Still making sense of it all, and how this is different from other poker-related money seizures and charges against Canadian Douglas Rennick … but it looks to be something big, and a new level of poker prosecutions.

Here’s the story from the Naples News:

Feds investigate Naples man in money laundering probe tied to online gambling

It may or may not be coincidental that the the Feds have arrested Michael Olaf Schuett’s for money transfers directly related (allegedly) to online poker just as the state is taking a closer-than-ever look at the game with eyes on its revenue potential. It’s also not clear if Schuett’s been charged with anything yet, or is just being held because he is a foreign national flight risk with felony charges pending.

Here are some plausibly relevant names, and highlights that jump out at yours truly:

• Michael Olaf Schuett, or Schütt, is the guy they’re after. He’s a 29-year-old German whose visa expire in April. A federal judge has ordered him held in Lee County jail without bond.
• He lives in a pretty sick oceanfront condo.
• He’s been married only a month to a 28-year-old woman he’s known for only nine months. Her name is Jennifer Sherman.
• Feds allege that since opening accounts in 2007, Schuett has transferred about $70 million to 23,000 people, mostly Americans and supposedly online poker winnings.
• The giveaway was dozens of checks being received daily via Fed Ex.
• People cashing checks sent to them from Schuett claim they are online poker winnings.
• Secret Service is the law enforcement agency involved.
• Agents are seeking to execute search warrants and seize allegedly ill-gotten property, such as fancy cars and watches.
• The complaint lays out a web of money transfers between businesses and banks and players.
• Lots of American and Canadian banks in play. Key company serving as go-between: Bluetool Ltd. out of Germany.
• Supposedly no direct allegations in the complaint against any online poker sites, but the Naples News reporter was able to connect them to transactions from Full Tilt, PokerStars, and Absolute.
• Three specific players — Corey Drury, Darren Elias, and Derek Dubois — get named as receiving money through Schuett’s legally questionable operation. All three have public profiles on BluffMagazine, PocketFives, CardPlayer, and PokerPages.
• As banks became hip to the set-up, Schuett tried to create a new accounts to hold the money, claiming to be a real estate investor — a story the banks didn’t buy.

Speaking of Oklahoma .. Clonie officially lost her lawsuit against Full Tilt last week. Though attorneys tell me it’s very strange that this case couldn’t get at least to the discovery phase — I mean it was all out there very publicly … she clearly had some relationship with Full Tilt, so in most cases being able to dispute the contractual nature of said relationship would be perfunctory.

Anyhow, bummer for Clonie and selfish-bummer for those of us who were curious to hear what the likes of Chris Ferguson, Ray Bitar, and Howard Lederer had to say about the early formation of Full Tilt under oath in the heat of deposition.

But here’s the judge’s three-strikes and you’re out ruling, with some explanation of why she will not get her day in Federal court. Seems more a matter of legal strategy than the merits of the case to me … but maybe some others with more-than-none law-schooling will weigh in on that.

Her attorneys, Howard & Howard, btw, will have another go in Nevada state court moving forward representing Jason Newitt and that other guy, Hilton Warmback in their similar contract disputes with Full Tilt.

Mostly unrelated, but hey, there’s a video … the day before this ruling came down, Newitt won the PLO/8 tourney and about $17k at the LAPC. Not bad for a guy who may or may not own a piece of Full Tilt:

The US Sixth Circuit Court of Appeals upheld a ruling earlier this month that American plaintiffs are not entitled to get their day in American courts for discrepancies with offshore online poker sites.

This case specifically addressed two players in Ohio who sued PartyPoker claiming collusion. However, the court ruled, and the Appeals court upheld: Sorry, take your beefs against Party to Gibraltar. When they signed on and agreed to play, they did so accepting Terms and Conditions agreeing to handle all disputes in Gib, nowhere else, the court said.

Here’s the tale from poker-law expert I. Nelson Rose:
Trial in Gibraltar or Jail in Ohio

In it …

But the concurring opinion of Judge Merritt, quoted above, should give all Internet poker operators and players some nightmares. He ruled that the case had to be heard in Gibraltar, because to allow Ohio state law to apply would mean Wong, Gibson and everyone working for Party Poker would have to go to jail!

No one had raised the issue of whether Internet poker was illegal. “But sometimes courts have to raise embarrassing questions that both parties to litigation had rather we overlooked.”

Not so sure I agree that this decision “should give all Internet poker operators some nightmares.” I think it’s kinda the opposite. With Full Tilt juggling cases of varying frivolity out the ying-yang, I gotta think they’d be pretty happy with what could be precedent to force plaintiffs to take up matters outside (the US).

Party Gaming’s stock, btw, has been doing quite nicely of late:

PRTY.L

The Full Tilt legal battles are heating up … and this time they are on the offensive, suing Cycalona Gowen in federal court.

Full Tilt (specifically Tiltware, LLC, out of California) is not seeking money from her beyond court costs and attorney fees. But they do want a clear declaration that she does not have the 1 percent ownership interest she alleges.

Click here to read Tiltware’s compaint against Gowen, filed on Friday.

So why would they be doing this? Well according to the Nevada lawyers I’ve spoken to, that’s hard to say …

Essentially, they’re looking for the court to rule against her without having a trial. She goes to court again on February 1, for the third and last time, with the court deciding if her Third-Amended Complaint has merits to proceed. But if Full Tilt wins, and the judge says, yeah, sorry, we can’t waste a jury’s time with this … then maybe they don’t win enough?

More…

It took some three years, but the mainstream media finally “gets it” … if not in print, than at least online. Check out the Newsweek blog post, “High Stakes for Online Gamblers“.

