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First Web bettors prosecuted
By Mike Brunker, MSNBC
March 5, 1998 4:29 PM PST
In the first federal prosecutions for gambling on the Internet, 14 operators of sports betting Web sites were charged Wednesday with conspiring to illegally transmit bets over the Internet and telephone.
The prosecutions mark a change of direction for the Justice Department, which has previously said that U.S. gambling laws cannot be enforced against Internet gambling operators.
Both the House and Senate are considering Internet gambling measures.
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All of those charged are either owners or managers of six firms based in the Caribbean or Central America that advertise their sports books over the Internet or in magazines circulated in the United States, according to complaints filed by the U.S. Attorney's Office in New York City. Only two of the companies actually accept wagers over the Internet, while the others use their Web sites to promote their wagering menu while taking bets over toll-free phone lines.
Each of the 14 faces a maximum punishment of five years in prison and a $250,000 fine if convicted.
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Reno sends 'a message'
In a statement announcing the criminal complaints, Attorney General Janet Reno said that the time had come to "send a message to Internet betting operators everywhere: You can't hide on-line and you can't hide offshore."
Mary Jo White, the U.S. attorney for the southern district of New York, said the prosecutions were timely, coming just a week before the start of the NCAA basketball tournament, a big money-maker for the rapidly growing online-gambling industry.
Albert Angel, vice chairman of the Interactive Gaming Council, an industry lobbying organization, on Thursday criticized the prosecutions, noting that other countries are establishing regulations and oversight of Internet gambling.
"There are people in Washington who seek to build a virtual wall around the United States with regard to interactive gaming," Angel said. "Instead of regulating the industry, they're trying to shut it down. That's impossible if the industry exists on the World Wide Web."
Three defendants were arrested shortly after the prosecutions were announced, and Herbert Hadad, a spokesman for White's office, said warrants would be issued for the others, many of whom were believed to be outside the country.
One who definitely was at least temporarily out of harm's way is Brian Janus, operations manager of Galaxy Sports.
'A bolt out of the blue'
"It's just a bolt out of the blue," he told MSNBC from the firm's wagering offices on the Caribbean island of Curacao. "We're licensed by the Dutch government in Curacao ... and we have an informational site only, with all our wagering done over the telephone. We're in a complex with 14 other sports books and I'm just wondering why we were singled out."
He said the firm's managing director and co-owner, S. Chester Hunter, was arrested in Dallas.
FBI agents also searched the Wall Street office of one of the companies, SDB Global, which apparently ran the marketing operation for its Costa Rica-based sports book from capitalism's ground zero.
Other firms charged Wednesday were Island Casino, also based in Curacao; Real Casinom, in Costa Rica; Winner's Way, Dominican Republic; and World Sports Exchange, Antigua.
According to the complaints, FBI agents opened accounts, usually with a minimum deposit of $500, and began placing bets on professional and college basketball, football, baseball and hockey games, among other sports. After being dunned with a 10 percent surcharge, proceeds from the wagers, if any, were mailed to an undercover address in Manhattan, the complaints said. Pressure from Senator suspected
One source in the Internet gaming industry - "a multimillion, if not billion-dollar industry," according to White - said the Justice Department may have acted at the urging of Sen. Jon Kyl, R-Ariz., the author of pending legislation to outlaw online betting in the United States.
"I would imagine they're doing it now because they're catching a lot of heat from Kyl," said the source, who spoke on condition of anonymity. "We know that he has been leaning on the FBI's criminal division to go after some people."
Kyl's spokesman did not return calls seeking comment.
The source said the authorities apparently decided to target sports books rather than Web sites offering casino-style games because the federal act banning sports betting is clearer than statutes governing casino gambling, which were written before the Internet existed.
"It appears they're going after the weak sister first," the source said.
The Justice Department has previously argued that the federal Wire Communications Act, the statute that bans interstate gambling, must be rewritten before it can be successfully used to crack down on Internet gambling.
No change of heart
But John Russell, a spokesman for the Justice Department, said the prosecutions announced Wednesday did not indicate that agency officials had undergone a change of heart.
"The law is on the books and has been for some time," he said. "We're just enforcing it now."
A congressional panel formed to study the impact of gambling in the United States is expected to recommend new laws next year to deal with the burgeoning Internet gambling industry.
In the only previously known federal action against an online gambling operator, FBI agents swept into the Blue Bell, Pa., offices of International Gaming and Communications Corp. in February 1997 and seized records relating to the company's operation of an online casino and a sports book in Grenada. No federal charges were ever filed against the company, but the disruption forced the firm to sell its gambling properties to a Canadian company earlier this year.
Others charged in Wednesday's crackdown were Allen Ross, Mike Saul and Orin Sleeper, of Island Casino; David Budin, Steve Budin and Sandy Becher of SDB Global; Jay Cohen and Steve Schillinger of World Sports Exchange; Kerry Rogers and Gene O'Brien of Winner's Way; and Brad Cohen and Jason Perry of Real Casino. Talkback Articles
Post TalkBack
What is wrong with these lawma... - Kris Porter
It's getting to the point wher... - TC Bobzin
Reno has clearly gone off t... - Virginia Metze
Whose morality is in question.... - Mike Haley
Who do you think is really beh... - Bob Whatley
Regulation not Subjugation. I... - Jim Anderson
Let Reno keep pushing her inju... - Gerald Gibson
How ridiculous to single out t... - Steven Skaggs
I believe the government, in a... - Glenda R. Wells
Maybe I'm lost... But isn't th... - Brian Gregory
Thanks for the support! I grew... - Kerry Rogers
Although I am not a gambler an... - Jack
Updated March 6, 1998
1:38 PM PST
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