955 of 18 of the United States Code, each of which is a Class E felony. Additionally, pursuant to Title 18. United States Code. Section 2, any person Or entity who aids or abets in the commission of any of the above-listed offenses is punishable as a principal violator of those statutes. The Department of Justice is responsible for enforcing these statutes and we reserve the right to prosecute violators of the law." Statutory Instruments and State Laws
Known colloquially as the "Wire Wager Act," Title 18, United States Code, Section 1084(a) provides that:
"Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers, or information assisting in the placement of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years or both."
The purpose of the statute is two-fold:
- To assist the various States and the District of Columbia in the enforcement of their laws pertaining to gambling, bookmaking, and like offenses.
- To aid in the suppression of organized gambling activities by prohibiting the use of wire communication facilities which are or will be used for the transmission of bets or wagers and gambling information in interstate and foreign commerce.
The Prohibition of Illegal Gambling Businesses Act 1955 states that;
(a) Whoever conducts, finances, manages, supervises, directs, or owns all or part of an illegal gambling business shall be fined under this title or imprisoned not more than five years, or both.
(2) ''gambling'' includes but is not limited to pool-selling, bookmaking, maintaining slot machines, roulette wheels or dice tables, and conducting lotteries, policy, bolita or numbers games, or selling chances therein.
Section 1952 of Title 18, United States Code, which is also referred to as the Travel Act, also proscribes interstate gambling activity by stating:
''... the use of any facility in interstate or foreign commerce, including the mail, with intent to (1) distribute the records of any unlawful activity ... or (3) otherwise promote, manage, establish carry on or facilitate the promotion, management, establishment or carrying on, of any unlawful activity ... shall be fined not more than $10,000 or imprisoned for not more than five years or both.''
The Organized Crime Control Act of 1970 was signed into law by President Richard Nixon. It prohibits the creation or management of a gambling organization involving 5 or more people, if it has been in business more than 30 days or accumulates $2000 in gross revenue in a single day. The Racketeer Influenced and Corrupt Organizations Act (RICO) is a United States federal law which provides for extended penalties for criminal acts performed as part of an ongoing criminal organization. RICO was enacted by section 901(a) of the Organized Crime Control Act of 1970, Pub. L. No. 91-452, 84 Stat. 922 (15 October 1970). RICO is codified as Chapter 96 of Title 18 of the United States Code, 18 U.S.C. § 1961 through 18 U.S.C. § 1968.
On July 11 2006 the Internet Gambling Prohibition and Enforcement Act, H.R. 4411 was approved by the House of Representatives today by 317 to 93 votes. To pass into law it will now need to be approved by the Senate and the President. The bill will make it illegal to use credit cards and fund transfers from banks to settle internet wagers and, it will update the Wire Act to specifically prohibit online gambling, allowing the authorities to work with Internet service providers to block access to online gambling web sites.
In addition to the statutory instruments, eight US states have laws that specifically prohibit Internet gambling: Washington, Nevada, Illinois, Indiana, Louisiana, South Dakota, Michigan and Oregon. Convictions brought in relation to operating Internet gambling websites
The first federal charges for Internet gambling were filed on March 18 1998 in the United States District Court for the Southern District of New York, charging Jay Cohen with conspiracy to violate the Wire Wager Act, 18 U.S.C. 1084(a), and seven substantive counts of violating, and aiding and abetting violations of, the Wire Wager Act, in connection with his operation of World Sports Exchange (WSEX).
WSEX, located on the island of Antigua in the Caribbean, targeted customers in the United States through the placement of ads on the radio, in newspapers, and on television. Customers were invited to bet on American sporting events either by ringing a toll-free telephone number or, by placing bets over the Internet. New customers were required to wire $300 to their account in Antigua. In the course of an FBI investigation into offshore bookmaking, FBI agents in New York contacted WSE by telephone and internet numerous times between October 1997 and March 1998 to open accounts and place bets.
On February 28, 2000 Cohen was found guilty of violating all three clauses of Section 1084(a) and sentenced to 21 months' imprisonment. Cohen's conviction was affirmed and in June 2003, the United States Supreme Court refused his petition for review. In October 2002, Cohen began serving his sentence. WSEX is still happily trading.