Not only have they finally figured out how to condense everything from the shady passage of the UIGEA to undesirable results of unregulated online poker and payment processor issues to a few sentences followed by some well thought out mainstream-friendly paragrafs, but also, at the end, they give a little hint at what might come next, which could involve Full Tilt fighting the matter in courts:

Even if the UIGEA is enacted, it’s unlikely online gambling would disappear completely. There are ways for American players to circumvent bank regulations, including setting up a foreign bank account. “We’re all holding our breath and hoping the petition will be accepted,” Lederer says, but that isn’t the industry’s only option. Online poker could be legalized through the courts on the argument that the Wire Act doesn’t apply to poker. The industry is waiting to see what happens Dec. 1 before taking any action, he says. But if they do head to court, Lederer likes the odds.

This is interesting, because time and time again poker has shown it can win in the judicial system, while the game-of-skill argument tends to carry no weight in legislative circles … where it’s still just gambling, and maybe a matter of personal freedoms at stake.

(I also gotta agree with Lederer … knowing FTP’s growing familiarity with the American court system, the money they’ve got to spend on lawyers, and “our issue’s” generally falling on the right side of the law … we all know where we’re eventually gonna get … it’s just a matter of how we get there.)

The Kentucky Supreme Court will be holding a hearing at 11am ET today regarding the Commonwealth of Kentucky’s efforts in seizing 141 domain names. A live stream of the arguments will be available on the Supreme Court site for those wanting to watch the proceedings, with updates available over at the Poker Players Alliance website. iMEGA’s site should also have their own analysis of the proceedings this afternoon.

For those interested, video of the hearing is now available below:

We’re not the only ones intrigued by the Kennedy vs. Full Tilt bot case.

Courthouse News Service took note. It’s like a Thrillist for lawyers … a subscription newsletter keeping attorneys abreast of “the most prolific and weighty litigation” in virtually all the courts in the USA (and Canada, Puerto Rico, and Guam).

And the Financial Times (the Wall Street Journal of the UK, you know, where all those European online sites that don’t accept American players reside) sees it as a bit more of a federal case:

Full Tilt accused of flouting US internet gambling rules

Face the Ace: Whether he’s abusively litigious or not is up for debate, but the Hollywood lawyer challenging Full Tilt (right) is apparently no legal schlep.

Just looking into the lawyer pressing the RICO Bot-suit against Full Tilt … Cyrus Sanai … from the best I can tell, he’s quite the loose-aggressive legal player … perhaps a self-appointed Gus Hansen of the courtroom?

Back in the day he wrote for Slate.com, about issues such as assisted suicide and school violence … and seemed to dig the journalism thing during his days at Harvard. (That’s where he went for undergrad. Law School at UCLA.)

His most recent case of note came last year, when he engaged in an ongoing battle against an LA judge … where Sanai found the judge’s personal blog, complete with humorous/bizarre porn images, and outed his NSFW fetish proclivities while was adjudicating a big obscenity case against a pornographer:

The question is how someone who has frequently engaged in frivolous litigation still remains a member of the California bar without any disciplinary record. It will be appalling if Kozinski faces judicial discipline in this dispute before Sanai faces attorney discipline.

More on what the LA legal community has to say about him below:

More…

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.

Here’s the actual Kennedy vs. FTP lawsuit, 19 pages, filed by Cyrus Sanai, a lawyer out of Beverly Hills.

And here’s the 2+2 thread from 2007 when the key plaintiff — Lary Kennedy (aka “pokergirl_z” on Full Tilt) — first spelled out her beefs that led to this lawsuit … mostly stemming from a series of heads-up matches against a Full Tilt player known as “TheComplainer”.

Kennedy is the real plaintiff. Greg Omoroy is just a guy who owned another account she used (which is a whole-nother issue altogether). And though they aren’t formally seeking class-action status, they do seem to be laying the groundwork for such a possibility — an aggressive legal play for sure.

Essentially, the allegations are that Full Tilt — with unfettered ability to label a player a bot, confiscate her money, and smear her name by calling her a bot — constitutes organized crime … being perpetuated by Californians against Californians, in violation of all sorts of California business and gaming laws.

They also say that “Playing Against the Pros” is tantamount to gambling against the “house” … there’s an added boogeyman with allegations that Full Tilt is running its own bots on the site … and a new-to-me company gets discussed, too: Verta Enterprises, out of St. Kitts.

On the surface, that seems less shakedown/extortion-y than other California lawsuits against Full Tilt. But the class-action possibilities suggest this suit is really looking for penalties in the hundreds of millions or more — you know, the kind of money the Feds have been collecting from longtime online gambling purveyors looking to get on the USA clean list.

If it turns out pokergirl_z was not a bot — and she claims to have video proof — it could be quite the expensive security goof.

Click below for further breakdown of the suit:

More…

Just a technical update, I believe … but courts in South Carolina have officially and full-on thrown out gambling charges against five South Carolinians caught up in a poker raid (that nabbed 20), after having their convictions reversed at least in part on the grounds that poker is a game of skill.

“It is important to note that while we have successfully argued that poker – specifically Texas Hold’em – is a game that is predominantly skill, this does not open the door to any other game found in a casino, since we would agree that every other game found in a casino are unquestionably a game of chance,“ [Greenville Attorney Jeff] Phillips said.

