More on BetonSports honcho David Carruthers’ surprising change of plea (in the UK press). Carruthers, of course, was the executive arrested in Dallas in 2006 — where the American government stepped up the level of their online gambling crackdown, showing the intent of not just confiscating hundreds of millions of dollars at a time, but also putting a new breed of white-collar criminal in prison.
From the Department of Justice:
Internet Gambling Payment Processor Charged With Bank Fraud, Money Laundering and Illegal Gambling Offenses
NEW YORK, Aug. 6 /PRNewswire-USNewswire/ — Lev L. Dassin, the Acting U.S. Attorney for the Southern District of New York, and Joseph M. Demarest, Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (FBI), announced today the filing of an indictment charging Douglas Rennick with bank fraud and other offenses stemming from his role in processing more than $350 million for Internet gambling companies. According to the indictment filed yesterday in Manhattan federal court:
Since at least 2007 through June 2009, Rennick opened a number of bank accounts in the United States under various corporate names, such as KJB Financial Corporation, Account Services Corporation and Check Payment Financial Co. In opening the accounts, he and his co-conspirators falsely represented that the accounts would be used for such purposes as issuing rebate checks, refund checks, sponsorship checks, affiliate checks and minor payroll processing. In fact, Rennick and his co-conspirators used the
accounts to receive funds from offshore Internet gambling companies that offered, variously, poker, blackjack, slots and other casino games. Rennick and his co-conspirators then disbursed those funds via checks to U.S. residents seeking to cash out their gambling winnings. Rennick and his co-conspirators provided false and misleading information to U.S. banks about the purpose of the accounts because the banks would not have processed the transactions had they known they were gambling-related. In
total, Rennick and his co-conspirators processed more than $350 million transferred from a Cyprus bank account to various U.S. bank accounts for this purpose.Rennick is charged with one count each of conspiracy to commit bank fraud, conspiracy to engage in money laundering and conspiracy to operate an illegal gambling business. If found guilty, Rennick faces a maximum term of 30 years in prison and a $1 million fine on the bank fraud charge, 20 years in prison and a $500,000 fine on the money laundering charge, and five years in prison and a $250,000 fine on the gambling charge. The indictment also seeks the forfeiture of at least approximately
$565,908,288, which represents the amount of proceeds obtained as a result of the illegal gambling and bank fraud conspiracies. The case has been assigned to U.S. District Judge Sidney H. Stein.Rennick, 34, currently resides in Canada. Mr. Dassin praised the investigative work of the FBI and thanked the
Department of Homeland Security’s U.S. Immigration and Customs Enforcement and the Internal Revenue Service for their assistance in the investigation. Mr. Dassin added that the investigation is continuing.Assistant U.S. Attorneys Arlo Devlin-Brown and Jonathan New are in charge of the prosecution, and Assistant U.S. Attorney Jeffrey Alberts is in charge of the forfeiture in this case.
The charges contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
The Associated Press is at least paying attention to the developments reported here on Pokerati in what is sure to be a complex legal situation — one that already is bringing up not just legally questionable issues of non-brick-and-mortar gambling, but also money laundering. They also clear up some of the details about who got tagged and how:
Documents obtained by the AP show that a judge in the district issued a seizure warrant last week for an account at a Wells Fargo bank in San Francisco, and that a federal prosecutor told a bank in Arizona to freeze an account.
In a letter dated Friday and faxed to Alliance Bank of Arizona, the prosecutor said that accounts held by payment processor Allied Systems Inc. are subject to seizure and forfeiture “because they constitute property involved in money laundering transactions and illegal gambling offenses.” The letter was signed by Arlo Devlin-Brown, the assistant U.S. attorney for the Southern District of New York.
In another letter faxed the same day, Devlin-Brown asks that the bank treat the funds “as legally seized” by the FBI, saying that the government has probable cause that the gambling payments of U.S. residents had been directed to offshore illegal Internet gambling businesses.
Meanwhile, the British press is reporting:
America might be about to loosen its gambling corsets
These two stories aren’t as mutually exclusive as they might seem. Often, when times are changing, old holdovers from a previous philosophical era will turn uber-aggressive with their means and methods trying to give their way one last shot, and at a minimum hoping to take a few folks down with them as their kind are pushed out.
That’s certainly plausible considering how emphatic bureaucrats in the DOJ have been about the illegality of online poker/gambling even when the people and courts have repeatedly disagreed.
Ah, once upon a time ret. Sen. Al D’Amato (R-NY) held real power … regardless, he’s still trying to wield his influence over federal actions in his home state, and the PPA statement around his statement says something about the seriousness of the payment processor account-freezing situation while confusing this quasi-legally savvy journo/not-a-lawyer on the difference between warrants and subpoenas:
PPA Statement on Southern District of NY Action Against Online Poker Players
Letter Sent to Assistant US Attorney Requesting Presence at Future HearingsWASHINGTON, DC (June 9, 2009) – The Poker Players Alliance (PPA), the leading poker grassroots advocacy group with more than one million members nationwide, today released the following statement by PPA Chairman Alfonse D’Amato on questionable actions taken by a federal prosecutor in the Southern District of New York to freeze payment processor accounts containing more than $30 million in poker players’ deposits and payouts.
