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.

US Anti-Online Gambling Bill One Step Closer to Law

Today, the US House Judiciary Committee passed the Internet Gambling Prohibition Act - a bill banning gambling over state lines or using the Internet and banning gambling businesses from accepting payments such as credit cards, checks, wire and Internet transfers in illegal gambling transactions as well as giving law enforcement authority to uphold the new legislation. The bill includes an exemption for the horse racing industry which would allow it to continue to conduct interstate, account, and Internet wagering. The bill moves to the full House of Representatives for consideration. You can read the story in Business Week.

Board Departures at PartyGaming Plc

Surprising news today from PartyGaming Plc -- Anurag Dikshit (who ranked 207th on the Forbes list of the world's richest people) and Vikrant Bhargavar (one of India's 40th richest people) resigned from the board of PartyGaming Plc, effective immediately.

US House Panel Approves US Anti-Online Gambling Bill

A US House of Representatives subcommittee approved Senator Bob Goodlatte's anti-online gambling bill today. If passed, the bill would update an existing ban on interstate gambling over telephone lines and outlaw the use of Internet technology to place bets. It would prohibit a gaming business from accepting credit cards, checks, and wire transfers for gambling transactions. You can view Goodlatte's bill at his site here. A summary of it is available here. 

The price of shares of the well-known overseas online gambling sites, such as PartyGaming Plc and 888 Holdings Plc tumbled about 5% on news that the bill was approved by the subcommittee.

Directors' Compensation at PartyGaming Hits $40.5 Million

The world's largest online gambling company, PartyGaming Plc, released its first annual report which you can view here. According to the report, directors were paid $40.5 million (CDN) in compensation (including salary, bonuses and other compensation) last year. Four of the largest earners were as follows:

• Richard Segal $22.9 million (CDN)
• Martin Weigold $9.7million (CDN)
• Michael Jackson $3.7 million (CDN)
• Brian Larcombe $2.2 million (CDN)

US Anti-Online Gambling Bill Closer to Reality

The US House Financial Services Committee approved one of the anti-online gambling bills today - it may very well be the one advanced by Senator Goodlatte. The Bill now goes to the House floor for consideration.  For a summary of the legislation proposed by Goodlatte, read our earlier post.

Antigua Opposes Proposed US Anti-Online Gambling Bill

On Friday, Antigua's ambassador to the US, John Ashe, formally expressed concern to the US over its proposed new anti-online gambling bill - story here.

Anti-Online Gambling Bill in US

Senator Bob Goodlatte has introduced his anti-online gambling bill (the Internet Gambling Prohibition Act) in the US House of Representatives and has received the support of over 100 members of the House. If passed, the bill would update an existing ban on interstate gambling over telephone lines and outlaw the use of Internet technology to place bets. It would prohibit a gaming business from accepting credit cards, checks, and wire transfers for gambling transactions. You can view Goodlatte's bill at his site here.  

PartyGaming PLC Acquires Assets of Empire Online Limited

Lots of news this week about PartyGaming PLC (the online gambling company started by American lawyer Ruth Parasol). Today, the company announced it has entered into an agreement to acquire certain assets of Empire Online Limited for $250 million (USD). The closing date was not announced. Under the terms of the agreement, Empire agreed to drop its current legal claim against PartyGaming. The agreement is subject to the approval of Empire's shareholders, but does not involve a substantial disposition. You can link to the press release here.

There was another story today about PartyGaming published in CFO Europe discussing the public relations effort that went into the IPO for PartyGaming in June and the challenges in representing Ruth Parasol and the company during that time. 

Market Nervous About Online Gaming Shares

According to the Dow Jones Newswire, shares in online gambling entities including PartyGaming PLC were under pressure and fell today amid renewed fear that the U.S. may introduce anti-internet gambling legislation. Republican Senator Bob Goodlatte is said to be planning to present a new online gambling prohibition bill to the House of Representatives early next week. 88% of PartyGaming's customers are from the U.S. PartyGaming has said in the past that it takes comfort from, among other things, the apparent unwillingness or inability on the part of the relevant U.S. authorities to bring actions against it. This will change if Goodlatte's proposed bill has any teeth to it.