“Although this opinion is a Circuit Court opinion, and thus has no binding authority over other courts in the state, this is a huge victory for the tens of thousands of South Carolina citizens who enjoy the great game of poker. It is our hope that other judges in other counties will see the tremendous logic of this opinion and find it to be persuasive in the cases that come before their courts. Should the Attorney General decide to appeal this decision, the Court of Appeals or Supreme Court will then have the opportunity to make this opinion the law of our state.”

The South Carolina legislature will likely consider a bill proposed by Senator Glenn McConnell that would make some sense of gambling activities throughout the state.

More on that bill here and here.

Two players in California have sued presumable principals of Full Tilt Poker in LA Superior Court. Lary Kennedy (aka Poker Girl) and Greg Omotoy (a Vegas-reared LA nightclub manager) claim that Full Tilt confiscated $80,000 from their accounts, believing they were bots.

We haven’t seen the legal docs yet, but named in the lawsuit: Chris Ferguson, Mike Matusow, Howard Lederer, and Phil Ivey (a November Niner).

From TMZ.com:

Poker Legends Sued for Robot Fraud

For all the obvious attempted shakedowns and plausibly legit payment beefs, this one (not sure how much they are seeking in damages) could be downright fascinating — on its surface at least — because it cuts to some key issues that are super-relevant to the past, present, and future of online poker … where the decisions any court renders (assuming there’s at least a smidgen of factual basis for the claim) affect not just the plaintiffs and defendants, but 10s of thousands if not millions of players.

More…

Kinda. They probably don’t want to ban it, or even take over Costa Rican domains … but they do want to have their say in how Iowans go about the business of online money games.

From the Iowa Politics Insider:

Iowa should keep its options open and develop plans to “protect its borders” while Internet gambling legislation is being debated in Congress, Iowa Lottery Chief Executive Officer Terry Rich said Tuesday.

[...]

The legislation could include provisions authorizing the federal government to regulate and tax Internet gambling in Iowa if the state’s elected officials don’t take action within a specified time frame, Rich said. He is urging state officials to protect their right to either reject or approve Internet gambling, and to impose taxes.

“The decision may be to do something, do nothing; but to at least have control so that if you do something in the state of Iowa that the state legislature and the governor decides what it should be,” Rich said.

And therein lies what seems to me the next big obstacle for regulated online poker — the states. They want theirs. And eventually all will follow in the footsteps of Kentucky, Minnesota, California, Iowa, et al. and take a look at the revenue possibilities should the Feds want to tax activities within their borders. Then it becomes a matter of who has the right to grab what … and issues of states rights, no matter how any level of legislation looks, is usually only settled in the higher courts.

Five South Carolina poker players convicted of gambling in February — after a raid on a private home in 2006 — had their convictions overturned on appeal yesterday.

From the Post and Courier:

In a letter that supports the argument that Texas Hold ‘Em is a game of skill, not one of chance, Circuit Judge R. Markley Dennis said this week it is his opinion the state Supreme Court would likely adopt “the dominate factor test” in deciding the case.

Under the dominate factor test, Texas Hold ‘Em is not gaming or gambling, the judge wrote, which would make it illegal under state law.

He also said the law covering the play “is ambiguous and must be construed in favor of appellants.”

The South Carolina law the judge is referring to was written in 1802.

Both sides expect the state to appeal the appeal to the SC Supreme Court.

Missed this article two weeks ago … but it’s a good one, as they always seem to be when the non-poker media takes a more-than-cursory look at poker “issues”.

From the LA Times:

Taking their chances on poker’s legality
Is Texas Hold ‘Em about the luck of the draw, or the skill of the player? The question is being played out in courts around the country.

So this Face the Ace lawsuit … yeah … you’ve got a lone amateur TV-show concept-creator trying to take on (lawyers for) PokerPROductions and NBC with claims that they stole his legally protected idea to put out a ratings-bomb game show … and therefore owe him $85 million.

OK.

Similarities between Brandon McSmith’s video pitch for All Star Poker Challenge and Face the Ace are one thing … and this video, shot outside what appears to be Poker PROductions studios in Las Vegas and posted on YouTube in July (and pointed out to us by a reader yesterday) is another:

Umm …

Click below to read the rejection letter sent almost two years earlier from Poker PROductions honcho Mori Eskandani that may or may not have put McSmith on tilt:

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The Feds have made another grab at money in US banks that at some point passed through online gambling and/or poker sites — seizing three more accounts held by payment processors with claims that the undisclosed sums in them are “forfeitable”.

This time it was the Maryland district going after accounts in California belonging to HMD, Inc.

In late July, Maryland-based federal authorities seized six other bank accounts from Electracash, Inc., also a payment processor alleged to be involved in laundering “proceeds of an illegal gambling business”.

Click here for a little more detail in the Baltimore City Paper, along with the latest seizure warrants.

In all these cases, the US District Court in Maryland has kept investigators’ affidavits calling for the warrants under seal. The New York Southern District handled their June payment processor seizures the same way, until the folks behind Gambling911 filed a motion that forced the courts to unseal them (with redactions).

A year ago, Maryland authorities charged (but did not arrest) two men — Edward Courdy and Michael Garone — with money laundering connected to $24 million seized from various bank accounts during an ongoing investigation of Bodog. The charges against Garone and Courdy stem from two specific transactions they allegedly facilitated — one from Germany to Georgia (for $1.5 million), the other from Dublin to Nevada (for $2.4 million).

G911 claims the most recent payment processor seizures involve online gambling and operations other than Bodog.

