Gaming Law International

Two Former Neteller Executives Arrested in US

The two Canadian founders and former directors of Neteller PLC, the Internet payment processing company, were arrested in the United States today. John David Lefebre and Stephen Eric Lawrence, both originally from Calgary, Alberta, were charged with laundering billions of dollars in gambling proceeds. Lefebre was arrested yesterday in Malibu, California and Lawrence was arrested in the U.S. Virgin Islands. The criminal complaints against them were unsealed in U.S. District Court in Manhattan yesterday. The press release from the United States Attorney General's Office is available here.

Download ag_statement.pdf

Man to Plea In Tocchet Gambling Case

James Ulmer, an accomplice in an alleged multimillion-dollar betting ring that catered to professional hockey players will plead guilty tomorrow in a deal that guarantees his cooperation against NHL coach Rick Tocchet, according to The Star-Ledger of Newark. Ulmer will plead guilty in Superior Court to promoting gambling and conspiracy with the expectation he will serve up to 364 days in county jail. Ulmer, Tocchet and former state trooper James Harney were charged in February with taking more than 1,000 wagers worth $1.7 million during a six-week period that ended with last season's NFL Super Bowl. You can read more here.

James Giordano Held Without Bail

James Giordano, the professional poker player accused of operating a $3.3 billion gambling enterprise, was ordered held without bail today in a New York City court. Giordano was indicted along with 26 others on charges of illegally operating an online sports betting gambling operation in the US.

Manitoba to Give Gaming Revenue to Aboriginal Groups

According to the Winnipeg Sun, the government of Manitoba has agreed to give aboriginal groups in that province $4 million a year from provincial gaming revenue over the next five years. Currently, aboriginal groups keep the gaming revenue from on-reserve casinos and 90% of the revenue from on-reserve video lottery terminals. Aboriginal groups in the province are also lobbying to regulate on-reserve gambling, a move which, if approved, would result in the creation of a second and separate gaming regulatory body in Manitoba. It would oversee gaming on reserves and would replace the Manitoba Gaming Control Commission as the gaming authority for on-reserve gaming.

27 Individuals and 3 Corporations Indicted in US for Illegal Online Gambling

Criminal charges have been laid against three corporations and 27 individuals in New York, New Jersey, Florida and Nevada, including professional poker player James Giordano and Frank Falzarano, a scout for the Washington Nationals, in connection with the operation of an online gambling enterprise that operated in the United States and elsewhere that allegedly took more than $3.3 billion (USD) in bets from tens of thousands of bettors over a 28-month period, according to a 33-count indictment filed in Queen's County Supreme Court today.

According to the AG's office, the indictment represents the first time charges have been brought against anyone under the Unlawful Internet Gambling Enforcement Act, although none of the counts in the indictment specifically refer to any offenses committed, or charges laid, pursuant to the Unlawful Internet Gambling Enforcement Act. It also marks the first time a web designer and an offshore based Internet company have been charged in connection with an alleged online illegal gambling enterprise. One of the corporations, Primary Development, Inc., was charged in connection with the development of a sports betting website (playwithal.com) apparently used for the gambling enterprise. Prolexic Technologies, Inc. was charged in connection with allegedly providing website security and Digital Solutions, S.A. was charged in connection with allegedly providing Internet servers, data and software to the enterprise.

A number of search warrants were executed and hundreds of millions of dollars in real and personal property, including four Manhattan condominiums, millions of dollars in cash, tens of thousands of dollars in casino chips from the Bellagio, rare art, gold coins and jewelery, was seized from several of the defendants named in the indictment.

Twenty of the defendants are also being sued civilly and have been named as respondents in a $500 million civil forfeiture action. You can read more here.

BetOnSports Plc Agrees to Permanent Injunction Shutting It Out of the US Market

Effective today, BetonSports Plc has agreed to a federal court order for a permanent injunction with the U.S. Attorney General's Office. Under the terms of the injunction, the Company is barred from:

1. continuing to operate an illegal gambling business through Internet web sites and telephone services;
2. continuing to operate any web site that offers sports betting or transmit betting information in the United States;
3. continuing to operate any telephone service that offers sports betting or transmits betting information in the United States;
4. soliciting and accepting wagers on sports and sporting events from persons in the United States;
5. transmitting wagering information using interstate and international wire communications facilities within the United States;
6. transmitting funds solicited from persons in the United States for the purpose of placing wagers on sports and sporting events to the Company and its agents outside the United States;
7. advertising any gambling activity which is in violation of United States law; and
8. transferring funds to, from, or within the United States in violation of United States law.

Ontario Plans to Ban Advertising of Offshore Internet Gambling Sites

The Ontario provincial government is considering amending its Consumer Protection Act, 2002, to prohibit the advertising of Internet sites that operate an "Internet gaming business" contrary to the Criminal Code of Canada. An "Internet gaming business" means a supplier that accepts or offers to accept wagers or bets over the Internet as part of the playing of or participation in any game of chance or mixed chance and skill outside Canada or on any contingency or on any event inside or outside of Canada including a casino game, card game, horse race, fight match, sporting event or contest. Advertising includes promotion by print, publication, broadcast, telecommunications, self-promotion and a website link if it is intended to promote the use of an Internet gaming business.

