State Gaming Control Board Complaint v. American Wagering

COMPLAINT FOR DISCIPLINARY ACTION

STATE OF NEVADA
BEFORE THE NEVADA GAMING COMMISSION
STATE GAMING CONTROL BOARD,
Complainant,
v.
AMERICAN WAGERING INC., dba MEGASPORTS PTY. LTD.,
Respondent.

Complainant, the STATE GAMING CONTROL BOARD (BOARD), by and through its legal counsel FRANKIE SUE DEL PAPA, Attorney General, and DEREK HARMER, Deputy Attorney General, hereby files this Complaint for Disciplinary Action against the above-named Respondent pursuant to Nevada Revised Statutes (NRS) 463.310 (2) and 463.312, and alleges follows:

1. The BOARD is an administrative agency of the State of Nevada duly organized, under, and by virtue of NRS Chapter 463, and is charged with the administration and enforcement of the gaming laws of the State as set forth in Title 41 of NRS, and the Regulations of the Nevada Gaming Commission.

2. At all times relevant hereto, Respondent, AMERICAN WAGERING INC. (AWI), dba MEGASPORTS PTY. LTD, located at 675 Grier Drive, Las Vegas, Nevada 89119, was and currently remains the holder of a nonrestricted gaming license with the responsibility of complying with all the provisions of the Nevada Gaming Control Act and the Regulations of the Nevada Gaming Commission.

3. AWI owns and operates MEGASPORTS PTY LTD.

4. MEGASPORTS (ACT) PTY. LTD. (MEGASPORTS AUSTRALIA), is an Australian subsidiary of AWI.

5. The Australian Capital Territory (ACT) has authorized Internet gambling and wagering in Australia. The ACT licensed MEGASPORTS AUSTRALIA to conduct bookmaking operations via the Internet and telephone on January 14, 1999. MEGASPORTS AUSTRALIA began Internet operations on March 18, 1999.

6. The BOARD is authorized to observe the conduct of licensees in order to ensure that gaming operations are not being conducted in an unsuitable manner. See NRS 463.1405(l).

7. The Nevada Gaming Commission has full and absolute power and authority to limit, condition, restrict, revoke or suspend any license, or fine any person licensed, for any cause deemed reasonable. See NRS 463.1405(3).

8. NRS 463.1405 (2) provides that the BOARD has full and absolute power and authority to recommend disciplinary action against a licensee for any cause deemed reasonably by the BOARD. As such, the Nevada Legislature has declared that:

(a)The gaming industry is vitally important to the economy of the state and the general welfare of the inhabitants.

(b)The continued growth and success of gaming is dependent upon the public confidence and trust that licensed gaming is conducted honestly and competitively, that establishments where gaming is conducted and where gambling devices are operated do not tinduly impact the quality of life enjoyed by residents of the surrounding neighborhoods, that the rights of the creditors of licensees arc protected and that gaming is free from criminal and corruptive elements.

(c) Public confidence and trust can only be maintained by strict regulation of all persons. Locations. practices, associations and activities related to the operation of licensed gaming establishments and the manufacture or distribution of gambling devices and equipment.

NRS 463.0129(a), (b), (c).

9. NRS 463.310 provides in pertinent part as follows:

1. The board shall make appropriate investigations:

a. To determine whether there has been any violation of this chapter or chapter 462, 464, 465 or 466 of NRS or any regulations adopted hereunder.

b. To determine any facts, conditions. practices or matters, which it may deem necessary or proper to aid in the enforcement of any such law or regulation.

2. If, after any investigation the board is satisfied that a license, registration, finding of suitability, pari-mutuel license or prior approval by the commission of any transaction for which the approval was required or permitted under the provisions of this chapter or chapter 462, 464, or 466 of NRS should be limited, conditioned, suspended or revoked, it shall initiate a hearing before the commission by filing a compliant with the commission in accordance with NRS 463.312 and transmit therewith a summary of evidence in its possession bearing on the matter and the transcript of testimony at any investigative hearing conducted by or on behalf of the board.

NRS 463.310 (1)(a) and (b), (2).