I’ve got a buddy named Adam who believes there’s no such thing as an original idea. Then you’ve got guys like Pauly, who, according to one of his closest friends and colleagues, “if you use the word ‘and’ in your writing he’ll think you took it from him.” (In Pauly’s defense, shady web ops around the world do steal Tao content daily, and he knows just how dirty Hollywood and Las Vegas can be …)

So in light of last week’s $85 million lawsuit against Poker PROductions, NBC Universal, and Mori Eskandani, see for yourself and decide: Does Brandon McSmith’s All Star Poker Challenge* look like ill-gotten inspiration for Face the Ace to you?

* Not to be confused with the British All-Star Poker Challenge, which ran for one season in 2005.

The above is a Powerpoint presentation McSmith sent me a little more than a year ago seeking feedback. Click below for my response: in a nutshell, I tell him I think this might have worked in 2006, but not now … and it needs more monkeys … but keep trying!

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Lawrence Burns, 65, was found guilty of gambling yesterday, despite arguments the real-money tournaments he organized were not gambling because poker is a game of skill. After 2 1/2 days of testimony, the Westmoreland jury took less than 2 1/2 hours to return a verdict.

http://www.post-gazette.com/pg/09225/990677-100.stm

Though a judge will determine Burns’ sentence, the prosecutor has said he does not believe the offense merits jail time. Burns plans to appeal the court’s ruling.

Regardless of these semi-bummer results, we should probably all take note: while it’s not too hard to convince non-poker people that poker is different from slot machines, lotteries, craps, etc. — and we might even convince them that Texas Hold’em tournaments are as skillful endeavors as fishing tournaments (where the pros generally win, but an amateur can always get lucky) — we’re always gonna have a really hard time persuading them to believe that poker isn’t gambling, game of skill or not. Sucks, but oh well … now we don’t need to hide all the players that like to say things like “gamble gamble!” when all-in on a draw.

(Thanks Marvin-in-Bedford for the heads-up.)

It occurs to me that we might well see some poker on Court TV, too. If not … we should. Payment processors fighting for their freedom, hundreds of millions of dollars, and the rights (and money) of Regular Joe others … that’s good stuff! Especially if they mix some whammies in with it all.

The defendant, Kevin Raley, has already been found not-guilty … but the state’s appeal succeeded in getting the testimony of Robert Hannum, Professor of Statistics at the University of Denver, thrown out on the grounds that Colorado law had already put poker in its gambling place. So now Raley is moving forward, even though he’s already — and still — in the clear.

From thePPA.org:

Poker Players Alliance Supports Appeal to Colorado Supreme Court

Washington, DC (August 12, 2009) –The Poker Players Alliance (PPA), the leading poker grassroots advocacy group with more than one million members nationwide and more than 13,000 in Colorado, today expressed its support for efforts to appeal a ruling in state intermediate court that poker is predominately a game of chance as part of Colorado v. Kevin Raley.

The defendant, Kevin Raley, will file a petition in Colorado Supreme Court requesting an appeal of the intermediate court’s ruling that poker is gambling under Colorado law.

“The PPA is going to do everything in its power to support Mr. Raley’s efforts in order to protect PPA members and all poker players in the state of Colorado,” said Gary Reed, PPA’s Colorado State Director. “I am especially alarmed because this ruling ignores the abundance of research that proves poker is a game of skill and confuses rather than clarifies the matter for law enforcement that may use their scarce resources to raid and arrest poker players instead of investigating real unlawful activity in the state.”

More…

A US District Judge has granted Costigan Media — the folks behind Gambling911 — their request to unseal seizure warrants and (heavily redacted) court documents related to the seizure of some $34 million that US attorneys allege are ill-gotten gains from illegal online gambling.

This is a semi-significant ruling because while the First Amendment has stood up for such requests in most criminal prosecutions, there is less case law directly addressing matters of civil forfeiture, according to Judge Laura Taylor Swain … but ultimately, yes, when thousands of American citizens are having funds they believe to be theirs seized by the government, yes, the public has a right to know what’s going on.

Click here for 49 pages of freshly released legal documents, not all of which look like this:

The losing side, btw, in this mini case-within-a-case are ultimately the same Manhattan federal prosecutors who followed up these payment processee seizures with an indictment against Douglas Rennick — the Canadian payment processor who faces more than 50 years in prison (cumulative), $1.75 million in fines, and the forfeiture of nearly $566 million on charges of fraud, money laundering, and illegal gambling operations for his doing business with websites such as Full Tilt, PokerStars, Ultimate Bet, and others.

That indictment, of course, may or may not have come coincidentally on the same day Sen. Robert Menendez (D-NJ) introduced a Senate bill that would effectively make all the issues being adjudicated above moot in the future.

Regardless of what’s in play there, I think it’s clear why, indeed online poker related money issues really can’t be handled in the shadows — as much as some federal prosecutors would like such transactions to stay that way.

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.

This story seems to have legs. ABC News has a piece — where they lede with a guy who so far is unable to buy into the WSOP main event. I found this story at the top of the Drudge Report … which means everyone in the mainstream media (who doesn’t read Pokerati) is also well aware of the situation. (FWIW, the ABC News story ups the number of banks targeted from four to five.)

Feds Order Banks to Freeze Millions in ‘LEGAL’ Online Poker Winnings…

Even the EU is getting involved again, threatening to take the European Commission’s discrimination claims to the WTO if they can’t reach a settlement with the US to allow their companies to compete without this sort of harassment from the US Feds. In their view, the recent actions in New York’s Southern District Court are merely a continuation of the protectionist policies that began three years ago:

“Internet gambling is a complex and delicate area, and we do not want to dictate how the U.S. should regulate its market. However, the U.S. must respect its WTO obligations,” said E.U. Trade Commissioner Catherine Ashton in a statement.

[...]