PartyGaming has also said in the past that it has been advised that it may be difficult for it to be prosecuted in the U.S or for enforcement proceedings to be successfully brought against it because its operating companies are not incorporated in the U.S. and do not have a physical presence there. The directors of PartyGaming are said to be comforted by that advice.

Survey says Gambling Online Preferred

Here's a survey I believe -- according to a survey published by WebUser, a U.K. Internet magazine, gamblers in the U.K. would rather gamble online than head over to the local pub for a beverage. 9% of those surveyed said they would rather quit their day job and gamble online professionally. Casino developers pouring vast amounts of money into new developments in England at the moment should take note.

Empire Online -- Profits of $50 Million for 2005

Empire Online Limited is expected to report profits of $50 million (USD) for 2005. It's net gambling revenue for the last quarter of '05 was $22.5 million.

Online Blackjack -- Next Big Thing?

Fascinating story on PartyGaming introducing online blackjack in today's Guardian. According to PartyPoker officials, blackjack is now PartyGaming's most popular non-poker game played online. The amount of money involved is staggering. The house win from casino games at PartyGaming ranges from $1.6 million to $2.4 million (CDN) a day. The win from poker is $5.4 million (CDN) a day, a third higher than a year ago.

Explosive Online Gambing Growth for Another 10 Years

The latest edition of Time Online is carrying a story on how the U.S. is getting financially beat in online gambling (Canada too for that matter) by continuing to prohibit it. According to Time's sources, almost $12 billion (USD) will be wagered over the Internet in 2005. This represents close to 5% of the world's total gross gambling yield. Over the next five years, the total take is expected to be about $22 billion (USD), representing about 7.5% of the industry total. The article also briefly discusses the "next big thing in the industry" -- mobile gambling.

60 Minutes to Run Story on Online Gambling

This Sunday CBS' 60 Minutes will carry a story on offshore online gambling and the loss of revenue to the U.S. treasury associated with the continued prohibition in the U.S. against providing online gambling services. According to one operator, if online gambling were legalized and regulated in the U.S., the industry would have earned $1.4 billion (CDN) in tax revenue in 2004.

Celebrity Online Gaming Endorsement?

Here is an interesting post from the International Herald Tribune discussing the latest phenomena of endorsement deals between celebrities (such as Tom Arnold) and offshore online casinos and the potential liability of these endorsements. You can read it here.

More Online Gaming Statistics

TodayOnline.com is reporting another new study showing that revenue earned by gaming operators from online gaming will top $11.9 billion (Cdn) in 2005 and total dollars spent gambling online will surpass $238 billion (Cdn) by the end of the year. Surprisingly, the report shows that 20 to 30 million U.S. Internet users visited gaming or sweepstakes-type sites in February 2005 alone. Picture From TodayOnline.com

A $125 Billion Industry!

Recent studies show revised projected revenues for online gaming . Two key facts:

• According to research analysts Datamonitor, online gaming will be worth $125 billion by 2015; and
• According to Angus Reid Group, online casino operators kept up to 75% of money wagered online.

Online Gambing In Quebec

The president of Loto-Quebec, Alain Cousineau, in a speech to the Montreal Board of Trade yesterday estimated that online gambling sites could generate between $300 million and $700 million this year for provincial governments in Canada but that provincial lottery authorities "had yet to tackle the thorny issues surrounding online gambling." Worldwide, online gambling generated an estimated $7.5 (USD) billion in revenue last year.

The Kahnawake Mohawk Reservation in Quebec hosts the largest number of online gambling sites in the world (at 18%) by providing the computer servers necessary to host online casino web sites under a licence issued by an entity called the kahnawake Gaming Commission. There is some debate as to whether the kahnawake arrangement is legal in Canada.

Future of Online Gambling

The Business Online has posted an interesting story about the future of online gaming companies, following the announcement last week by PartyGaming plc that its expected growth for the second half of the year would be slower than previous interim periods. Following the announcement, the whole online gaming sector took a beating. Almost £2 billion was wiped off PartyGaming's share price in a single day, leaving the company valued at roughly £4.2 billion. The company is sure to rebound as the online gaming marketplace is far from saturated, especially in North America. You can read the story here.