At the time of Cohen's trial Manhattan U.S. Attorney Mary Jo White said that the case showed that operators of illegal sportsbooks who took bets from Americans could not avoid the federal wager law by simply moving their business offshore;
``An Internet communication is no different than a telephone call for purpose of liability under the Wire Wager Act,'' she said. ``As this case demonstrates, persons convicted of operating Internet sportsbooks offshore face very serious consequences -- imprisonment and thousands of dollars in fines.''
In the State of New York v. World Interactive Gaming Corp July 1999, the Court granted an injunction barring World Interactive Gaming Corporation, Golden Chips Casino, Inc. and their principals, officers, and directors from operating within or offering to residents of the State of New York State gambling over the Internet. The court held that -
"The act of entering the bet and transmitting the information from New York via the Internet is adequate to constitute gambling activity within New York state," moreover, it stated that "the Wire Act, Travel Act and Wagering Paraphernalia Act all apply despite the fact that the betting instructions are transmitted from outside the United States over the Internet."
In January 2000, federal prosecutors in St. Louis, Missouri charged Marc Meghrouni and Scott Shaver, the owners of Paradise Casino, which operated an offshore sports book in Curacao, with violating the Wire Wagering Act, as well as tax fraud. Additionally, Paradise Casino was charged with money laundering relating to the spending of betting funds in the United States. Meghrouni, Shaver and Paradise pleaded guilty to all of the charges and agreed to forfeit a one million dollar condominium, and a 1995 Lamborghini.
In October 2001 New Jersey Attorney General John J. Farmer, Jr. announced that divisions of Gaming Enforcement and Consumer Affairs had filed civil actions against 2betdsi.com, Intercasino.com, Laythepoints.com, Sportingbet.com, Sportsbook.com,Intertops.com, BetonSports.com, Betmill.com amongst others for acting in violation of New Jersey law by accepting wagers from individuals, including minors, located in New Jersey. The suit alleged that the defendants operated illegal sports book sites where New Jersey residents, via the Internet or telephone, can place wagers on professional and college sporting events.
On December 3 2001 Gold Medal Sports, an online sportsbook which operated on the Island of Curacao in the Dutch Netherland Antilles, entered a guilty plea to racketeering and a criminal forfeiture count. On February 26, 2002, Chief U.S. District Judge Barbara B. Crabb sentenced Gold Medal Sports for racketeering, and imposed a forfeiture of $3,528,617.47. Judge Crabb also sentenced Pede and D'Ambrosia for filing false U.S. Individual Income Tax Returns, and operating an offshore sports book, in violation of the federal Wire Wagering Act. Pede and D'Ambrosia each received a prison term of five years. They also paid fines of $100,000 each, and paid back taxes totaling $1,429,565.
In January 2002 Francis Howard, a Certified Public Accountant in Las Vegas, and Randy Moreau, an accountant in Miami, each pleaded guilty to owning a share of a sports betting business (Gold Medal Sports) that engaged in illegal sports wagers, using the phone lines and Internet. In April 2002 Attorney Bruce Meagher pleaded guilty to participating in the gambling conspiracy involving Gold Medal. He received one month in jail, five months of home detention, and a fine of $20,000. Gold Medal manager Rick McColley was indicted on February 21, 2002. He is currently a fugitive. Howard and Meagher were both convicted of violating the Wire Wagering Act.
On October 21, 2002 David Tedder was arrested by FBI and IRS Special Agents at O'Hare International Airport in Chicago, Illinois. He had been a fugitive from justice since being charged by the Grand Jury in September of that year with Money Laundering and Conspiracy. Information had been received to the effect that Tedder would be arriving in Chicago on Delta Airlines flight #1608, which was non-stop service from Atlanta. He was met at the gate by FBI and IRS agents and taken into custody. Tedder was indicted with conspiracy to violate the Wire Wagering Act, and conspiracy to commit money laundering (including helping D'Ambrosia move $3.5 million in Gold Medal profits from a Merrill Lynch account in the United States to Tedder's MIB offshore bank after the NFL sued D'Ambrosia in early 2000 over a false advertisement in the USA Today newspaper).
Following a jury trial, petitioner was convicted of conspiring to violate the wire wagering act, 18 U.S.C. 1084, in violation of 18 U.S.C. 371;
conspiring to launder money, in violation of 18 U.S.C. 1956(h); and two counts of money laundering, in violation of 18 U.S.C. 1957. The jury also rendered a criminal forfeiture verdict under 18 U.S.C. 982 (2000 & Supp. II 2002).