“The report comes to the conclusion that these proceedings are legally unjustified as well as discriminatory, because the activities of E.U. companies took place under the cover of U.S. WTO commitments,” the Commission said in a statement.

At a minimum, this guarantees that federal authorities (beyond a lone Assistant US Prosecutor) should be taking a real look at how “American-friendly” online poker sites process the dollars that transact in peer-to-peer poker games taking place on offshore sites before being shipped to American banks.

Word about the payment processor shizznit was definitely part of the buzz around the Rio today. We should know in about a week whether this is poker’s version of the swine flu, or if it spreads into something far more significant. Supposedly Full Tilt checks are back to clearing. However, at least one major PokerStars affiliate had his check bounce — and that’s money he lives on.

Seen in the Amazon cash game area (reading a story in the New York Post):

UPDATE: Oops, maybe swine flu wasn’t the best comparison.

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.

More…

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.)

• The DOJ is spearheading the effort to shake down up PokerStars payment processors, with authority from New York’s Southern District federal court.
• $14 million has been frozen (in a Sacramento bank?) in either one or two accounts — the account(s) of a third-party payment processor — affecting 5,500 PokerStars players.
• These people have supposedly been notified not to cash any checks they’ve been issued, and their online accounts have been credited.
• No need for a panic or a run on online banks — $14 million may or may not be being covered by a friendly non-PokerStars-ish entity, which should be made available in a matter of days.
• Online poker indy big-wigs planning aggressive counterattack in court tomorrow. New York DA (?) Somebody will be seeking injunctions on the federal action(?), suggesting rogue overzealous Dept. of Justice prosecutors are overstepping their bounds, similar to the way they did going after Alaska Sen. Ted Stevens.

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.

An appeals court reported lessened the jail sentences of two men convicted of throwing a 700-player shindig. From CP-Europe:

The men had the charges against them reduced from “serious illegal gambling” to “illegal gambling”. The court ruled that because the game being played was Texas hold’em in a tournament format, the players own judgment was more important than the cards being dealt, effectively ruling that the game was one of skill and not luck.

Cop-killer-turned-Dallas-underground-game-operator (and alleged Choctaw colluder) James McDaniel’s trial in the death of 21-year-old SMU coed Meaghan Bosch is supposed to get underway this week, but has been temporarily delayed. In an effort to put one of the more, er … colorful characters from the Dallas poker scene behind bars for life, prosecutors will make the case that underground poker in Dallas (circa 2006-07) was a breeding ground for drug crimes, rape, and ultimately … an unfortunate, untimely death.

Update from the Morning News:

Monday’s trial of the ex-con accused of causing the overdose death of Southern Methodist University student Meaghan Bosch has been postponed, the judge ordered Thursday.

James McDaniel’s defense attorney, Thomas Mills Jr., is ill, according to court documents. No new date has been set. McDaniel faces up to life in prison if convicted of charges that he supplied Bosch, 21, of McKinney, with drugs that caused her death. She was found dead May 14, 2007, in a portable toilet at a construction site near Waco. Her death followed two other fatal overdoses of SMU students, prompting criticism that the university was ignoring a severe drug problem.

Prosecutors say that McDaniel drugged and raped other female SMU students who attended his underground poker games near campus and that they plan to call some of them to testify. McDaniel also supplied students with drugs, prosecutors allege.

McDaniel, a convicted murderer and self-described professional poker player, has denied he caused Bosch’s death. He also denies selling drugs or committing sexual assaults.

This should be a semi-fascinating case should it not get insta-folded as frivolous: Two “recreational” California poker players, Dennis Chae and Jeff Kim, have sued the Bike, Commerce, Hustler, Hollywood Park, and Hawaiian Gardens casinos — alleging that the dollar-a-pot raked for bad beat jackpots makes them illegal lotteries.

In a 2005 advisory, then-Atty. Gen. Bill Lockyer cautioned casinos that the promotions violated state law unless players were allowed to win the jackpots without paying the fee. It’s the same legal principle that requires McDonald’s to give away game pieces for its popular Monopoly game to consumers who ask for them, regardless of whether they buy anything.

On its surface, the lawsuit seems like a hustle. I’m not sure how much in damages are they’re seeking, but the suit requests class-action status and hopes to enlist 10s of thousands of poker players as plaintiffs. But at the same time, Chae and Kim may have a technical point, at least to the extent that casinos advertise these promotions. We’ll have to see about how the finer details of rakeage break down according to California law. Honestly, can’t see this getting too far … but then again, it’s hard to say how many people might jump at the chance to score some rebate and slightly improve their EV retroactively.

2+2 is speculating that “Clonie Gowan’s suit against Full Tilt dismissed” [sic].

PokerNewsDaily followed suit:

With the majority of the case being dismissed with prejudice and only Tiltware, Bitar and Lederer eligible for any further action, Gowen’s lawsuit appears to be dead at this time.

And then PokerNews reported “Gowen Lawsuit Against Full Tilt Dismissed”.

These hedlines are for the most part inaccurate, and at a minimum misleading. Clonie’s lawsuit is still alive … the courts have simply stripped out some irrelevant defendants while considering motions for expedited discovery, and her team has 30 days to amend their complaints around the still relevant defendants, i.e. Tiltware, Howard Lederer, and Ray Bitar. These recent rulings may be considered setbacks, but it’s not like she has to start from scratch to “refile”.

