Net gambling case to court next month

A pair of Canadians accused of laundering billions of dollars in illegalonline gambling proceeds originating in the United States are expected to face a preliminary hearing in New York next month --the first step in determining whether to proceed with formal charges. John Lefebvre and Stephen Lawrence, both co-founders and ex-directors of Isle of Man-based NETeller Plc, have each been released on $5-million US bond following their arrests last week --Lefebvre in Los Angeles and Lawrence in Virgin Islands. If convicted, each faces a maximum sentence of 20 years in prison. Lefebvre, 55, will have his bail terms reviewed when he appears in Manhattan Federal Court Wednesday. Lawrence, 46, who appeared in the same court Friday, saw his bail terms upheld. A judge gave him until Friday to come up with $1 million US still outstanding after he posted $2.5 million in cash and $1.5 million against a New York condominium. While a federal judge in Los Angeles ordered Lefebvre not to leave that city except for making his Manhattan court appearance, Lawrence has been ordered not to leave New York before the end of February. Even then, he must not leave the continental United States, and must provide the court with contact information for each night he is away from New York. Both men are accused of conspiring to promote illegal gambling by transferring billions of dollars of cyberspace bets placed by U.S. citizens with overseas gambling companies. Lefebvre, a University of Calgary law graduate and well-known philanthropist in the city, was arrested at his Malibu, Calif., beach house, but also owns a home on Saltspring Island in British Columbia. Fellow former Calgarian Lawrence's ties to the city date to the 1990s, when he worked as a principal with Cavendish Investing Ltd., a Calgary-based private venture capital firm. NETeller allows users to transfer money to global companies for a fee. The men are former directors of the company and knowingly broke the law, according to an FBI special agent based in New York. "Public filings acknowledge that a large chunk of their business was derived from handling wagers from American customers," James Margolin said last week.



"Under U.S. law, gambling is a very tightly regulated industry and thesolicitation of American bettors by offshore companies is illegal."



According to the company's 2005 annual report, payment services were provided to more than 95 per cent of gaming merchants around the globe,amounting to roughly $7.3 billion in financial transactions.



In the first half of 2006, the company reported processing $5.1 billion in transactions.



"There is ample indication these defendants knew the American market for their services was illegal," Michael Garcia, U.S. attorney for New York, wrote in the indictment.



"The U.S. is exerting its long arm in an effort to totally stamp out online gaming in their country, and in this case are pushing as hard as they can" Michael Lipton, a Toronto lawyer who specializes in gambling law, told CanWest News Service.

US Authorities Issue Subpoenas to UK Gambling IPO Backers

In their relentless pursuit of anybody and anything that was responsible for spreading online gambling in the United States, the US Department of Justice is reported to have issued subpoenas to a number of high profile UK investment banks. The Financial Times reports that the subpoenas were issued from October (after the passing of the Unlawful Internet Gambling Enforcement Act of 2006) by a New York Grand Jury at the request of Michael Garcia, the US Attorney who was recently at the forefront of the arrests of the founders and former directors of Neteller plc last week.

The FT report says that the subpoenas are likely to have requested copies of emails, telephone and banking records going back to 2001 and are concerned with an investigation of specific gambling companies such as Party Gaming plc and 888 Holdings plc. Companies publicly identified as having received subpoenas include HSBC, Dresdner Kleinwort, Deutsche Bank and Credit Suisse. The report refers to "sources familiar with the probe" who say that these companies have not been told they are targets and that other advisers to online gaming floats, including accountants and lawyers, could also be the subject of subpoenas.

The FT report quotes a Columbia University Law Professor, John Coffee, as saying that sending a company a subpoena ".doesn't automatically mean that they're automatically going to indict a corporation. They are often gathering information against other people who will be charged later." The ongoing actions of the US authorities against online gambling have been controversial since they often target non-US companies who are conducting business perfectly legally under the laws by which they are governed in their own countries, but it is clear the US has taken badly to the amount of money that has left its shores through the gambling activities of its citizens; that much was made crystal clear by the Neteller charges that were made public last week.

The Sunday Times also quotes sources in the City of London, one of which is quoted as saying: "To say the situation is sensitive is the understatement of the decade. The problem is, even if you know you have done nothing wrong, you have no powers of resistance. You can quickly go from being a bystander to a target, so even if you are bomb-proof, you have to assume you are subject to hostility. The Department of Justice has taken a shotgun, not a rifle approach, in relation to lots of gaming companies and has just asked everyone to hand over all the information they have."

Guyana Passes Hotel Gambling Bill

Guyana's Parliament has approved limited casino gambling in some hotels that are scheduled to open ahead of this year's cricket World Cup. The proposal, which passed late Monday, prompted street marches last week by the political opposition and religious groups who argue it will encourage vice and provide new opportunities for organized crime. "We have been condemned but we believe that history will absolve us," Interior Minister Clement Rohee said of protests from opposition benches in Guyana's 65-member Parliament.

Theruling party said the bill, backed by President Bharrat Jagdeo, was necessary to help hoteliers recoup investments made ahead of the World Cup. As many as 100,000 visitors are expected in the region for the tournament, which runs from March 13 to April 28, with matches in Guyana and eight other Caribbean countries. The legislation provides for up to 30 gambling licenses in the South American country. No hotels currently in Guyana would meet the conditions for a license -- which include having a minimum 250 rooms -- but two high-end hotels under construction in the capital of Georgetown near a new cricket stadium would be eligible.

Only foreigners would be permitted to wager in the yet-to-be-built hotels. Deborah Backer, a lawmaker for the main opposition People's National Congress, said the government had not offered candid estimates of license costs and other information. "We oppose it on religious and moral grounds," she said, adding that the country's "fragile security sector" may not be able to deal with crime that could accompany casino gambling rooms.