In August 2003 Tedder was sentenced by United States District Chief Judge Barbara B. Crabb to five years in prison, followed by a three-year term of supervised release and $400 in special assessments. The Judge also ordered Tedder to pay a fine of $1,060,040, due and payable immediately with interest accruing and to immediately forfeit $2,765,052 in laundered proceeds. The charges brought against Tedder were the result of an investigation conducted by the Internal Revenue Service-Criminal Investigation, the Federal Bureau of Investigation, the U.S. Postal Inspection Service, and the State of Wisconsin, Department of Justice, Gambling Enforcement Bureau. In September 2005, the United States Supreme Court refused Tedder's petition for review .
In total, the U.S. Attorney's Office for the Western District of Wisconsin collected $9,318,149.67 from their investigation into Gold Medal Sports. This amount consisted of fines of $1,594,915.20; forfeitures of $6,293,669.47; and back income taxes of $1,429,565.
In March 2003 Ronald "The Cigar" Sacco, the founder of Betcris, was sentenced to 21 months in federal prison for illegal gambling and money laundering. Sacco had been originally indicted in April 4, 2000, with five other men on charges of running an illegal sports gambling ring that used a toll-free number in the United States to place bets in Costa Rica. In 1993, he was arrested in the Dominican Republic and charged with operating an illegal betting ring that allegedly netted $1 billion a year. He spent five years in prison after pleading guilty. Sacco had also previously been a Bay Area bookie and had a number of felony convictions for bookmaking.
A federal racketeering indictment unsealed on April 11 2005 charged Arthur Gianelli with running an illegal gambling ring that allegedly paid protection money to the New England mob. The charges contained in the indictment included racketeering, extortion, and money laundering and stemmed from enterprises that Gianelli and his associates allegedly ran from 1999 to the time of the indcitment, including an "illegal" Internet gambling operation aided by an offshore sportsbetting website.
The indictment alleged that Gianelli's group made money illegally from football betting cards, video poker machines, and Internet gambling. The ring allegedly paid an offshore gambling company called Weshtod Consultants, with offices in San Jose, Costa Rica, to take bets from Massachusetts customers, both on the Internet, at www.dukesportsweb.com, and over the telephone. Todd Westerman, 41, of San Jose, the alleged owner of Weshtod Consultants, who was arrested by customs at Miami airport, was charged in the indictment, along with his company, of running an offshore gambling office and with taking bets from US customers in Massachusetts.
In May 2005 a 39-count Enterprise Corruption indictment was filed in Queens County Supreme Court charging that another gambling ring, that made protection payments to reputed Bonanno captain Anthony "Tony Green" Urso, operated three wire rooms that handled illicit wagers averaging $250 each at 136-72 72nd Avenue in Kew Gardens Hills; 147-19 Jewel Avenue in Flushing and at a shopping mall in San Jose, Costa Rica.
The criminal enterprise was alleged to have handled about 2,000 bets a day, that generated gross revenues of nearly $500,000, $15 million a month and $180 million a year during the 28-month period covered by the indictment. It was alleged that the gambling ring relied on modern technology, including computers, the Internet, e-mail and AOL instant messaging to safedepositsports.com and a toll free telephone number - 1-800-582-1383 - that ran up a monthly bill of over $50,000.
The indictment charged that Christopher Bruno, 34, of 4022 Jean Avenue in Bethpage, New York was the ringleader and major bookmaker in the enterprise and that his partners were Joseph Amato, 40, of 439 North Queens Avenue in Massapequa, New York, who was also allegedly the ring's enforcer who ensured that its protocols and procedures were obeyed, and Dana Antal, 36, of 606 Martz Road in Stroudsburg, Pennsylvania.
In August 2005 Christopher Bruno, 34, pleaded guilty and was scheduled to be sentenced to three to nine years in prison. Appearing before Queens Supreme Court Justice Richard L. Buchter, Bruno pleaded guilty to Enterprise Corruption and was ordered to immediately forfeit $510,000 in cash, investment accounts and vehicles. Among the forfeited items were a 2003 Mercedes Benz valued at $95,000, a 2002 GMC Denali valued at $29,000 and a rare baseball card collection reportedly worth as much as $300,000.