Read the court documents for yourself:

Gowen Motions Denied
Gowen Hearing Vacated

Now granted, these are a little confusing, so Pokerati has made half-hearted attempts to contact attorneys on both sides of the case, and have received no response from either. We’ve also contacted insiders on both sides of the case, whom literally say the exact same thing: “It’s definitely not over”. To be sure, on both sides, no one’s celebrating nor stomping about wildly screaming “Appeal!” bemoaning these most recent decisions.

In the meantime, to help us understand, Pokerati has brought in an independent, poker-savvy legal expert from a neighboring state to help translate:

More…

I’m still trying to figure out what it all means … who the plaintiffs are, and what they’re seeking. The best I can tell on first skim is that an LA attorney is representing himself, and seeking injunctive relief in an attempt to prevent Californians from gambling across state lines — i.e. James B. Hicks wants the site shut down.

This may or may not be connected to proposed legislation in California to allow players to gamble online within state lines.

Developing, obviously.

Click here to download and read the lawsuit.

UPDATE: Looks like this likely is a nuisance shakedowny kinda case … though personally I’m still suspicious that the proposed California intrastate online gambling bill might have something to do with it. From the Pokerati legal advisory team’s Cali branch:

This is really an attorney driven case under a California law called the “Unfair Competition Law” (UCL) that basically says, in part, that if any party is committing an act that is “unlawful” (i.e., violates a statute), that party can be enjoined from those unlawful acts and…..must pay the plaintiff’s attorneys fees. In other words, there probably is no harm to the plaintiff, but that may be irrelevant. This is really just a vehicle to get some attorneys fees paid.

No details yet … just an unsubstantiated report. More info sure to emerge:

http://www.aintluck.com/clonie-gowens-claims-dismissed-against-full-tilt/

UPDATE: And that “more info” is that someone misread a legal document and pressed “publish”. LOL! If I had a dime for every time I did that I’d have at least a nickel! … April 27th still the next relevant legal date.

We wrap up the week in online gambling with our exclusive interview of Nick Jenkins from Betcha.com about his battle with the Washington State Gambling Commission. Plus, breaking poker news from South Carolina and the European Union’s next move!

Game of Skill ruling expected tomorrow … can we get another state to testify? All looks good for poker.

The PPA is there covering the proceedings via Twitter.

UPDATE: The ruling is now in, and the judge states there’s “overwhelming” evidence that poker is a game of skill. However, the five defendants were found guilty of running a gambling house.

A Judge in Washington State has made a ruling in the Betcha.com online gambling case involving our old friend, Nick Jenkins! Plus, we cover industry news from the United Kingdom about Google’s online gambling advertising policy, and the Toronto Sun article about which finally covers the Absolute Poker cheating scandal.

The Kentucky domain name seizure case has a verdict, and it’s good news! Also, not such good news for the online poker room Cardspike, as we finally get closer to the truth, and how Casino Affiliate Program’s Lou Fabiano may be connected.

A look at the non-poker media’s take on the Kentucky case as it moves through The System:

From the subscription newsletter blog Daily Online Examiner …

By Wendy Davis, Wednesday, January 21, 2009
Kentucky’s Move To Kill Online Gambling Squashed — For Now

In a closely watched case, an appellate court in Kentucky rebuffed the state governor’s attempts to shut down online gambling. But, while the case attracted attention from a wide range of outside groups who made all sorts of lofty constitutional arguments, the judges ended up deciding the case on a technicality.

The court ruled 2-1 that the government couldn’t confiscate domain names of 141 out-of-state gambling sites because the 1974 forfeiture law only applied to gambling “devices,” like roulette wheels.

“It stretches credulity to conclude that a series of numbers, or Internet address, can be said to constitute a ‘machine or any mechanical or other device,’ ” judge Michelle Keller wrote.

The dispute started late last summer, when the state hired a law firm to bring proceedings against online gambling companies. At the time, Kentucky Gov. Steve Beshear made no secret of his protectionist motives. He said he wanted to shutter the gambling sites as part of an effort to preserve horse racing, which he termed the state’s signature industry.

As news of the court showdown spread, a wide range of groups questioned whether one state could legally reach beyond its borders to claim jurisdiction over sites with a global reach. Outside parties — ranging from trade organizations like the Interactive Gaming Council and the Internet Commerce Association to civil rights groups like the Electronic Frontier Foundation and ACLU — weighed in on behalf of the Web sites.

The groups argued the law was unconstitutional for a host of reasons, including that Kentucky had no right to block sites visited by a worldwide audience.

While the appeals court dodged those issues for now, they’re bound to recur. If Kentucky rewrites its laws to specifically include domain names, the court will again be faced with determining how far one state can go to police the Web.

See what others are saying on the Online Examiner blog.

I guess it kinda depends how you look at it. Some might say a 66-33 percent victory is pretty dominating. Others might see winning by just one vote as a tiny margin of error.

The PPA just put out a statement, regarding actions yesterday in Kentucky that shows the Governor has no intention of backing down on his desire to seize control of 141 gambling-related internet domains located outside of Kentucky, and America for that matter. Yee-haw! I’m tellin’ ya … it’s off to the Supreme Court we go on the way-bigger-than-poker issues in play here.

(Anyone wanna agree on a bet over the internet and transfer funds via PayPal?)

Though I’m not totally sure, I think Kentucky higher courts work like volleyball, or tennis after deuce. If you can win two points in a row, you win outright. The state of Kentucky won the first case, and had we lost our first appeal, we’d be dead. But we won … so now it’s their serve, and if we win that — the appeal to the appeal — I think then they can go no higher (can someone confirm this?). But if they win, then we can appeal to the state Supreme Court, yadda yadda.

