US Enforcers Seek To Extend Gambling Reach
Published: Monday, January 22, 2007 Online-Casinos.com
U.S. ENFORCERS SEEK TO EXTEND REACH OF ONLINE GAMBLING ACTION
But the latest attempt to accumulate evidence has not gone down well....
Shares in Party Gaming and 888.com took a knock Monday on news over the weekend that the Department of Justice authorities in the United States were seeking information on Internet gambling by issuing subpoenas on major financial and investment banks involved in IPOs for gambling companies on the London stock exchange.
Reports in The Times that the Justice Department had issued subpoenas to at least four Wall Street investment banks as part of a widening investigation into the multibillion-dollar online gambling industry, caused anger in some banking quarters.
The subpoenas were issued to firms that had underwritten the initial public offerings of some of the most popular online gambling sites that operate abroad. The banks involved in the inquiry include HSBC, Credit Suisse, Deutsche Bank and Dresdner Kleinwort, these people said.
Other, unconfirmed reports were that lawyers and other professional services companies had also received the attentions of the American authorities.
While online gaming sites such as PartyGaming and 888 Holdings operate from Gibraltar and have floated on the London Stock Exchange, companies that do business with them and have large bases in the United States have come under scrutiny by regulators in Washington.
None of the largest US banks such as Goldman Sachs or Citigroup underwrote the issues in London, in part because of the legal ambiguity of the sites; they are illegal in the United States but still accessible to residents.
The subpoenas, earlier reported by The Sunday Times of London, appeared to be part of an indirect but aggressive and far-reaching attack by federal prosecutors on the internet gambling industry just two weeks before one of its biggest days of the year, the Super Bowl.
Unable to go directly after the casinos, which are based overseas, they have sought to prosecute the operations' American partners, marketing arms and now, possibly, investors.
The prosecutors may be emboldened by a law signed by President Bush last October that explicitly defined the illegality of running an internet casino. Even before that law, the Unlawful Internet Gambling Enforcement Act, was adopted, the US Government claimed internet gambling was illegal under a 1961 Wire Act provision, a claim that is contested by the industry.
The prosecutors' efforts have already taken a toll in the last two years on offshore casinos, most notably with the arrest last year of David Carruthers, the chief executive of an internet sports book, BetonSports. The company is based in Britain and has operations in Costa Rica but Carruthers was detained at the Dallas airport. The arrest led to BetonSports' decision to stop taking bets from the US, crippling its business.
Several weeks later, agents of the Port Authority of New York arrested Peter Dicks, the chairman of Sportingbet, which offers online sports betting and, like Carruthers' company, trades on the London exchange. Dicks was arrested at Kennedy Airport.
Last week, a British online money transfer business, NETeller, said it would cease handling gambling transactions from US customers because of regulatory uncertainty.
"It appears that the Department of Justice is waging a war of intimidation against internet gambling," said I.Nelson Rose, a professor of law at Whittier Law School in Costa Mesa, California, an expert on internet gaming law.