10. Nevada Gaming Commission Regulation 5.011 provides in pertinent part as follows:

The board and the commission deem any activity on the part of any licensee, his agents or employees, that is inimical to the public health, safety, morals, good order and general welfare of the people of the State of Nevada, or that would reflect or tend to reflect discredit upon the State of Nevada or the gaming industry, to be an unsuitable method of operation and shall be grounds for disciplinary action by the board and the commission in accordance with the Nevada Gaming Control Act and the regulations of the board and the commission. Without limiting the generality of the foregoing, the following acts or omissions may be determined to be unsuitable methods of operation:

1. Failure to exercise discretion and sound judgement to prevent incidents which might reflect on the repute of the State of Nevada and act as a detriment to the development of the industry.

. . . .

8. Failure to comply with or make provisions for compliance with all federal, state and local laws and regulations pertaining to the operations of a licensed establishment including, without limiting the generality of the foregoing, payment of all license fees, withholding any payroll taxes, liquor and entertainment taxes and antitrust and monopoly statutes.

Nev. Gaming Comm'n Reg. 5.011 (1) and (8).

11. NRS 465.091 provides as follows:

As used in NRS 465.091 to 465.094, inclusive, unless the context otherwise requires, 'medium of communication" includes, but is not limited to, mail, telephone, television, telegraph, facsimile, cable, wire. the Internet, or any other similar medium.

NRS 465-091.

12. NRS 465.092 provides as follows:

1. Except as otherwise, provided in NRS 465.094, a person, alone or with others, shall not knowingly, within or outside of this state,

(a) Accept Or receive, directly or indirectly, through any medium of communication a wager from another person who is physically present within this state; or
(b) Allow a lessee, agent or employee to accept or receive, directly or indirectly, through any medium of communication a wager from another person who is physically present within this state.

2. If a person engages in conduct in violation of subsection I and the person is outside of this state at the time of the offense:

(a) The offense shall be deemed to commence outside of this state;
(b) The offense shall be deemed to be consummated within this state; and
(c) The person may be prosecuted within this state pursuant to the provisions of NRS 171.015.

NRS 465.092.

13. On or about July 20, 1999, while physically located in Las Vegas, Nevada, a Board agent opened a dial-up Internet service account with a Canadian Internet service provider (ISP), known as Netrover, Inc.

14. On or about July 20, 1999, while physically located in Las Vegas, Nevada, a Board agent established an Internet connection to the Canadian ISP via a telephone modem connection originating from Las Vegas, Nevada. Through this Internet connection, the Board agent accessed MEGASPORTS AUSTRALIA's website, then opened a wagering account under the identity of James Lawrence.

15. On or about July 23, 1999, one hundred dollars ($100.00) in United States currency was deducted from the credit card account of James Lawrence, and the amount was credited to MEGASPORTS AUSTRALIA's wagering account for James Lawrence.

16. On or between July 23, 1999 and August 4, 1999, while physically located in Las Vegas, Nevada, a Board agent used a telephone modem connection to access MEGASPORTS AUSTRALIA'S websitc and placed twelve (12) separate %wagers totaling $120.00 on various U.S. professional baseball games. As a result of those wagers, a total amount of $134.00 in winnings was credited to the account of James Lawrence. At the end of the twelve days of belting activity, a balance of $114.00 was remaining in the wagering account of James Lawrence.

17. On or about August 5, 1999, a Board agent sent an E-mail to MEGASPORTS AUSTRALIA requesting the company to cash out the wagering account of James Lawrence, and to send the balance of funds to an address in the United States.

18. On or about August 6, 1999, a Board agent placed a telephone call to MEGASPORTS AUSTRALIA requesting the company to cash out the account of James Lawrence, and to send the balance of funds to an address in the United States. In responding to a question from the Board agent during that telephone call, the company's representative stated that account funds could be sent anywhere in the world, but that bets could not be made from within the United States. Because the address for James Lawrence was located in the United States, the MEGASPORTS AUSTRALIA representative asked the Board agent to send a birth certificate via facsimile to MEGASPORTS AUSTRALIA.