Anyhow, John Pappas taunting Kentucky gov. Steve Beshear — reminding him he has an election in the not-too-distant future, and a plausibly disgruntled citizenry to answer to:

PPA Statement on Commonwealth of Kentucky Appeal of Domain Name Seizure Ruling

WASHINGTON, DC. (January 21, 2009) – John Pappas, executive director of the Poker Players Alliance (PPA), the leading poker grassroots advocacy group with more than one million members nationwide, today issued the following statement regarding the appeal filed by the Commonwealth of Kentucky in light of yesterday’s ruling by the state court of appeals overturning a lower court decision allowing the Commonwealth to seize Internet gambling domain names.

“Kentucky residents should be outraged that the Commonwealth is investing another minute of time and another dollar of scarce resources in this quixotic case. The appeals court’s sound rejection of the Commonwealth’s case should have ended this legal debacle in its tracks. Unfortunately, the Governor and the hired-gun attorneys want to drag their ultimate defeat to another venue at the expense of Internet freedom and the rights of law-abiding Kentucky poker players.”

A copy of the Commonwealth’s appeal can be found at www.pokerplayersalliance.org.

BTW, for those in need of a lexicographic refresher, here’s a definition of “quixotic”.

Pete Campana, esq.

We clearly have our first finalist for Best Poker Lawyers ‘09: Pete Campana of Williamsport, PA, successfully defended two clients caught up in an undercover police investigation into a $1/$2 NL game held in a garage (a dealer and a garage operator) on the grounds that they couldn’t have been engaged in any sort of gambling under Pennsylvania law — because poker is a game of skill.

Click here to read the complete ruling. (via PPA-premium.)

But in a nutshell, what Campana convinced successfully convinced the courts:

Commonwealth and Defendant both agree the controlling issue is whether Texas Hold’em poker is “unlawful gambling” under the Crimes Code.

… the controlling sub-issue is whether Texas Hold’em is a game of skill or chance, or, if both, does skill trump chance or vice-versa. Simply, if chance predominates, Texas Hold’em is gambling. If skill predominated, it is not gambling.

… Pennsylvania courts have not specifically addressed the issue … Our courts have found that poker is gambling within the context of the Liquor Code.

… With the advent of internet poker and tournament poker has come a spate of very intrusive law review analyses of gambling law and poker.

… Using the predominance test, in conjunction with analyzing skill versus chance using the four prong dominant factor test, it is apparent that skill predominates over chance in Texas Hold’em poker.

… Skill comes with varying degrees of competence, but that is the case with any competition involving skill.

The academic studies and experts generally agree that a player must be skillful to be successful at poker. At the outset, chance is equally distributed among the players. But the outcome is eventually determined by skill. Successful players must possess intellectual and psychological skills. They must know the rules and the mathematical odds. The must know how to read their opponents “tells” and styles. They must know when to hold and fold and raise. They must know how to manage their money.

This court finds that Texas Hold’em poker is a game where skill predominates over chance. Thus, it is not “unlawful gambling” under the Pennsylvania Crimes Code.

Poker is having its day in court, that’s for sure. One case getting press all over South Carolina comes from a busted $20 tourney being held in a private home — raided in 2006 by heavily armed police — where 5 of the 25 arrested have refused generous plea bargains and are trying to persuade a presumably non-poker jury that poker Texas Hold’em is indeed a game of skill. A judge has ruled that the defendants do indeed have the right to present witnesses and evidence to make to support this claim. A court date is expected to be set for later this winter.

More here (Charleston.net) and here (Up for Poker).

This is exactly how California became California, poker-wise — it took arguments about skill in the courts to pave the way for all the great poker there. I don’t know the details of the cases, but Mike Caro was one of the guys who testified, bringing charts and graphs to show statistics of specific games — hold’em, Stud, and 5-card Draw, I believe.

Meanwhile, also going on last week and drawing lots of non-poker attention (Lexington Herald-Leader, Business Week, Physorg.com) … a Kentucky Court of Appeals will attempt to begin to start to decide: Does a single US state have the right to venture across its own borders to seize internet domains of businesses based in Costa Rica and run out of a protected Indian nation in Canada … and who will get to hold onto these domains while the courts figure it all out. The court will supposedly be making its decision in January, and judicial facial tells suggest poker is leading in this court 2-1.

You know, the evidence thing has me thinking … one of the hardest things for Kentucky to prove in their case will be that online gambling does actually hurt regulated Kentucky gambling interests. You don’t have to look much further than the WSOP to present actual numbers refuting this claim. So what evidence will Gov. Beshear and the state be able to present — they have the burden of proof, after all — that suggests the opposite? I don’t think it exists, at least nothing stronger than what the poker side could present.

For those of you who love parsing legal documents, and perhaps want a little one-sided insight into the inner workings of Full Tilt, here is the official 20-page lawsuit filed by Clonie Gowen against her former partners? employer? friends? online poker site cronies:

Gowen v Tiltware.pdf

I’m still thinking settlement … but maybe not, as Howard Lederer has responded publicly (odd that any attorney would encourage this) saying, basically, bring it on, let’s open it up … we’re all-in, ho-bitch!

UPDATE: The below from “HowardLederer” has turned out to be a hoax post. My apologies for briefly forgetting that blogs came about in part to filter through all the crap on forums, so you don’t have to waste your time. But the Negreanu stuff after the jump is really him.

From 2+2:

Originally Posted by HowardLederer
I have personally given Clonie over 600K in cash over the last three years alone. I wonder if she has paid he taxes on this money? I never once offered her 1 percent of anything. For her to say otherwise is disingenuous and is really sad.

