Last week, attorneys Anthony Cabot, Lawrence Walters and Martin Owens chimed in on the implications of the recent Sporting News settlement on the I-gaming industry. Today, Patrick O'Brien of Greenberg Traurig offers his views.
IGN asked the Experts: In light of the Sporting News settlement, how serious a threat does the DOJ now pose to the vitality of online gambling companies who deal in the U.S. market?
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DOJ lulled Casino City and the industry into a false sense of security until the danger of the Casino City case was past, and it then resumed its attack.
-Dave McClure
USIIA
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Patrick O'Brien: I find the Sporting News settlement interesting from several perspectives.
First is the timing. When the Department of Justice (DOJ) began its attack on the advertising of Internet gambling, Casino City filed suit alleging that DOJ was infringing on its First Amendment right to free speech. The case was dismissed after DOJ admitted that merely carrying advertisements did not constitute aiding and abetting and Casino City was not at risk of prosecution. Although its case was dismissed, Casino City had essentially won its point. DOJ had admitted that accepting and publishing advertisements for illegal gambling was not aiding and abetting.
Casino City appealed the dismissal nonetheless because it wanted the courts to rule that advertising was not aiding and abetting and was constitutionally protected free speech. However, as the months passed, DOJ took no action against others, Internet gaming ads were being run throughout the country and the question faced by Casio City was whether it was worth continuing the case. After all, DOJ had admitted advertising was not aiding and abetting and had backed off its attack on advertising, so why risk losing the case in court, when the battle had already been won. In early January, Casino City advised DOJ that it was going to move to dismiss the case with prejudice, that is, the case could not be re-filed in the future. DOJ agreed, the motion to dismiss was filed and two weeks later, DOJ announced its continued crackdown. I find it hard to believe that this was just a coincidence. DOJ lulled Casino City and the industry into a false sense of security until the danger of the Casino City case was past, and it then resumed its attack.
The timing of the Sporting News settlement is troublesome from another aspect as well. Is the case evidence that Attorney General Alberto Gonzales and U.S. Attorney Catherine Hanaway intend to continue the focus which their predecessors, John Ashcroft and Raymond Gruender, put on Internet gambling? Is the industry in for more of the same, or was this merely the conclusion of a case which had commenced in the previous administrations, and was now being concluded following the Casino City dismissal? Only time will give us the answer to this question.
There are two other aspects of the settlement which warrant note. First, although the government’s announcement of the Sporting News settlement focuses on its assertion that advertising Internet gambling is aiding and abetting criminal activity. In its motion to dismiss the Casino City case, DOJ admitted that running ads was not aiding and abetting. Furthermore, in In Re: MasterCard International, the Fifth Circuit Court of Appeals ruled that non-sports casino gaming is not a violation of the Wire Act and may or may be illegal depending on the state law where the gambling business is conducted (assuming that it is even deemed to be conducted in the States). If Internet gaming was illegal and if advertising was aiding and abetting, would DOJ have moved to dismiss the Casino City case? To the contrary, if it was confident in its position, it would have welcomed the Casino City case as an opportunity to further its crackdown on advertising and to have the Fifth Circuit Court of Appeals reverse its decision in In Re: MasterCard Intentional.
Finally, it is important to note that the penalty assessed in the Sporting News case was based to a large extent on the assertion that the fees used to pay for the advertising were the proceeds of illegal gambling and, therefore, subject to forfeiture. That is the same basis used in assessing the penalties against the St. Louis radio stations, as well as in the seizure and forfeiture of fees paid for Internet poker advertisements on the Travel Channel’s World Poker Tour. This is important because it means the funds would be subject to seizure even if the ads were for dot-net sites as opposed to dot-com sites. Although advertising dot net-sites might avoid violations of statutes relating to the promotion of illegal activity, it provides no protection whatsoever against seizure of the advertising fees if the funds used to pay the fees were the proceeds of illegal gambling.
Patrick O'Brien spent 25 years as a special agent with the U.S. Customs Service before joining the law firm Greenberg Traurig. In those years, he occupied numerous important positions, including Special Agent in Charge of South Florida and the Caribbean, and Assistant Regional Commissioner New York, where his primary responsibilities involved combating money laundering, drug smuggling and illegal exports of arms and technology. In addition, as the director of internal security for Customs he was responsible for all Customs corruption prevention programs and corruption investigations worldwide. He practices widely in customs law and in other areas of international trade law.