19. On or about August 9, 1999, a fabricated birth certificate in the name of James Lawrence was sent via facsimile to MEGASPORTS AUSTRALIA.

20. On or about August 10, 1999, MEGASPORTS AUSTRALIA sent ail E-mail to James Lawrence stating that the wagering account with the company had been locked until further notice and that the balance of funds would not be disbursed as requested.

21. On or about August 19, 1999, Victor Salerno, the President of AWI, sent a letter to James Lawrence stating "MegaSports hereby rescinds all wagers placed by you over the Internet through your account with MegaSports." The letter went on to request how James Lawrence wished to receive his "original deposit of $100." The letter failed to address the disposition of the current total balance, which was $114.00.

22. The BOARD repeats and realleges and incorporates by reference herein the allegations set forth in paragraphs 1 through 21, inclusive.

23. On or about March 18, 1999, when MEGASPORTS AUSTRALIA began Internet wagering operations, its internal controls indicated that telephone, e-mail and Internet applications had to be completed by sending or faxing required proof of identification within 10 days of opening a wagering account.

24. During the period between July 20, 1999, through August 8, I999, MEGASPORTS AUSTRALIA failed to obtain verification of the identity of the Board agent who had opened the wagering account. Despite such failure, MEGASPORTS AUSTRALIA permitted the Board agent to place 12 separate wagers via the Internet account.

25. The failure of MEGASPORTS AUSTRALIA to verify the identity of the Board agent within 10 days of the account being opened, and allowing 12 separate wagers to be placed in the interim, was a violation of the internal control procedures of MEGASPORTS AUSTRALIA.

26. By failing to comply with MEGASPORTS AUSTRALIA's internal control procedures, a Board agent, while physically located in Las Vegas, Nevada, was able to place wagers over the Internet.

27. By allowing its Australian subsidiary, MEGASPORTS AUSTRALIA to accept Internet wagers front the State of Nevada, AWI failed to exercise discretion and sound judgment to prevent incidents which might reflect on the repute of the State of Nevada and act as a detriment to the development of the gaining industry.

28. The conduct of AWI, hereinabove described, constitutes an unsuitable method of operation under Nevada Gaming Commission Regulation 5.011 and, as such, is grounds for disciplinary action. See Nev. Gaming Comm'n Regs. 5.01 0(2), 5.030.

29. The BOARD repeats and realleges and incorporates by reference herein the allegations set forth in paragraphs 1 through 28, inclusive.

30. On or about July 23, 1999, while physically located in Las Vegas. Nevada, a Board agent used a telephone modern connection to access MEGASPORTS AUSTRALIA's website and placed a $10.00 wager on the Chicago Cubs professional baseball team to win a game that evening against the New York Mets professional baseball team. The Chicago Cubs lost that particular Same. As a result, the $ 1 0.00 wager was deducted from the account of James Lawrence.

31. The conduct of MEGASPORTS AUSTRALIA, in accepting the Internet wager from the State of Nevada, is defined as a misdemeanor crime pursuant to NRS 465.092.

32. By allowing its Australian subsidiary, MEGASPORTS AUSTRALIA, to accept Internet wagers from the State of Nevada, AWI engaged in conduct which constitutes an unsuitable method of operation under Nevada Gaming Commission Regulation 5.011 and, as such, is grounds for disciplinary action. See Nev. Gaming Comm'n Regs. 5.010(2), 5.030.

33. The BOARD repeats and realleges and incorporates by reference herein the allegations set forth in paragraphs 1 through 32, inclusive.

34. On or about July 29, 1999, while physically located in Las Vegas, Nevada, a Board agent used a telephone modem connection to access MEGASPORTS AUSTRALIA's website and placed a $10.00 wager on the Baltimore Orioles professional baseball team to win the game that day against the Texas Rangers professional baseball team. The Baltimore Orioles lost that particular game. As a result, the $10.00 wager was deducted from the account of James Lawrence.

35. The conduct of MEGASPORTS AUSTRALIA, in accepting the Internet wager from the State of Nevada, is defined as a misdemeanor crime pursuant to NRS 465,092.

