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UNITED STATES The BetonSports and Neteller DoJ agreements: analysis Following BetonSports and Neteller’s July 2006, BetonSports’ then-CEO, former directors of BetonSports. David Carruthers, a UK citizen, Also, BetonSports - which intends decision to cooperate with the US was arrested in Dallas, Texas, while to dissolve itself under the laws of Department of Justice (DoJ) in its en route to Costa Rica. The the UK - agreed, if it has funds investigation into illegal internet Carruthers arrest surprised and available after the dissolution, to wagering, PartyGaming and 888 alarmed the internet gaming pay an amount to the US Holdings have reportedly entered into industry, which did not generally (potentially millions of dollars) understand that an officer of a that the US District Court for the similar discussions with the DoJ. foreign company could be arrested Eastern District of Missouri Linda J. Shorey, Jeffrey L. Bornstein, while simply passing through the determines is representative of the Fred D. Heather, Anthony R. US. Six months later, on 15 profits generated via its acceptance Holtzman and Ashley Camron of January 2007, Neteller’s co- of online sports wagers from US founders, Stephen Lawrence and based bettors and, if the other Kirkpatrick & Lockhart Preston Gates John Lefebvre, both Canadian defendants in the case go to trial, to Ellis LLP examine these agreements. citizens who had held senior provide one or more custodians of management positions with and records to testify, if requested. Why have BetonSports and Neteller, had ownership interests in Neteller, As to Neteller, no criminal non-US companies that provided were arrested by US law indictment was filed. Instead, internet-wagering-related services enforcement officials. Lawrence following the arrests of Lawrence to US based bettors, agreed to was detained in the US Virgin and Lefebvre - who were charged cooperate with the US Department Islands. Lefebvre was detained in under 18 U.S.C. §371 (the general of Justice (DoJ) and to ‘disgorge’ the Malibu, California, where he criminal conspiracy statute) with profits they earned from US based owned a residence 1 . conspiring to operate an bettors? Why have other internet After Carruthers was arrested, the unlicensed money transmitting gaming companies that once government unsealed the criminal business in violation of 18 U.S.C. provided internet wagering indictment filed against Carruthers, §1960 and conspiring to promote opportunities to US based persons BetonSports, and others in the US illegal gambling in violation of 18 also approached DoJ? Are there District Court for the Eastern U.S.C. §1955 - DOJ froze Neteller’s lessons to be learned? District of Missouri. In the assets in US banks 5 , thereby BetonSports and Neteller are two indictment, BetonSports was precluding Neteller from making non-US companies that provide charged with racketeering any payments to US based account conspiracy 2 and mail fraud 3 . The services that relate to internet holders. Ultimately (and after wagering. Each is or was publicly charges were based, principally, on Lawrence and Lefebrve entered traded in the United Kingdom, allegations that BetonSports had guilty pleas 6 ), Neteller and the US where internet wagering is legal accepted online sports wagers from Attorney’s Office for the Southern and now licensed. Each, at one US based bettors. On 24 May 2007, District of New York, on 17 July time, provided services to US based just over ten months after the 2007, entered into what is styled a bettors. indictment was unsealed, deferred prosecution agreement. PartyGaming Plc and 888 BetonSports entered into a plea Under a deferred prosecution Holdings Plc are two non-US agreement with the US Attorney’s agreement, the DoJ agrees to internet companies that also, at Office for the Eastern District of postpone prosecution to give a one time, offered online wagering Missouri. company time to comply with the opportunities to US based persons. Pursuant to the plea agreement, law and take other steps to Both are reported to be having BetonSports pleaded guilty to the completely avoid prosecution. ‘discussions’ with DoJ concerning racketeering charge 4 . The US Typically under such an agreement, their business activities in the US. Attorney’s Office agreed to move to the DoJ requires the company to dismiss the mail fraud charge at admit facts that would establish the The criminal cases sentencing, agreed to bring no elements of the crime alleged to In 2006 and early 2007, three non- further criminal charges against have been committed, but does not US citizens who were serving or BetonSports related to the events file the charge. And, the company had served in a management in the indictment, and indicated also agrees to take various steps to capacity at BetonSports or Neteller that, based on what it then knew, it make amends, such as paying back were detained by US federal law had no intention of charging any any ill-gotten proceeds and enforcement authorities. On 16 as-of-then uncharged current or changing its practices to prevent 08 world online gambling january 2008
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