DOJ Wins Again

28 March 2007

A California-based, back-end payment processing company has entered into a non-prosecution agreement with the United States Attorney for the Southern District of New York, Michael J. Garcia.

Under the terms of the non-prosecution agreement, the U.S. Attorney has agreed not to criminally prosecute Electronic Clearing House, Inc. (ECHO) in exchange for fines, cooperation and changes in the corporate structure. The agreement is part of the U.S. Department of Justice's (DOJ) effort to combat unlawful Internet gambling.

According to a prepared statement by ECHO as part of the non-prosecution agreement, from 2001 until the beginning of 2007, the company provided payment processing and collection services in the United States that enabled several e-wallets to conduct financial transactions almost exclusively relating to Internet gambling.

In a separate statement released on Oct. 11, 2006, ECHO announced that due to the impending enactment of the Unlawful Internet Gambling Enforcement Act (signed on Oct. 13, 2006), the company "has decided to phase out any services related to check processing activities for Internet gaming before the 270-day regulatory determination period expires." ECHO also froze funds, totaling approximately $21 million, belonging to the e-wallet companies.

Garcia based his decision not to prosecute ECHO on the Principles of Federal Prosecutions of Business Organizations, according to which ECHO exhibited full and complete cooperation with the government's ongoing investigation into the illegal online gambling industry, and its commitment to continue that cooperation. According to a prepared statement released on Tuesday by the DOJ, ECHO has been cooperating with the investigation since January 2007, providing the government with requested documents and volunteering employees for interviews.

Garcia also said he appreciates ECHO's initiative in shutting down its relationships with Internet gambling related e-wallets and the negative impact that charges against ECHO would have on the company's innocent employees and legitimate activities.

While ECHO is not being prosecuted, it did lose out on a lucrative merger deal as a result of the DOJ agreement. A $142 million merger with financial software vendor Intuit, announced in December, has been cancelled.