36. By allowing its Australian subsidiary, MEGASPORTS AUSTRALIA to accept Internet wagers from the State of Nevada, AWI engaged in conduct which constitutes an unsuitable method of operation under Nevada Gaming Commission Regulation 5.011 and as such, is grounds for disciplinary action. See Nev. Gaming Comm'n Regs. 5.010(2), 5.030.

37. The BOARD repeats and realleges and incorporates by reference herein the allegations set forth in paragraphs 1 through 36, inclusive.

38. On or about July 30, 1999, while physically located in Las Vegas, Nevada, a Board agent used a telephone modem connection to access MEGASPORTS AUSTRALIA's website and placed a $10.00 wager on the New York Mets professional baseball team to win a game that day against the Chicago Cubs professional baseball team. The New York Mets won that particular game. As a result, $17.70 in winnings were posted to the account of James Lawrence.

39. The conduct of MEGASPORTS AUSTRALIA, in accepting the Internet wager from the State of Nevada, is defined as a misdemeanor crime pursuant to NRS 465.092.

40. By allowing its Australian subsidiary, MEGASPORTS AUSTRALIA, to accept Internet wagers from the State of Nevada, AWI engaged in conduct with constitutes an unsuitable method of operation under Nevada Gaming Commission Regulation 5.011 and, as such, is grounds for disciplinary action. See Nev. Gaming Comm'n Regs. 5.010(2), 5.030.

41. The BOARD repeats and realleges and incorporates by reference hereby the allegations set forth in paragraphs 1 through 40, inclusive.

42. On or about July 30, 1999, while physically located in Las Vegas, Nevada, a Board agent used a telephone modem connection to access MEGASPORTS AUSTRALIA's website and placed a $10.00 wager on the Houston Astros professional baseball team to win a game that day against the San Diego Padres professional baseball team. The Houston Astros won that particular game. As a result, $20.00 in winnings were posted to the account of James Lawrence.

43. The conduct of MEGASPORTS AUSTRALIA, in accepting the Internet wager from the State of Nevada, is defined as a misdemeanor crime pursuant to NRS 465.092.

44. By allowing its Australian subsidiary, MEGASPORTS AUSTRALIA, to accept Internet wagers from the State of Nevada, AWI engaged in conduct which constitutes an unsuitable method of operation under Nevada Gaming Commission Regulation 5.011 and, as such, is grounds for disciplinary action. See Nev. Gaming Comm'n Regs. 5.010(2), 5.030.

45. The BOARD repeats and realleges and incorporates by reference herein the allegations set forth in paragraphs 1through 44, inclusive.

46. On or about July 30, 1999, while physically located in Las Vegas. Nevada, a Board agent used a telephone modem connection to access MEGASPORTS AUSTRALIA's website and placed a $10.00 wager on the Arizona Diamondbacks professional baseball team to win a game that day against the Los Angeles Dodgers professional baseball team. The Arizona Diamondbacks won that particular game. As a result, $16.60 in winnings were posted to the account of James Lawrence.

47. The conduct of MEGASPORTS AUSTRALIA, in accepting the Internet wager from the State of Nevada, is defined as a misdemeanor crime pursuant to NRS 465.092.

48. By allowing its Australian subsidiary, MEGASPORTS AUSTRALIA, to accept Internet wagers from the State of Nevada, AWI engaged in conduct which constitutes an unsuitable method of operation under Nevada Gaming Commission Regulation 5.011 and, as such, is grounds for disciplinary action. See Nev. Gaming Comm'n Regs. 5.010(2), 5.030.

49. The BOARD repeats and reallegcs and incorporates by reference herein the allegations set forth in paragraphs 1 through 48, inclusive.

50. On or about August 2, 1999, while physically located in Las Vegas, Nevada, a Board agent used a telephone modem connection to access MEGASPORTS AUSTRAI-IA's website and placed a $10.00 wager on the New York Mets professional baseball team to win a game that day against the Milwaukee Brewers professional baseball team. The New York Mets won that particular game. As a result, $23.50 in winnings were posted to the account of James Lawrence.