In 2003 Betcorp changed its name from Consolidated Gaming Corporation ("CGC") as part of a restructuring programme that included the acquisition of BetWWTS, a north American facing sportsbooks operator. In early 2005, the Company also acquired Sinsational Intertainment Inc an online sports betting and casino operator based in Antigua.
On April 7, 2005 the Department of Justice filed a 12-count indictment against William Scott and Jessica Davis of World Wide Tele Sports alleging that wagers placed by toll-free telephone numbers and through www.BetWWTS.com and other Internet websites violated the Wire and Travel Acts. The indictment was unsealed by the District Court for the District of Columbia on May 16 2006. It was alleged that by causing the funds to be sent from places within the United States to places abroad with the intent to promote Wire and Travel Act violations, Scott and Davis engaged in a money laundering conspiracy. They pair were also charged with failing to disclose foreign bank accounts, which it was believed they had opened in Antigua, St. Kitts, St. Maarten, Singapore, Canada, Australia, and the Channel Islands. BetWWTS is still trading. Davis has reportedly left the company but Scott, according to some Australian newspapers, still hold shares in Betcorp through a family trust, although his name does not appear on any of the trusts.
Scott was allegedly charged by US authorities in 1998 with running an online book, but fled to Antigua where he formed BetWWS, which was later acquired by Betcorp for $58.6 million. Revelations in the Sydney Morning Herald also stated that he was once jailed for 'racketeering' in the eighties.
On Monday July 17 a federal grand jury in the Eastern District of Missouri returned a 22-count indictment charging 11 individuals and four corporations on various charges of racketeering, conspiracy and fraud. The indictment was returned on June 1, 2006.
The founder of Costa Rican based BetonSports.com, Gary Stephen Kaplan, 47, was charged with 20 felony violations of federal laws including: the Wire Act, Racketeer Influenced and Corrupt Organizations (RICO) Conspiracy, interstate transportation of gambling paraphernalia, interference with the administration of Internal Revenue laws and tax evasion.
Kaplan, like Scott, formerly of BetWWTS, had operated a sportsbook in New York City in the early 1990s, but after gambling charges were brought against him in May 1993, he had moved his betting operation to Florida and eventually offshore to Costa Rica.
According to the indictment, BetonSports.com, the most visible outgrowth of Kaplan's sports bookmaking enterprise, misleadingly advertised itself as the "World's Largest Legal and Licensed Sportsbook." It also alleged that Kaplan failed to pay federal wagering excise taxes on more than $3.3 billion in wagers taken from the United States and sought forfeiture of $4.5 billion from Kaplan and his co-defendants, as well as various properties.
The indictment alleges that Gary Kaplan and Norman Steinberg, as the owners and operators of Millennium Sportsbook, Gibraltar Sportsbook, and North American Sports Association, took or caused their employees to take bets from undercover federal agents in St. Louis who used undercover identities to open wagering accounts.
The indictment also alleges that Kaplan and Mobile Promotions illegally transported equipment used to place bets and transmit wagering information across state lines and that DME Global Marketing and Fulfillment shipped equipment to Costa Rica from Florida for BetonSports.com.
The racketeering conspiracy alleges that the defendants agreed to conduct an enterprise through a pattern of racketeering acts, including repeated mail fraud, wire fraud, operation of an illegal gambling business and money laundering. Other defendants in the racketeering conspiracy included Kaplan's siblings, Neil Scott Kaplan and Lori Kaplan Multz; Norman Steinberg; David Carruthers, chief executive officer of BetonSports.com; Peter Wilson, media director for BetonSports.com.
On 16 August 2006, it was announced that there had been an expansion of the criminal complaint against persons connected with the offshore sportsbook Bettheduck. Richard Anderson of Los Angeles, Darwin Mobley, of San José, Costa Rica, Jorge Esteban Hall Zumbado, of San José, Costa Rica and Houshang Pourmohamad of Richmond, CA were indicted for their roles in "an illegal gambling and money laundering scheme".
The indictment charges the quartet with;
Conspiracy to conduct an illegal gambling business in violation of 18 U.S.C. § 371. This count carries a maximum statutory penalty of five years imprisonment, a $250,000 fine, three years supervised release, and a $100 special assessment.
