It has been a busy 2007 for the U.S. Justice Department (DoJ). Shortly after Neteller co-founders John Lefebvre and Stephen Lawrence were arrested on Jan. 15, media reports began leaking of a controversial DoJ probe into some of the world's largest investment banks with ties to major I-gaming companies. Recently, IGN spoke with U.S. gambling law authority I. Nelson Rose about the Neteller arrests, moreover, whether the DoJ is going beyond the boundaries of the law.
IGN: In your opinion, what direction is the DoJ heading, taking into consideration its recent action against Neteller?
Rose: The DoJ is clearly waging a war of intimidation, instead of acting to protect people by saying, "Look, if you don't return that money right now, we're going to add counts for fraud and theft." The London Exchange should be saying, "If you don't return it, we're going to de-list you." But the DoJ maybe is thinking, "Hey, this isn't bad if we put another little scare—we're going to make it difficult for you to bet online. Neteller is gone; Pinnacle is gone. You might get arrested, and worse, you might not get your money back."
I understand, from a criminal prosecution point of view, you focus on bringing the charges, and obviously they're trying to put the business out of business. But they (DoJ) are making public announcements that gambling online is illegal, which it isn't, necessarily. They're making public announcements to try to scare people; I feel they really should be forcing the return of this money.
The dangerous situation for the players is that gambling debts are normally not collectible, so if the government doesn't force the return, it's possible that they won't get the money back. It's not fraud; it wasn't like Neteller took the money with no intention of returning it. Neteller, BetonSports or any other operator—I don't think they would do this—could say, "Hey, it's a gambling debt. We don't have to pay. Sorry."
IGN: Do you think the DoJ is reaching beyond the limits of the law?
Rose: I think they are certainly stretching the law and their jurisdiction to the limits, and may have gone beyond the limits. It wasn't unexpected to me that they were going after Neteller. I told someone that was talking to the president of Neteller last year, after the Peter Dicks arrest: "Neteller is not a client, but I'll give them some free legal advice: Stay out of the United States." If sports betting is illegal in the United States, then the company that knowingly allows the bet to take place, the facilitator, is clearly aiding and abetting. And under what's called accomplice liability that makes them liable for all the crimes that the principal, the operator, is committing.
Whether or not it is illegal is one question. Whether or not they're aiding and abetting, that's not a question. Now, it is interesting that what they did decide to charge them with were not violations of the Wire Act. What they charged them with was a single count of money laundering. It may turn out that they (prosecutors) decided that money laundering was an even a stronger count, because the crime says "sending money." But what is unusual, and I don't know why they did this—when you go after somebody, you normally don't just charge a single count. When the DoJ went after BetonSports, it's a 27-page-long grand jury indictment. Here, this one is a single count of money laundering, and I don't understand why they didn't include a count of the Wire Act. Every charge against BetonSports could have been charged against Neteller, plus money laundering. I mean, all they really had to do was copy that indictment, and say, Neteller was helping BetonSports, so I don't know why they didn't do that.
IGN: One reliable source said that recent action by the DoJ looks less like a coordinated effort and more like individual efforts by certain U.S. Attorneys.
Rose: I have heard the opposite, which is that they don't bring actions like this without having it cleared by D.C., but it's possible, at least with the subpoenas: that they don't do something like that without having it cleared by Washington, D.C.
In terms of the arrests of the Neteller people, that came out of the Southern District of New York, which is where criminal complaints were filed against Jay Cohen and others, and was clearly involved with the Attorney General of the United States at the time.
So, one reason it might be true is that U.S. Attorneys are very, very independent. When I first started looking about this, I was surprised. I'll give you a kind of dramatic example. 15 years ago … the Attorney General issues opinions, I think they're called blue papers, and they said "Every ship that has gambling must have overnight accommodations for every passenger." The U.S. Attorney in Texas said to all the gambling ships, "Okay, you either have overnight accommodations or you're out of business." The U.S. Attorney in Fla. said, "Thank you for your advice; we don't read the law that way." That was when I knew how independent they are.
But there is a task force—an international task force—that I have spoken to a number of times made up of the DoJ, the RCMP from Canada, state regulators, the Internal Revenue Service (IRS) … so, I doubt that this is some rogue U.S. Attorney. It could be, but I doubt it.
Professor I. Nelson Rose is an internationally known scholar, public speaker and writer and is recognized as one of the world's leading authorities on gambling law. A 1979 graduate of Harvard Law School, he is a tenured full Professor at Whittier Law School in Costa Mesa, Calif., where he teaches one of the first law school classes on gaming law. Professor Rose is the author of more than 300 books, articles, book chapters and columns. He is best known for his internationally syndicated column Gambling and the Law.