The PPA also sent a letter to the Assistant United States Attorney for the Southern District of New York asking for an opportunity to be heard in any future warrant hearings. The letter is available at www.pokerplayersalliance.org.
The latest on Federal online poker funds crackdown and legally questionable anti-poker court actions …
Pokerstars has confirmed with its players that indeed, some payout funds have been frozen in American banks — but they’ve credited back affected monies with a 10 percent inconvenience bonus and an invitation to try again, Gambling911 reports.
If you wish to resubmit your cashout request, you can do so from our Cashier by selecting the check option (your new check will be issued on a different account and can be deposited as normal) or wire transfer (only available for amounts greater than [$2,500]).
But while Stars’ “take care of the player first” approach may be admirable, wiring money through a new financier may just be a temporary solution to eCheck problems affecting thousands of players — a little game of financial cat and mouse (+ good-will PR) while a bigger, costlier legal battle takes shape.
Under advisement from the DOJ agent, a federal prosecutor in New York’s Southern District apparently got a magistrate to sign off on seizure orders last week for multiple American bank accounts connected to PokerStars payouts. The court also issued subpoenas (warrants?) for two individuals to appear before a grand jury on June 18.
None of this is super-confirmed — government officials don’t work “on the record” over the weekend — but here’s what we are hearing from presumably reliable sources regarding payment troubles at PokerStars and elsewhere:
(Again, this is all subject to factual revision — the news-gathering process can be messy business — but it’s definitely not a joke like our “news” of the Russ Hamilton/Full Tilt banner endorsement. Question marks added on stuff we’re less clear about; grain of salt knowing some sources may have a “message” they want out there.)
Normally we wouldn’t think much of a thread on 2+2 about some withdrawal problems at a major American-friendly online site. Usually these problems get resolved in a matter of days or maybe weeks, but this time something’s different.
Developing …
We’ll hold off on saying too much until we get more solid information, but basically, checks from PokerStars are “bouncing”, particularly with New York banks. Instant E-checks seems to be the payment processor most notably affected at present. However, it’s not just e-checks … paper checks are proving uncashable, too. Reliable sources tell us that this is not just a little snafu, but that it’s the direct result of DOJ enforcement actions somehow connected to the Federal Court in New York’s Southern District.
This is the same court, of course, that handled Neteller way back when, and more recently came to non-prosecution agreements guilty plea settlements with Anurag Dikshit et al. While the Party Poker dudes are officially in the clear,* is it possible the Feds are now saying, hey, that was fun, and we got a lot of money … let’s try it again with those PokerStars guys!?!
The FBI offers more clarity on who’s agreed to what between Party Poker peeps and the Feds here.
The best I can tell, right now Stars seems to be the target. No confirmation on the fates of Full Tilt and UB payment processing.
UPDATE: Problems at Full Tilt, too. (Thanks, Ken, for the info/link!) And Ultimate Bet.
Regardless, whatever shakes down (pun intended), it raises a lot of questions at an interesting time, considering how much big money gets transfered passed between poker players — particularly in the summer — often on an online site in exchange for casino chips and/or bricks of cash.
Might the value of the Euro have just gone up, at least in the poker economy? Seems plausible if they’re the only ones able to convert online bankrolls into real American WSOP buy-in dollars.
* Cases against (with?) two other Party principals, Ruth Parasol and Russ DeLeon, are still pending in the same court.
Party Gaming has entered into a non-prosecutional agreement with the US Department of Justice, in which they admitted to illegally providing gambling services to US customers from 1997 to Oct. 2006 and agreeing to pay $105m in fines in semi-annual payments thru 2012.
Their press release regarding the matter after the jump:
From the Financial Times: Party Poker co-founder Anurag Dikshit will appear in the Southern District Court of New York Tuesday to plead guilty to violating the Wire Act, pay a $300,000,000 fine and cooperate with the Department of Justice in the hopes of avoiding a 2-year jail sentence.
Dikshit currently owns 27% of Party Gaming, but it appears he won’t have to divest his holdings in Party after pleading guilty. Ruth Parasol and Russ DeLeon, who also co-founded Party Poker, don’t appear to be near any type of settlement with the US government. Party Gaming has been negotiating with the Department of Justice for some time now; could this mean their eventual return to the US if and when Internet gaming is regulated?
More on this developing story later…
UPDATE: Party Gaming has released their own press release stating that they are still in final negotiations with the US Dept. of Justice in terms of a settlement, and that they will pay a substantially lower amount to the US government than Dikshit. At the time of this update, they’re up over 25% in trading today.
5pm UPDATE: Dikshit has entered his plea, and is free on a $15m bond, which limits him to travel within the European Union, India and New York. He has also already paid $100,000,000 with another payment due in 3 months, and the rest by September. Also, he’s scheduled for sentencing December 16, 2010. Further details here.
What is the United States Department of Justice doing with an investigation of Google and Yahoo? Speculation is there may be some trouble for their years of accepting online gambling advertising. Subpoenas and depositions have been given! We have that story, plus updates on the Bodog situation, Party Gaming troubles, the Gambling Wages Challenge, and other industry news.
More at APCW.org