Conducting an illegal gambling business in violation of 18 U.S.C. §§ 1955, 2. This count carries a maximum statutory penalty of five years imprisonment, a $250,000 fine, three years supervised release, and a $100 special assessment.
Conspiracy to launder funds derived from illegal gambling business in violation of 18 U.S.C. § 1956(h). This count carries a maximum statutory penalty of twenty years imprisonment, a $500,000 fine, five years supervised release, and a $100 special assessment.
Conspiracy to use facility in interstate and foreign commerce to carry on unlawful gambling business in violation of 18 U.S.C. § 371. This count carries a maximum statutory penalty of 5 years imprisonment, a $250,000 fine, 3 years supervised release, and a $100 special assessment.
Additionally, the indictment charges Mr. Mobley and Mr. Zumbado, the alleged operators of the sportsbook in Costa Rica, in absentia, with the following:
Use of facility in interstate and foreign commerce to carry on and facilitate the carrying on of unlawful gambling business in violation of 18 U.S.C. § 1952. Each count carries a maximum statutory penalty of 5 years imprisonment, a $250,000 fine, 3 years supervised release, and a $100 special assessment. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
On Thursday, 6 September 2006 the Non-Executive Chairman of the online betting company Sportingbet Peter Dicks, was detained at JFK Airport by the Police Department of the Port Authority of New York and New Jersey in repsonse to an arrest warrant issued by the state of Louisiana relating to gambling by computer (LA R.S. 14:90.3(E);
"Gambling has long been recognized as a crime in the state of Louisiana and despite the enactment of many legalized gaming activities remains a crime. Gambling which occurs via the Internet embodies the very activity that the legislature seeks to prevent. Gambling by computer is the intentional conducting, or directly assisting in the conducting as a business of any game, contest, lottery, or contrivance whereby a person risks the loss of anything of value in order to realize a profit when accessing the Internet, World Wide Web, or any part thereof by way of any computer, computer system, computer network, computer software, or any server."
On Sept. 8 Dicks was was released on bond by the New York Supreme Court of Justice. His lawyer Peter Neiman told the judge that his client's willingness to travel to the U.S. so soon after the arrest of David Carruthers clearly demonstrated that he did not believe that he had done anything wrong. Requesting bail for his client, who is now fighting extradition to the US Neiman said; "There are serious questions regarding whether New York's extradition statute permits extradition for conduct allegedly committed entirely overseas.'' Charging of Internet sportsbook agents
Associates of Gambino family member Frank "The Bear" Basto, Joseph P. Fafone and Joseph J. Fafone were charged with acting as agents on behalf of a sports betting operation based in Costa Rica called Bestlinesports.com. Both faced state bookmaking charges for collecting bets and making cash payoffs locally on wagers placed in Costa Rica via toll-free telephone and internet website links. Bestlinesports was recently listed in the indictment in the case of United States District Court of Eastern District of Missouri vs. BetonSports.com, as a website owned by Betonsports; although those behind the website claim that this is not the case.
In 2004 Scott Andrew Carstens and Keith M. English were charged with racketeering; accused of acting as bookmakers, collecting and paying out sports gambling bets chanelled through the Costa Rican based online betting website Safedepositsports.com.
In late July 2006 eight men were arrested and booked on charges that they were operating as agents on behalf of another Costa Rican based online betting website, BetTheDuck.com. U.S. District Attorney Kevin Ryan was reported as saying that the men collected wagers in the form of cash and checks from bettors in the United States on behalf of the website. They would then hand over the funds to "runners" who transmitted or transferred the money to the offshore firm.
The complaint against the eight charges them with conspiracy to conduct, finance, manage, and supervise an illegal gambling business in violation of 18 U.S.C. § 371 and conducting, financing, managing, and supervising an illegal gambling business in violation of 18 U.S.C. § 1955. Each count carries a maximum statutory penalty of five years imprisonment, a $250,000 fine, three years supervised release, and a $100 special assessment. The complaint also charges the defendants with conspiracy to launder money in violation of 18 U.S.C § 1956. Each count carries a maximum statutory penalty of twenty years imprisonment, a $500,000 fine, five years supervised release, and a $100 special assessment. Actions taken against the advertising of Internet gambling services
The Justice Department claims that selling advertising to online casinos may be "aiding and abetting" an illegal activity and they have employed money seizures and subpoenas to outlaw the activity, in their most high profile case, seizing $3.2 million from the Discovery Network, that had been paid by PartyPoker.com and ParadisePoker.com for advertising slots.