The proposed bill, Bill 152, also prohibits persons, other than Internet service providers, from arranging for or otherwise facilitating the advertising of online gambling sites.

Bill 152 is supported by Ontario's horseracing industry which has lobbied the government for several years to take action to ban the people of Ontario from gambling online, a move they say will ensure the economic viability of the industry.

US Senate Approves Anti-Online Gambling Legislation

As expected, the US Senate approved the proposed Unlawful Internet Gambling Enforcement Act of 2006 (the "Act") today as part of the adoption of the Safe Port Act, H.R. 4954. The Act amends Chapter 53 of Title 31 of the United States Code (the "Code") You can download a copy here Download unlawful_internet_gambling_enforcement_act.pdf. Some of the key amendments are as follows:

Definitions

Several new terms are defined in the Code and are intended to capture all the components of the activity of online gambling from the placing of bets, the handling of funds and the use of the Internet.

(a) "Bet or Wager" (i) means to stake something of value on the outcome of a contest of others, a sporting event or game of chance on the understanding that either the better or someone else will receive something of value in the event of a certain outcome; (ii) includes purchasing a chance or

Austrian Online Gambling Executives Held in France

Two executives of Austria's online gambling company BWIN Interactive Entertainment Ag, Manfred Bodner and Norbert Teufelberger, were detained in France on Friday and questioned for allegedly violating French gaming laws. They were released late today on a bail of €300,000 each. The investigation against Bodner and Teufelberger in France is concerned with BWIN's alleged conduct advertising its gambling product in France and accepting bets from citizens of France. Earlier this year, three German states apparently banned BWIN from operating in their territories.

Policy makers in the EU are already divided on the issue of the competence of individual states to restrict gambling in their territories to state-owned monopolies. Many EU gaming lawyers argue that European state gambling monopolies are inconsistent with EU competition law. However, considering the unique nature of gambling and the overriding concern to ensure its integrity by, inter alia, ensuring the absence of criminals in gaming and restricting minors from having any access to gambling, member states restricting gambling would have cause to argue that maintaining a state monopoly is the only way to maintain the public order. Several member states have indicated that they will challenge state gambling monopolies at the EU Court of Justice to ensure that online gambling services can be provided anywhere in the EU by any member state. This will be an interesting area to watch in the months to come.

Dick Peters Allowed to Leave the US

Sportingbet's Chairman, Peter Dicks, resigned from the company yesterday, shortly after a US court ruled that he could return to the UK until his extradition hearing on September 28. Read more here.

US Arrests Second Online Gambling Executive

Sportingbet Plc's chairman, Peter Dicks, was arrested by the US authorities Thursday after arriving from an international flight at JFK International Airport. Apparently unbeknownst to Dicks, the Louisiana State Police had an outstanding warrant for his arrest since May of this year on charges related to his involvement with online gambling activities in the state of Louisiana, an activity that is prohibited in that state and in many other US jurisdictions.

No information has been made available as to whether federal charges have been laid against Dicks or are pending but such charges are a real possibility and if laid, would likely include Sportingbet Plc and its other executives. American operating service suppliers of Sportingbet Plc are also likely to be targeted.

On Friday, Dicks appeared in court for a bail hearing and was released on $50,000 bail, pending extradition to Louisiana. Dicks is said to have refused to be voluntarily transferred to Louisiana to face the charges laid against him. His next court appearance is scheduled for September 14, 2006. Despite the arrest of its Chairman, Sportingbet Plc does not appear to have taken any steps to curtail bets from US citizens. Dicks is a director of Polar Technology Trust Plc and Standard Microsystems Corp.

Wynn Casino Opens in Macau

Macao's newest casino, the $1.2 billion Wynn Macao, opened today with much fanfare, almost two years after the opening of the Sands Macau. The Sands was the first foreign casino to open after Macao ended a 40-year monopoly run by Stanley Ho. Read more here.

Manitoba Aboriginal Bands Asking for 12% of Provincial Gaming Revenues

Aboriginal bands in the Canadian province of Manitoba are asking the provincial government for 12% of the annual revenue generated from all sources of legalized gambling in the province, including lotteries. Aboriginal bands say they represent 12% of the population in Manitoba and are entitled to a revenue sharing arrangement in proportion to their population. The provincial government has confirmed that it may consider a revenue sharing arrangement in the future. Aboriginal bands in Manitoba already keep all the profits from casinos on reserves and 90% of the revenues from VLTs located on reserves.

The aboriginal position ignores the fact that there are significant costs associated with the regulation of the gaming industry for the province and significant costs for managing and administering the lotteries. A revenue sharing arrangement based on population would mean that aboriginal groups would in effect receive a much greater percentage, likely closer to 18%.

The province is also considering permitting the establishment of a provincial aboriginal gaming commission that would oversee regulation of the gambling industry for on-reserve gambling.

David Carruthers Free on Bail

Former BetOnSports Plc CEO David Carruthers was freed on a $1 million bond today - read more here.

