by Kevin Smith
Lawyers and industry observers believe a federal
investigation into I-gaming advertising practices is cause for concern.
The scope of the investigation remains unknown, but the
consensus is that a broad net has been cast.
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"This is the first time we have seen the federal government go
after advertisers using the aiding and abetting clause. That
is very significant."
- Lawrence Walters
Weston, Garrou &
DeWitt
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Interactive Gaming News on Tuesday obtained a copy of a
subpoena issued to a portal owner who accepts advertising for online
casinos and sports books.
The subpoena, issued by the United States District Court
in the Eastern District of Missouri, asks the operator to turn over all
commercial and financial information from Jan. 1, 1997 to the present
related to the advertisement of online casinos and sports books.
Among information requested in the subpoena is all the
"names and all identifying and contact information you have for every
point of contact for each such gambling advertiser."
The subpoena also calls for the turning over of any
information about advertisements placed on TV, radio or cablecasts. The
court, through the subpoena, asks for any accounting records including
accounts receivable or accounts payable. They also ask the portal to turn
over records of sales calls, telephone records, contracts, invoices,
records of negotiations pertaining to payment, e-mail correspondence (both
incoming and outgoing), financial transactions, annual gross revenue for
the site, information on how advertising revenue was received and the
names of financial institutions and account numbers pertaining to the
business.
Lawrence Walters, a lawyer with expertise in advertising
law, said the subpoena should send up a red flag to those in the industry.
"This is a big deal," he said. "This is going to cause
some ripples. This is the first time we have seen the federal government
go after advertisers using the aiding and abetting clause. That is very
significant."
It's the first time such an investigation has taken
place, but not the first time the Eastern District of Missouri has
targeted the online gaming industry. Raymond W. Gruender, the U.S.
Attorney in the district, reached a $10 million settlement with PayPal
Inc. in July following an investigation into the alternative payment
solution provider's involvement with the interactive gaming industry.
Gruender argued the company was in violation of federal law and aided in
illegal activities by providing its service to online sports books and
casinos.
"You have to wonder if this guy has an axe to grind
against the industry," said a lawyer who represents interactive gaming
parties, but requested anonymity.
Meanwhile, Gruender was nominated this week for a seat on
the Eighth U.S. Circuit Court of Appeals. If confirmed, he would succeed
Judge Pasco M. Bowman II of Kansas City, who took senior status. The
nomination process could take six months to a year.
The subpoena calls for the party to testify to the grand
jury Oct. 29, but one legal expert pointed out that the subpoena is aimed
at getting as much information as possible through documentation and not
testimony.
"Document subpoenas, which is what we have in this case,
are pretty standard," the source said. "They are just trying to get as
much information as they can to determine what direction the investigation
will take next."
The uncertainty has many in the industry on edge, but at
least one major broadcaster that runs online gambling ads isn't concerned.
A spokesperson with the Howard Stern Radio show, one of the highest rated
syndicated programs in the United States, said they haven't been served
any subpoenas and aren't worried about it. The program is aired by
Infinity Broadcasting and one if its sponsors is GoldenPalace.com.
"This cleared all the proper channels through the
Infinity legal department," the spokeswoman said. "We only advertise the
free part of the site and we are following all the rules."
The news of the grand jury came one day before the
Metropolitan Transportation Authority in New York announced a deal with
online sports book BetOnSports.com to place advertisements on 250 New York
City buses with the BOS logo and the company's toll-free wagering hotline.
Walters is concerned that an investigation could be
centered on advertising rights for companies. He said it would mark the
first time advertising for a certain industry has been singled out as
off-limits to radio stations, newspapers and Web sites.
"This is probably just a scare tactic, but the government
likes to take on issues, and if they feel strongly enough about it, they
could create some problems," Walters said. "For them to single out online
gaming advertising is unheard of, but the Department of Justice is
unfriendly to First Amendment interests and there are significant
constitutional rights at stake here."