PartyPoker said in its IPO prospectus;
"In April 2004, the Group was informed by Discovery Communications, the television and media company that owns the Travel Channel, that US marshals had seized over $2 million of the Group's funds from Discovery Communications. The amount involved was originally paid to Discovery Communications for television advertisements to promote PartyPoker.com. Court documents state that Discovery Communications was told that it could be party to illegal activity (effectively 'aiding and abetting' a crime) by broadcasting such advertisements. In October 2003, Discovery Communications told the Group that it would cease broadcasting commercials which had been pre-paid."
In his letter to broadcast organisations dated !1 June 2003, John G.Malcolm, Deputy Assistant Attorney General, Criminal Division,United States Department of Justice wrote;
With very few exceptions limited to licensed sportsbook operations in Nevada, state and federal laws prohibit the operation of sportsbooks and Internet gambling within the United States, whether or not such operations are based offshore. Broadcasters and other media outlets should know of the illegality of offshore sportsbook and Internet gambling operations since, presumably, they would not run advertisements for illegal narcotics prostitution, child pornography or other prohibited activities. We'd appreciate it if you would forward public service message to all of your member organizations which may be running such advertisements, so that they may consult with their counsel or take whatever actions they deem appropriate.
In April 2004 the major search engines and portals, most notably google and yahoo, announced that they would fortwith discontinue accepting advertising for online gambling sites.
Catherine L. Hanaway, the United States attorney for the Eastern District of Missouri, has been reported as saying that prosecutors would consider those that accepted gambling ads to be the eqivalent of those that
accepted advertising on behalf of drug dealers and child pornographers.
Hanaway's office sued Vulcan Sports Media Inc., which owns The Sporting News, alleging that from the spring of 2000 to December 2003, the latter had accepted paid print, Internet and radio advertising for Internet and telephonic gambling services, and that its advertising reached U.S. audiences. In January 2006 the Sporting News agreed to a $7.2 million settlement with the U.S. government to resolve the matter. In 2004 in St. Louis sports radio stations KFNS-AM, KFNS-FM and KFRT-AM paid $158,000 to settle allegations that they too had promoted illegal online gambling. Action taken against online gambling portals
In a lesser known case, but one that goes to the very heart of the online advertising debate, Nicholas Drakos, who hosted a Web site known as www.internationalnetcasino.com that provided bettors with instructions on how to set up accounts with offshore sportsbooks, was arrested in April 2004 after assisting undercover detectives in placing bets on his Web site and charged with promoting gambling, conspiracy and money laundering between January and April of 2004. Drakos was subsequently convicted and sentenced to 90 days on a manual labour program and three years' probation for illegally promoting gambling. County Assistant Prosecutor Melanie Smith said that under state law, a person is guilty of promoting gambling when he or she knowingly engages in conduct that "...materially aids any form of gambling activity." A clear warning one might think to the many Stateside online gambling affiliate websites. But in truth none of them seem to have cut back on their activities in the wake of the judgement. Actions against software and payment processing companies
In July 2005 PayPal announced that it would pay the U.S. government $10 million in repsonse to claims from the U.S. Attorney for the Eastern District of Missouri that its provision of services to online gambling merchants violated 18 U.S.C. 1960 of the USA PATRIOT Act, which prohibits the transmission of funds that are known to have been derived from a criminal offense or are intended to be used to promote or support unlawful activity. Raymond Gruender, then U.S. Attorney for the Eastern District of Missouri, said in a statement following the case;
"offshore sportsbooks and online casino gambling operations which do business in the United States generally do so in violation of federal criminal laws. Therefore, we will continue to investigate and pursue such activity."
In October 2001 CryptoLogic Inc, the software developer, was sued by the New Jersey Attorney General for assisting an online casino to take bets from New Jersey citizens;
"If CryptoLogic knows these services are being used to violate New Jersey laws, they're liable,'' said John P. Suarez, the assistant attorney general who is director of the agency's Division of Gaming Enforcement. "In our view, there's no question they know.''
