The Summer of raids has taken yet another victim. This time around the police came knocking on the doors of the World Wide Web Casinos Inc. offices in Garden Grove, California.
The Los Angeles Times reported September 17 that the Orange County gambling software company is suspected of cheating hundreds of investors out of as much as $20 million. The paper reports that six computers and about 50 boxes of company records were seized.
State investigators say that the company is selling stock to the public in violation of securities laws. According to Department of Corporations Enforcement Director Bill McDonald, there may be hundreds of violations, and each carries a possible fine of up to $10 million and a prison term of as long as five years.
McDonald accused the company of lying to investors about its financial performance and soliciting his company to the general public illegally.
WWW Casinos CEO Peter Michaels denies any wrongdoing. "I don't think we've broken any laws," Michaels said. "We have a viable business, and this [investigation] is silly."
Michaels' company, now called NWDP.com and formerly called New Discoveries Publishing Corp., develops and licenses Internet gambling software. The company supplies the games for Net Pirates online casino (www.netpirates.com).
In July 1998, WWW Casinos investors filed a class action lawsuit alleging, among other charges, fraud and breach of fiduciary duty. The court responded in early August by issuing a preliminary injunction, which gives the plaintiff's attorney access to the company's financial information and adds his name for approval of expenditures over $5,000.
Las week's raid was reportedly part of a crackdown on suspected "boiler room" operations in Southern California which victimize less knowledgeable investors after enticing them with promising Internet enterprises. According to the Department of Corporations, online gambling is one of the more popular ploys.