Cohen PiggyBacks on Truesdale Case

8 December 1998

The attorneys of Jay Cohen, one of the defendants in the March sportsbetting busts, have made hay from the recent Fifth Circuit ruling in Texas which claims that the gambling is taking place where the operators are. Attached is a letter to the federal district judge in Jay Cohen's case relaying this latest ruling from another district. Although the Texas case was not predicated on the Interstate Wire Act, attorney Melissa Beck says that there are some pertinent parallels which bear bringing to the attention to the judge in Cohen's case.

Also, check out the article, Texas Case Provides Interesting Counterpoint

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August 26, 1998

Honorable Thomas P. Griesa
United States District Judge
Southern District of New York
United States District Courthouse
500 Pearl Street
New York, New York 10007

Re: United States v. Jay Cohen 98 Cr. 484 (TPG)

Dear Judge Griesa:

I write to supplement the pre-trial motions filed on behalf of the defendant JAY COHEN on August 12, 1998, in connection with the above captioned matter. I have enclosed a copy of a decision from the Fifth Circuit, United States v. Truesdale. et al., Docket No. 97-10773, that was decided just this past Monday, August 24, 1998. I respectfully submit this case provides further support of the arguments we articulated in our motion to dismiss the indictment.

In United States v. Truesdale, the Fifth Circuit overturned the convictions of four defendants who had been found guilty of a variety of charges including violations of 18 U.S.C. §1055 (illegal gambling), 18 U.S.C. § 1956 (money laundering), and 18 U.S.C. § 1952 (traveling in aid of racketeering). While, unlike the case at bar, Truesdale was not prosecuted under 18 U.S.C. § 1084, there are significant factual similarities between the two cases thereby rendering the underlying rationale of Truesdale persuasive in this matter.

The four defendants in Truesdale ran a business called World Sportsbook (hereinafter "WSB"). WSB was similar to Jay Cohen's business, the World Sports Exchange, to the extent that both were operating offshore with licenses obtained from sovereign foreign nations. The business in Truesdale however did not use the Internet, and relied instead upon toll-free telephone numbers to accept bets from bettors located in the United States. WSB operated in both Jamaica and the Dominican Republic where, like in Antigua where Mr. Cohen operated his business, it is legal to operate a bookmaking service.

In Truesdale, there were "several" toll-free numbers available to bettors in the United States. Some of the numbers terminated in Dallas, Texas and some of the numbers terminated offshore. Those telephone numbers terminating in Dallas were "information only" lines that were answered in the homes of defendants Jones and Truesdale. The government failed to produce evidence that either of these "information only" lines were used to accept bets.

Instead, the purpose of the information lines was to enable a bettor to receive an information packet explaining how to set up an account. In this regard, WSB was run in a manner almost identical to that of World Sports Exchange. Indeed, like World Sports Exchange, WSB required that a bettor, before placing a bet, would have to first wire money and establish an account with WSB. In Truesdale, that money would be deposited in bank accounts maintained in Texas. Once an account was established with WSB, the bettor in had to call either Jamaica or the Dominican Republic to place the bet. Similarly, in all transactions with World Sports Exchange occurred in Antigua. Whatever the bettor won from WSB was paid to the bettor from the Texas bank accounts. It is important to recall that in Mr. Cohen's case, the World Sports Exchange bank accounts were maintained in Antigua and all financial transactions relating to World Sports Exchange occurred in Antigua as well.

Furthermore, unlike Jay Cohen, the defendants in Truesdale maintained significant contact with the United States. Defendant Jones would travel from Texas to Jamaica to oversee the business and he also maintained a computer in his home in Texas that could connect via modem to the computer in Jamaica so that Jones could input information. Mr. Cohen, on the other hand, resided full-time in Antigua where World Sports Exchange is located, maintained and operated.

In Truesdale, law enforcement agents in Texas searched the home of the defendants and recovered money, office equipment, a safe, a tally sheet indicating that more than 2 million dollars were wagered during a two month period, and black ashes floating in the toilet. In addition, law enforcement officers answered ringing phones in Jones' home and heard requests for information, deposit or account information and requests to place actual bets. In Hamilton's home, the officers discovered a tally sheet of bets placed (similar to the one found at Jones' home) and a list of bettors. At Truesdale's and Milner's homes the officers seized WSB documents, cashier checks, and Western Union transfer slips and money order receipts totaling 473,114 dollars.

On appeal, the defendant's argued that there was insufficient evidence to support their convictions for illegal gambling. The Fifth Circuit agreed, and reversed the defendants convictions under 18 U.S.C. § 1955 which prohibits conducting an illegal gambling operation in violation of state law. Specifically, the Fifth Circuit held that where the alleged illegality ---bookmaking --- took place entirely within the jurisdictions of either the Dominican Republic or Jamaica, where bookmaking is legal, the defendants had not violated the laws of Texas and thus, had not run an illegal gambling operation within the meaning of 18 U.S.C. § 1955.

It is respectfully submitted that an identical conclusion should be reached in Mr. Cohen's case. Indeed, as discussed in our motion to dismiss Mr. Cohen's indictment, the placing of bets in New York is completely legal. In Antigua, where World Sports Exchange was operating, accepting bets over the Internet and the telephone lines is legal. This is analogous to the Fifth Circuit's determination that because Texas law was not violated, and the defendants' acts in Truesdale were legal in Jamaica and the Dominican Republic, no law had been broken.

Moreover, the Fifth Circuit highlighted the fact that the government in Truesdale did not present any evidence to support its conclusion that bets were being accepted in Texas. Of paramount importance to Mr. Cohen's case is the Fifth Circuit's observation that:

Jones and his co-appellants went to great effort(s) to make sure that their operation was legal. They set up off shore offices and consulted with lawyers in the United States and abroad on the legality of their enterprise; they furnished the Caribbean local offices with desks and telephones and staffed them with personnel to accept international phone wagers; they set up separate phone lines that could be used to place bets in the offshore offices.

These actions, observed the Fifth Circuit, belie a finding that the defendants were operating in Texas illegally. Indeed, the Court continues:

Under these circumstances, without specific evidence of any wrongdoing, it is irrational to conclude beyond a reasonable doubt that after having gone thorough the effort of fully equipping, staffing, and widely advertising the Caribbean offices, the appellants nevertheless illegally accepted bets in the United States… The appellants went out of their way to stay within the law.

Similarly, in Mr. Cohen's case, he went to "great efforts" to make sure that World Sports Exchange was operating squarely within the law. To be sure, Mr. Cohen underwent a due diligence procedure, obtained a license, and operated openly and honestly. The efforts Mr. Cohen took, completely obliterate any possibility that he had the requisite criminal intent to violate the law.

In sum, we respectfully submit that the rationale underlying the Fifth Circuit's determination to reverse the convictions of the defendants in United States v. Truesdale should be given weight in Mr. Cohen's case. It is our hope that this case gives further support to the arguments already presented in our motion to dismiss the indictment.

Thank you for your courtesy in this matter.


Ben Brafman, Esq.

cc: Assistant United States Attorneys
Joseph V. De Marco
Thomas S. Rubin

Jay Cohen