Carruthers Likely to be Released on Bail Today

Former BetOnSports Plc executive David Carruthers may be released today on bail if the terms of his bond can be finalized. Carruthers' bail is set at $1 million. If released, he would be required to stay in St. Louis  under electronic monitoring until his trial.

Carruthers was arrested in Texas almost a month ago as part of a 22-count indictment against BetOnSports Plc and several other defendants. The indictment alleges that the defendants fraudulently took bets from US residents by phone and the Internet, and failed to pay excise taxes. The US is seeking a $4.5 billion forfeiture from the defendants.

Since the indictment, BetOnSports Plc fired Carruthers and ceased taking bets from the US. The other defendants are Gary Stephen Kaplan, Neil Scott Kaplan, Lori Beth Kaplan-Multz, Peter Wilson, Norman Steinberg, Tim Brown, Direct Mail Expertise, Inc., DME Global Marketing & Fulfillment, Inc., Mobile Promotions, Inc., William Hernan Lenis, William Luis Lenis, Manny Gustavo Lenis and Monica Lenis. All the defendants who appeared for their arraignment, except William Hernan Lenis, pled not guilty to the complaints. Mobile Promotions, Inc. and BetOnSports Plc did not enter an appearance.

The latest information on this case from the US Department of Justice can be viewed at this link.

Gambling Revenue Down in Nevada

Nevada's casino gambling revenue fell 3.5% in June according to the state's Gaming Control Board, falling to $921.1 million from $954.2 million a year earlier, while the state government collected $55.1 million in percentage fees in July, up 1 percent from $54.6 million a year earlier.

Online Gambling CEO Detained in USA

David Carruthers, the CEO of the online gambling company, BetonSports Plc, was detained last night by US authorities while changing flights in the US en route from the UK to Costa Rica. He is being held in Fort Worth, Texas, along with four others. The US Department of Justice apparently released a statement saying that a grand jury in Missouri returned a 22-count indictment charging 11 individuals and four corporations, including BetonSports Plc and three companies based in Florida, on various charges of racketeering, conspiracy, tax evasion and fraud. The indictment was returned by the grand jury on June 1, 2006 but was kept under seal because many of the defendants were offshore.

The United States has also filed a civil complaint to obtain an order requiring BetonSports Plc to stop taking sports bets from the US and to return money held in wagering accounts to account holders in the US. To view the press release from the Department of Justice explaining the indictment, Download here.pdf.

ABC News has the latest here.

HR-4411 -- US Anti-online Gambling Bill Approved by the House

Today, the US House of Representative approved the anti-online gambling bill (H.R. 4411, short-titled the Unlawful Internet Gambling Enforcement Act ). The bill now moves to the Senate for consideration and if approved, would amend the United States Code by prohibiting the use of any financial instrument for unlawful online gambling. Criminal convictions under the bill carry a five-year term of imprisonment or a fine, or both. The bill also requires the US government to advance policies that promote the cooperation of foreign governments in the enforcement of the bill.

US House of Representatives to Vote on Anti-Online Gambling Bill

The US House of Representatives will vote today on a proposed bill designed to prohibit online gambling in the U.S. and prevent financial transactions with offshore online gambling sites. The bill combines two measures sponsored by Republican Representatives James Leach of Iowa and Bob Goodlatte of Virginia. The bill would exempt online gambling involving horse racing (pari-mutuel betting) and state lotteries. If approved, the bill will go to the Senate for consideration.

The crux of the bill is a set of provisions designed to prevent the use of credit cards and other financial instruments for online gambling by making it unlawful for financial intermediaries to process payments for online-gaming businesses. The bill requires financial intermediaries and web service providers to cooperate with American law enforcement agencies to restrict online gambling.

Enforcement with financial intermediaries will take at least two forms: (a) on the prevention side, financial intermediaries, such as credit card companies, will have to identify which of their merchants are involved in online gambling activities involving US based cardholders. Once they have identified those merchants, the relevant merchant account numbers used to process credit card authorizations will be restricted. This means that a gambling transaction will simply not be authorized. The prohibitions should not affect credit cards issued outside the US; (b) on the deterrence side, credit card issuers will likely be asked or compelled to provide transaction records for the merchants identified as providing online gambling services. Transaction records will show the credit card numbers that were used to gamble online, allowing an investigating authority to then obtain from the credit card issuers, the names and addresses of credit card holders who gambled online. This information will likely be used for prosecution purposes.

There are significant privacy concerns, national and international, that arise with legislative attempts to control online conduct. Those concerns should be addressed concurrently with measures intended to compel production of personal information.

As the bill is being considered at the House of Representatives, some of the largest US gaming companies, such as MGM Mirage and Harrah's Entertainment Inc., are lobbying Congress to consider whether online gaming should be legalized in the US.

British Book-keeper Took $2 million From Employer to Gamble Online

Another case of employee theft to fuel a gambling addiction - in Britain today 23-year-old Bryan Benjafield pleaded guilty in Dorchester Crown Court to stealing more than $2 million CDN from his employer to gamble online. Benjafield's employer, Charminster Limited, was forced into administration as a result of the theft.  The court will consider sentencing in a few weeks time.

Story here. Update here.