51. The conduct of MEGASPORTS AUSTRALIA, in accepting the Internet wager from the State of Nevada, is defined as a misdemeanor crime pursuant to NRS 465.092.

52. By allowing its Australian subsidiary, MEGASPORTS AUSTRALIA, to accept Internet wagers from the State of Nevada, AWI engaged in conduct which constitutes an unsuitable method of operation under Nevada Gaming Commission Regulation 5.011 and, as such, is grounds for disciplinary action. See Nev. Gaming Comm'n Regs. 5.010(2), 5.030.

53. The BOARD repeats and realleges and incorporates by reference herein the allegations set forth in paragraphs 1 through 52, inclusive.

54. On or about August 2, 1999, while physically located in Las Vegas. Nevada, a Board agent used a telephone modem connection to access MEGASPORTS AUSTRALIA's website and placed a $10.00 wager on the Texas Rangers professional baseball team to win a game that day against the Minnesota Twins professional baseball team. The Texas Rangers won that particular game but did not cover the point spread. As a result, the $10.00 wager was deducted from the account of James Lawrence.

55. The conduct of MEGASPORTS AUSTRALIA, in accepting the Internet wager from the State of Nevada, is defined as a misdemeanor crime pursuant to NRS 465.092.

56. By allowing its Australian subsidiary, MEGASPORTS AUSTRALIA, to accept Internet wagers from the State of Nevada, AWI engaged in conduct which constitutes an unsuitable method of operation under Nevada Gaming Commission Regulation 5.011 and, as such, is grounds for disciplinary action. See Nev. Gaming Comm'n Regs. 5.01 0(2), 5.030.

57. The BOARD repeats and reallogcs and incorporates by reference herein the allegations set forth in paragraphs 1 through 56, inclusive.

58. On or about August 3, 1999, while physically located in Las Vegas, Nevada, a Board agent used a telephone modem connection to access MEGASPORTS AUSTRALIA's website and placed a $10.00 wager on the Cincinnati Reds professional baseball team to win a game that day against the Colorado Rockies professional baseball team. The Cincinnati Reds won that particular game. As a result, $15.70 in winnings were posted to the account of James Lawrence.

59. The conduct of MEGASPORTS AUSTRALIA, in accepting the Internet wager from the State of Nevada, is defined as a misdemeanor crime pursuant to NRS 465.092. 60. By allowing its Australian subsidiary, MEGASPORTS AUSTRALIA, to accept Internet wagers from the State of Nevada, AWI engaged in conduct which constitutes an unsuitable method of operation under Nevada Gaming Commission Regulation 5.011 and. as such, is grounds for disciplinary action. See Nev. Gaming Comm'n Regs. 5.010(2), 5.030.

61. The BOARD repeats and reallcges and incorporates by reference herein the allegations set forth in paragraphs 1 through 60, inclusive.

62. On or about August 3, 1999, while physically located in Las Vegas, Nevada, a Board agent used a telephone m(idem connection to access MECYASPORTS AUSTRALIA's website and placed a $10.00 wager on the Minnesota Twins professional baseball team to wiii a game that day against the Texas Rangers professional baseball team. The Minnesota Twins lost that particular game. As a result, the $10.00 wager was deducted from the account of James Lawrence.

63. The conduct of MEGASPORTS AUSTRALIA, in accepting the Internet wager from the State of Nevada, is defined as a misdemeanor crime pursuant to NRS 465-092.

64. By allowing its Australian subsidiary, MEGASPORTS AUSTRALIA, to accept Internet wagers from the State of Nevada, AWI engaged in conduct which constitutes an unsuitable method of operation under Nevada Gaming Commission Regulation 5.011 and, as such, is grounds for disciplinary action. See Nev. Gaming Comm'n Regs. 5.010(2), 5.030.

65. The BOARD repeats and realleges and incorporates by reference herein the allegations set forth in paragraphs I through 64, inclusive.