Team Full Tilt has decided to take this case all the way. There will be no settlement. This will just give us more publicity, and when online poker is no longer public enemy number one in a few months, it will make our brand that much stronger.

Clonie, I am really disapponted in you. What you really need is a good tax attorney for the 600K that you never reported.

Regards,
Howard

OK, hmm. Intriguing. I have a feeling that Howard “never once offered her 1 percent” might hold up as technically true. But I’m not so sure how the “tattletale strategy” will work in the legal system. But can’t wait to find out! The OJ Trial of Poker: Juicy!

And even though he has nothing to do with Full Tilt, Daniel Negreanu offers up his $.02 on Full Contact Poker — letting people know essentially that Clonie should be ostracized from the poker community. He also claims there’s “no freaking way” that she is a 1 percent owner, making him the first non-Team Full Tilt member to make an assertion with absolute certainty on the mysterious ownership nature of the biggest competitor to the site he works for.

More…

Chewed up, spit out? Clonie Gowen is challenging the most fearsome of Full Tilt avatars in Clark County Court.

We all knew something fishy was going on with Clonie and Full Tilt, right? And we’ve always wondered how exactly Full Tilt operates — seriously it’s kinda a mystery, even to people who work for them — and now, with Clonie Gowen suing four different companies connected to the game so many play with the pros, we should find out quite a bit of interesting info.

As far as I know, this is the first time any online poker biz that operates in the grayish world of processing money from American players (really really light gray, but still … ) will have to show its stuff publicly. Even Ultimate Bet/Absolute, with all the audits and investigations hasn’t really had to show anything it doesn’t want to to anyone outside its own semi-corporate family.

Um, hole-card cameras in the courtroom?

Official court docs here.

Gowen v. Tiltware LLC, et al.,
Plaintiff: Cycalona Gowen
Defendant: Full Tilt Poker, Tiltware LLC, Pocket Kings Ltd., Kolyma Corporation, A.V.V., Raymond J. Bitar, Howard Lederer, Andrew Bloch, Phillip Ivey, Christopher Ferguson, John Juanda, Phillip Gordon, Erick Lindgren, Erik Seidel, Jennifer Harman-Traniello, Michael Matusow, Allen Cunningham, Gus Hansen and Patrick Antonious

Case Number: 2:2008cv01581
Filed: November 14, 2008

Court: Nevada District Court
Office: Las Vegas Office [ Court Info ]
County: Clark
Presiding Judge: Judge Robert C. Jones
Referring Judge: Magistrate Judge Robert J. Johnston

Nature of Suit: Contract – Other Contract
Cause: 28:1332 Diversity-Other Contract
Jurisdiction: Diversity
Jury Demanded By: Plaintiff

They’re talking about it on 2+2, and the summary of her allegations below comes from the Hendon Mob:

More…

The PPA always seems to be doing something every day on our behalf — and now they’re looking to pull together some sort of class-actiony lawsuit against the UIGEA. I like it! Why not be the aggressor in the courts, instead of always playing defense?

Here’s the word that just came over the D’amat-phone:

Dear Dan,

Yesterday, in a move reminiscent of 2006 when the Unlawful Internet Gaming Enforcement Act [UIGEA] legislation passed in the dead of night, the Bush Administration finalized the UIGEA regulations. These so called “midnight rules” are set to go into effect on January 19th, 2009, the day before President-Elect Obama takes office. Even though the President stated many times he was against midnight rulemaking, his actions undermine those words.

Right now, the Poker Players Alliance (PPA) is preparing for a potential lawsuit against the UIGEA because its vagueness will likely force banks and other payment processors to over-block lawful Internet poker transactions. Thusly, the PPA is looking for a few good men and women to stand with us in a potential lawsuit. As a paid PPA member, your support has been crucial to our successes. The PPA is prepared to underwrite the complete cost of potential litigation we just need members like you to be part of our action.

More…

Well, to be truthful, it coulda been a lot worse! On first glance, it may look like Kentucky Governor Steve Beshear has won this court case… but not so fast. While it’s true that the court upheld the state’s right to seize the domain names, the did give online gambling company’s an out! Tune in to see!

We also release the results of our Bodog cash out audits to see how long it really takes for players to get their money… plus ask why so many online gamblers seem to be in favor of electing John McCain!

From APCW.org:

From the PPA:

We have just received word from our attorneys in Kentucky that Judge Thomas Wingate has ruled against us on all points. In his conclusion he orders the 141 online gaming sites to geographically block and prove that they have done so before the Commonwealth of Kentucky will release ownership of their domain names.

Click here to read the court decision.

(Funny-ironic that I put up my first affiliate link in like forever shortly before this decision?)

UPDATE: In addition to Kentucky’s semi-unprecedented action, Turkey is blocking websites left and right, China is cracking down at internet cafes, and it appears that net freedom will not be an issue of any weight in the homestretch of this election season.

MEANWHILE: Italy has updated its laws and just granted a license to PokerStars.

This just in … the case got a continuance, allowing all sides to do a little more research. In the meantime, Howard Lederer and friends get to legally keep control of FullTiltPoker.com. Likewise for other sites.

The internet is temporarily safe.

Interesting rant over about those eTrade baby commercials — pointing out similarities between online stock trading and gambling.

Interesting to me because one of the big issues being raised by online poker opponents is whether or not we can protect children from calling an all-in with just a gutshot and daddy’s credit card worth of rebuys. It really isn’t that different from the unstudied trying to day-trade for dollars … and yet that industry can comfortably run ads like this:

A little perspective as we discuss all these big-time online poker money exchanges currently being considered in courts and Congress …