Starnet Communications International Inc - Street Wire
Starnet's $4-million (U.S.) criminal fine sets a record
Fri 17 Aug 2001
by Brent Mudry
In a landmark North American Internet gambling prosecution, Starnet
Communications International has pleaded guilty to one criminal gambling
count and agreed to forfeit $3.92-million (U.S.) in illicit proceeds and
pay a fine of $100,000, plus a mandatory victim surcharge of $15,000.
The guilty plea and monetary penalties, the subject of extensive
negotiations between Crown prosecutor Pat Donald, Starnet counsel Len Doust
and investigating officers of the Organized Crime Agency of B.C., was
approved Friday afternoon by Judge Smyth of the Provincial Court of British
Columbia in Vancouver in a one-hour hearing.
The forfeiture of $3,925,000 (U.S.) is the largest forfeiture in B.C.
history, and one of the largest in Canada, under the Criminal Code of
Canada, although not as large as some drug-case forfeitures under the
Controlled Drugs and Substances Act.
The amount represents close to 60 per cent of the $7-million (U.S.) frozen
in two Starnet-related accounts since Starnet officials tried to quickly
withdraw and move funds offshore the morning of the first business day
after the company's Vancouver headquarters and operational base was raided
on Aug. 20, 1999.
The massive combined fine and forfeiture dwarfs the $200 (U.S.) worst-case
fine publicly predicted by Starnet's then-chief executive officer Mark
Dohlen, a law school graduate, soon after the police raid.
"This definitely culminates one of the largest and the longest cases we've
ever taken," Inspector Mike Ryan of OCA told Stockwatch. The 1999 raid
capped a top-secret 18-month police probe launched in December of 1997, in
which police officers, led by Mr. Ryan, used covert Canadian identities and
covert Canadian credit cards to place casino and sportsbook wagers through
Starnet licensees.
The guilty plea and forfeiture negotiations had been at an advanced stage
for some time, but were delayed after Mr. Doust suffered a serious cycling
accident on July 28, which left him in intensive care in the hospital for
10 days. The respected lawyer suffered several broken ribs and internal
injuries.
Ms. Donald summarized an extensive agreed statement of facts, negotiated
with Mr. Doust, which noted that Starnet was operated by four key
individuals: Ms. Dohlen, John "Jack" Carley, Christopher Zacharias and Paul
Giles. "It is fair to say these people were the corporation's directing
minds in various aspects of this enterprise," the prosecutor told the
court.
No criminal charges have been laid against any of these individuals, who
were officers and/or directors of Starnet from the time of its
incorporation.
In brief follow-up submissions, Mr. Doust emphasized to the court that
Starnet was in the midst of moving its operations offshore to Antigua,
where such Internet gambling is not just legal but openly embraced, when
the police swooped down in their raid.
"They were moving some of it, but not nearly enough and not fast enough."
Outside the courtroom, Starnet counsel John Ford told Stockwatch the
company's criminal misadventures, at the hand of former management, is all
in the past. "It has long ago been corrected."
As one legal ordeal ends, another is beginning.
Counsel for Canada's Department of Justice and Messrs. Dohlen, Carley,
Zacharias and Giles made a brief appearance Friday morning in the Supreme
Court of British Columbia, before the corporate guilty plea was entered in
the other courthouse across town, on an income tax matter. Revenue Canada,
now known as the Canada Customs & Revenue Agency, under provisions of the
Income Tax Act, seeks copies of extensive Starnet files seized in the
police investigation, pursuant to an audit.
The tax-man is likely to be especially interested in trading of Starnet
shares through offshore trusts and domestic accounts. Associate Chief
Justice Patrick Dohm adjourned the application to Aug. 30.
In the negotiated settlement, Starnet admitted that its gambling operations
operated from Canada, in its former Carrall Street headquarters in
Vancouver's seedy Gastown district, not offshore in Antigua, as previous
management has repeatedly claimed before and much after the police raid two
years ago.
"The investigators determined that, as of August 20, 1999 (the raid date),
the components of the systems that enabled persons to engage in gambling or
betting, that were located in Vancouver, as described above, were still
present in Vancouver," stated the agreement, signed by Mr. Doust for
Starnet and Ms. Donald for the Crown.
Ironically, Starnet officials made a number of half-hearted attempts to
comply with Canadian laws in the months and years leading up to the police
raid, but failed to fully follow through on such efforts.
Mr. Dohlen helped paper the file, but was ostensibly thwarted by his close
associate Mr. Carley.
"On January 28, 1999, Dohlen advised many of (Starnet subsidiary) Softec's
licensees that Softec has conducted a legal review and had identified risk
to the licensee and Softec of possible Criminal Code charges if wagers were
accepted by Canadians. Dohlen instructed these licensees to cease accepting
wagers from Canadians and to contact Starnet Canada to determine how to
filter Canadians out," states the negotiated guilty plea agreement.
These affected licensees included Oz Gaming, Superbet, Las Vegas Casino,
Club Rio, Players Only, Global Interactive, Aztec Gaming and Casino of the
Kings.
"A Starnet Canada programmer (however,) had determined how many Canadian
customers the Softec licensees had and a method to grandfather these
customers while preventing any new Canadian customers accessing Softec
licensees. The decision to allow current customers to continue gambling
from Canada was made by Jack Carley," states the settlement agreement.
Mr. Doust conceded this move by Mr. Carley was quite incredible.
"How can you justify grandfathering some and not accepting others?" in an
attempt to comply with the law, the Starnet lawyer told the court.
(c) Copyright 2001 Canjex Publishing Ltd. stockwatch.com |
