Action in New York Highlights Marketing Risks for Online Casinos

20 October 1998

New York Attorney General, Dennis Vacco, has an active internet/computer investigative unit which is designed to "look for fraud, flim flams and pyramid schemes," said NY AG spokesman David Corvette. But, they also seem to be on a mission to go after internet gambling operations which have some link to the Empire State.

According to a release from Vacco's office, his officers "raided two Long Island computer service companies and pulled the plug on computer systems allegedly used to to host an illegal offshore Internet gambling operation taking bets on Yankee playoffs, as well as other sporting events."

A temporary restraining order (TRO) was issued and raids were executed by investigators from the AG's office and the Nassau County Police Department and District Attorney Denis Dillon's Office on Thursday, Oct. 15 on Planet Pouch Inc., located in Babylon, and Lightning Internet Services L.L.C. of Mineola, N.Y.

Again, the release notes that the "two businesses were registered as the Internet addresses for Casino International Ltd. and World Wide Tele-Sports Ltd., virtual casino and sportsbook licensed in Antigua."

Dennis Vacco stated, "Casino International boasted that its offshore location placed it out of bounds from US law enforcement, but because it ran its operation through Long Island, this illegal enterprise remained in play for our aggressive crackdown."

The raids were apparently part of a "gambling sting," where Casino International allegedly took bets on the Yankees from an undercover investigator in the AG's office who set up an account thru the website. That agent placed a $170 bet on the Yankees-Cleveland Indians playoffs, and a $195 bet on the Padres-Atlanta Braves.

They also set up a 14 year old to log on to the casino gaming site (with information to get them past all the safeguards noted the operators of the site), where they promptly lost $70 on blackjack. This prompted Vacco to say, "Internet gambling sites have no control over who is on the other end for the bet. Our investigation demonstrates that minors easily can go online to place wagers - and lose money."

In a discussion with the AG's spokesman, David Corvette, he noted that these two companies operate as the "server" and the "ISP" for the gambling operations. During the course of the four hour raid and search, they "shutdown the gaming operations."

"We know there's difficulty in extending jurisdiction to the site where these operations are licensed in Antigua," he said. "But, we know that they're using ISPs and servers in New York so we shut those down."

He added that Casino International and WorldWide TeleSports also use servers in a number of other states in the US. "We've forwarded this information to our colleagues in other states for their action."

When asked if he anticipated any further criminal action on this case, he said he doubted it. "The undercover agents continue to investigate. Much of the future of this case will depend on the level of knowledge and intent of those companies we raided."

What is the operator's take on this? Bob Mann from Casino International is quick to point out that these sites were marketing representatives, essentially a $35/month billboard" to point people to his operation. When told that the AG was alleging that the wagers took place there, he let his feelings be known as to how ridiculous that was.

What this does do is point to the risk for operators who are using gateways and other front ends in the US as marketing tools? When investigators who may not be that knowledgeable about the nuances of the technology see a US address on their search of Internic domain names, red lights are going on more often now. Operators should beware of having those internic addresses showing a US connection when the wagers are being made offshore in licensed jurisdictions.

Enduring a raid by law enforcement and a four hour search of the premises was clearly a traumatic experience for the two New York based internet companies. But it appears they came out swingin' by the attached letter which they sent out to their clients to explain the shutdown....

Dear Planet Pouch Subscriber,

Yours and my rights are in serious jeopardy!!

At 4:30 this afternoon, the Attorney's General of the State of New York, Dennis Vacco, authorized a raid on the offices of Planet Pouch under the guise of investigating an alleged gambling site that was hosted on a Planet Pouch server.

The site, which was known to Planet Pouch as a sports site and Internet advertising company, we have learned, has been under investigation for many months. Instead of the Attorney's General office asking Planet Pouch to supply the information pertinent to their investigation, they raided our office and violated yours and our rights! The Attorney's General office was authorized to seize any and all information pertaining to the investigation of the suspected gambling company, and Planet Pouch cooperated 100% in an effort to aid in their endeavors, however, you need to know that the investigators not only took the information that pertained to the investigation, they are now in possession of every bit of information on our system! The innocent and the alleged guilty. What is next? Will they investigate your neighbor for something and include you just because you live next door???

For the last 4+ hours the State Government of New York has held our entire system hostage, denying you and each and every other subscriber and business using Planet Pouch as a provider, the services you have come to expect from us.

Planet Pouch is not aware of whether or not the allegations lodged against this company are true or not, they simply hosted a site on our equipment. Planet Pouch did not create the site for the client and the client managed and maintained the site themselves.

Certainly Planet Pouch does not condone illegal activity of any kind, but Dennis Vacco is attempting to set a precedent in this matter and as usual, the little guy gets hurt! Planet Pouch was put out of business for these many hours and they confiscated a very expensive hard drive from our server! Thank God we had the available resources to replace it, or we would be out of business! To search the hard drive for information, OK, to confiscate it, with 1000s of peoples information on it and hundreds of businesses web sites on it, this sounds too much like 1994! George Orwell, where are you? Planet Pouch is the first Internet Service, to our knowledge, that has had this happen to them. The Attorney's General, in an attempt to make a precedent setting case, in an election year I might add, has trod on our rights. And cost Planet Pouch thousands of dollars and all of you your privacy! This must never happen again. You cannot arrest a landlord for a tenant's activity, all we were was the landlord for the site, if it was, in fact, a gambling site at all!

Once again, the Government, in an attempt to do the right thing, did it wrong! They had no idea how to go about extracting the information that they wanted, so they took it all!!! Should Planet Pouch be responsible to screen your email to be sure that you are not exchanging illicit or pornographic materials?? I don't think so!!

Go to your phone books now and call your Congressperson and Senator, and tell them that you disagree with this action. Watch News 12 at 10:00, and tomorrow at 10:00am Dennis Vacco is going to make his grandstand at a press conference. The press conference was called only after he was informed that we contacted every news organization in the state to complain. I think it is called spin control!

I honestly feel as though all the conspiracy buffs and paranoid militia persons that I scoffed at on the news, that are telling us day in and day out that the Government is violating our rights, may actually be right. I pray not!

We apologize for any inconvenience that this may have caused any of you.

Julius Engel IV, President
Planet Pouch Internet Service Inc.
"Marketing the Internet, a new era in commerce"