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

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.

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

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.

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.

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.

PartyGaming Plc to Acquire Gamebookers

According to Reuters, PartyGaming Plc is contemplating an acquisition of on-line bookmaker Gamebookers.

Online Gambling in Washington- Soon a Class C Felony

Starting on June 7, 2006, under new legislation, Washington State residents who gamble online may, on conviction, be liable for a fine of up to $10,000 or imprisonment for a term of five year, or both. The new bill upgrades online gambling from a misdemeanor to a Class C felony. Surprisingly, the Washington State Gambling Commission confirmed to reporters at the Seattle Post-Intelligencer that commission agents had gone to the homes of several gamblers in the state a year ago to warn them that online gambling was illegal but no one was arrested. This is surprising to me because it suggests that either the Internet activity of several citizens of Washington was being monitored for a suspected misdemeanor or that credit card, charge card or other payment transfer companies provided information to enforcement agencies on targeted off-shore merchants and their Washington clients who paid those merchants for services. It seems to me that there are important privacy issues at stake that will need to be resolved as more and more anti-online gambling legislation comes into force in the US.