In May 2002 WagerLogic and CryptoLogic agreed that any licensing or related agreements they may enter into in the future will contain a provision prohibiting the licensee or other entity or individual with which WagerLogic or CryptoLogic contracts, from accepting sports bets from persons located within New Jersey, unless and until it becomes legal to do so. Is the party over for PartyGaming?
In the wake of the arrests of various persons associated with Betonsports, Mitch Garber PartyGaming's chief executive was quoted as saying that his company would in the future be "legally marketing in the US ...through a variety of channels - internet, television, radio, newspapers and sponsorship."
In the wake of the arrest of Sportingbet chairman Peter Dicks, Mitch Garber was further quoted as saying; "We are a FTSE 100-compliant company. If the Department of Justice has any issue with our business, I would hope they would notify us and communicate that with us fully."
PartyPoker said in its IPO prospectus;
"In April 2004, the Group was informed by Discovery Communications, the television and media company that owns the Travel Channel, that US marshals had seized over $2 million of the Group's funds from Discovery Communications. The amount involved was originally paid to Discovery Communications for television advertisements to promote PartyPoker.com. Court documents state that Discovery Communications was told that it could be party to illegal activity (effectively 'aiding and abetting' a crime) by broadcasting such advertisements. In October 2003, Discovery Communications told the Group that it would cease broadcasting commercials which had been pre-paid."
PartyGaming also stated in its IPO Prospectus that it had received an e-mail in January 2005 purporting to be from the office of the Louisiana Attorney-General, requesting that the company desist from offering its services in the US state. The company said that it had "no knowledge of the legitimacy of the e-mail or its author" and that it would dispute jurisdiction if a legal challenge were to be launched against it.
Kris Wartelle a spokesperson for the office of Louisiana's Attorney General told the Financial times that it was possible that the email was indeed legitimate;
"It is possible that our consumer protection division could have sent a cease and desist letter following a request from the police gaming enforcement division."
PartyGaming alleges that the Wire Act does not apply to online casinos and online poker companies. Its case is built around the fact that in February 2001 United States District Court Judge Stanwood Duval, whilst looking to the actual language of the Wire Act, ruled that it "does not prohibit Internet gambling 'on a game of chance'." Duval's ruling was upheld November 21, 2002 by the US Fifth Circuit Federal Appeals Court.
The problem with PartyGaming's reasoning is that until the U.S. Supreme Court rules on the matter of the Wire Act (if, indeed, it ever does), individual U. S. Attorney Generals are free to interpret the statute in relation to online gambling as they see fit. That is to say, the decision of the Fifth Circuit on the issue of the Wire Act and sports betting is not binding on any other court outside the geographical boundaries of the Fifth Circuit.
Some support for PartyGaming's argument is perhaps provided by the fact that in the past U.S. Attorney Generals have typically chosen to only target internet sports books that had explicitly taken bets by telephone. Moreover, there is also some truth to the fact that in the past it was always only American citizens that were charged in relation to the operation of such books.
The problem with this line of reasoning, however, is that the arrest of the two Brits, Carruthers and Dicks, and two Costa Rican citizens in the case of betheduck.com, would seem to suggest that the rules of engagement have been changed overnight. Moreover, in the case of Sportingbet's Dicks, we have also seen the application of wide ranging state laws, that very clearly outlaw all forms of internet gambling. A sense of foreboding prevails
The words of US Attorney Catherine Hanaway of the Eastern District of Missouri in the wake of the arrest of David Carruthers, have begun to take on a certain sense of foreboding;
"Illegal commercial gambling across state and international borders is a crime....This indictment is but one step in a series of actions designed to punish and seize the profits of individuals who disregard federal and state laws.....Just because you stand outside the U.S. doesn't mean you can flow crime into the U.S"
Whilst the party may not yet be over for PartyGaming, it would certainly be remiss of that company, and others like it, to believe that they are somehow immune from prosecution. Moreover, in the particular case of PartyGaming, it is fair to say that having invited the Department of Justice to contact it as regards any illegal activities that it may be engaging in, the company would do well to take seriously the next email that arrives from the office of an attorney general asking it to desist its activities. <HR>http://www.bettingmarket.com/index.htmcopyright © bettingmarket.com; all rights reserved
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