66. On or about August 3, 1999, while physically located in Las Vegas, Nevada, a Board agent used a telephone modem connection to access MEGASPORTS AUSTRALIA's website and placed a $10.00 wager on the New York Mets professional baseball team to win a game that day against the Milwaukee Brewers professional baseball team. The New York Mets won that particular game. As a result, $21 .00 in winnings were posted to the account of James Lawrence.

67. The conduct of MEGASPORTS AUSTRAI,IA, in accepting the Internet wager from the State of Nevada, is defined as a misdemeanor crime pursuant to NRS 465.092. 68. By allowing its Australian subsidiary, MEGASPORTS AUSTRALIA, to accept Internet wagers from the State of Nevada. AWI engaged in conduct which constitutes an unsuitable method of operation under Nevada Gaming Commission Regulation 5.011 and, as sucil, is grounds for disciplinary action. See Nev. Gaming Comm'n Regs. 5.010(2), 5.030.

69. The BOARD repeats and realleges and incorporates by reference herein the allegations set forth in paragraphs 1 through 68, inclusive.

70. On or about August 4, 1999, while physically located in Las Vegas, Nevada, a Board agent used a telephone modem connection to access MEGASPORTS AUSTRALIA's website and placed a $1000 wager on the Montreal Expos professional baseball team to win a game that day against the Chicago Cubs professional baseball team. The Montreal Expos lost that particular game. As a result, the $10.00 wager was deducted from the account of James Lawrence.

71. The conduct of MEGASPORTS AUSTRALIA, in accepting the Internet wager from the State of Nevada, is defined as a misdemeanor crime pursuant to NRS 465.092.

72. By allowing its Australian subsidiary, MEGASPORTS ATJSTRALIA, to accept Internet wagers from the State of Nevada, AW] engaged in conduct which constitutes an unsuitable method of operation under Nevada Gaming Commission Regulation 5.011 and, as such, is grounds for disciplinary action. See Nev. Gaming Comm'n Regs, 5.010(2), 5,030.

73. The BOARD repeats and realleges and incorporates by reference herein the allegations .set forth in paragraphs I through 72, inclusive.

74. On or about August 4, 1999, while physically located in Las Vegas, Nevada, a Board agent used a telephone modem --connection to access MEGASPORTS AUSTRALIA's website and placed a $10.00 wager on the New York Mets professional baseball team to win a game that day against the Milwaukee Brewers professional baseball team. The New York Mets won that particular game. As a result, $19.50 in winnings were posted to the account of James Lawrence.

75. The conduct of MEGASPORTS AUSTRALIA, in accepting the Internet wager from the State of Nevada, is defined as a misdemeanor crime pursuant to NRS 465.092.

76. By allowing its Australian subsidiary, MEGASPORTS AUSTRALIA. to accept Internet wagers from the State of Nevada, AWI engaged in conduct which constitutes an unsuitable method of operation under Nevada Gaming Commission Regulation 5.011 and, as such, is grounds for disciplinary action. See Nev. Gaming Comm'n Regs. 5.010(2), 5.030.

WHEREFORE, based upon the allegations contained herein which constitute reasonable cause for disciplinary action against the licensee including suspension, modification, limitation or revocation of its gaming license pursuant to NRS 463.3 1 0, and Nevada Gaming Commission Regulations 5.011 and 5.030. the BOARD prays for relief as follows:

1. That the Nevada Gaming Commission serve a copy of this Complaint on Respondent pursuant to section 463.312(2) of Nevada Revised Statutes;

2. That Respondent be fined a monetary sum pursuant to the parameters defined at NRS 463.310(4) for each separate violation of the provisions of the Nevada Gaining Control Act, or the Regulations of the Nevada Gaming Commission;

3. That the Nevada Gaming Commission take action against Respondent' licenses pursuant to the parameters defined at NRS 463.310(4); and

4. For such other and further relief as the Nevada Gaming Commission may deem just and proper.

DATED this 16th day of December, 1999.

STATE GAMING CONTROL BOARD

BY: STEVE DuCHARME, Chairman

BY DENNIS K. NEILANDER, Member

Submitted by:

FRANKIE SUE DEL PAPA
Attorney General

By: DEREK HARMER
Deputy Attorney General
Gaming Division
(702) 486-3103