In May the United States District Court for the District of Columbia unsealed an indictment against William Scott and Jessica Davis for alleged offenses of conspiracy and money laundering in relation to their roles in the operation of offshore betting Web site WorldWide Telesports (WWTS). Filed in April 2005, the 12-count indictment accuses Scott, Davis and WWTS of setting up a bank account for a shell company named Soulbury Ltd. with the Royal Bank of Scotland on the British Channel Island of Guernsey and using the account to launder an estimated $250 million in funds obtained from illegal online gambling.
The charges hinge on the basis that the operation of an online gambling site violates the U.S. federal Wire Act, but WWTS is based in Antigua, not in the United States. Antiguan government officials are adamant that Scott and Davis have not engaged in any money laundering conduct other than by virtue of conducting the ordinary business of a licensed Antiguan gaming company. Scott and Davis reside in Antigua, and it remains unclear what the United States can do to enforce its indictment against them.
The situation is entirely murky and a bit confusing, so IGN has asked a pair of legal experts to shed some light on the matter. We asked them:
If the WWTS indictment was filed over a year ago, why has it only now been unsealed? Is WWTS being singled out, or has it put itself at a greater risk than other online gambling operators by conducting certain actions of its business differently than other companies? Will the United States pursue charges against other operators as well? Can the United States enforce the forfeiture it seeks, or is it overstepping its bounds?
Martin Owens: After over a year’s delay, it’s pretty certain that the timing was deliberate. For my part, however, I wonder if the main quarry was really Antigua or the WTO, for it was already quite plain that this administration is not going to bow to any adverse ruling of the WTO regarding online gaming from Antigua, whatever the interpretation of the treaty language may be. That case, in the eyes of the executive branch, was over and done with.
So while the chance to tar Antigua with this brush was a nice bonus for the DOJ, in my opinion the true target of this carefully timed release was the U.S. Congress, in particular those committees now considering legislation against I-gaming. The unsealed WWTS indictment specifically included charges of money laundering. This was a just-in-time boost to Rep. Leach’s bill, HR 4411, which focused on the financial side of online gaming and had not been doing well.
American law enforcement has been alleging since the mid 1990s that I-gambling is a veritable Babylon of covert finance. The problem was, of course, that there were no facts of any standing to back this theory up. Online gaming operations occasionally appeared as part of a money laundering episode, but only when the wrongdoers controlled both ends of the transaction anyway– in other words, when they might just as easily have used a wholly-owned restaurant or hardware store as the vehicle for hiding money and its sources. And the Financial Action Task Force of the OECD (better known as the G-8 nations) twice reported, in 2000 and 2002, that there was no evidence that online gaming was a particular identified venue for money-laundering.
This inconvenient state of affairs particularly hurt Rep. Leach’s chances, and his bill had already failed enactment once this session. If there wasn’t any money laundering tailored to operate through online gaming, then there really was no particular reason to “defend” the American banking system against it. The indictment of WWTS, with its accusations of money laundering and conspiracy, keeps the old shibboleth on its feet for one more try. “If there wasn’t a case before, we’ll supply one– damn the torpedoes, full speed ahead.” And it’s worked, at least so far. Both Goodlatte’s bill and Leach’s have a shot at the floor of Congress now.
As a second, and longer-range concern, this indictment has in fact raised another conflict between U.S. law, especially the PATRIOT Act, and foreign law. Antigua is once again the test case. What is, and is not, money laundering? The technical definition–hiding or disguising the proceeds of an illegal act–is clear enough when the act in question is illegal everywhere, like drug running or bank robbery. I-gaming, however, may violate certain U.S. laws, while remaining OK under Antiguan law. In normal circumstances, there would be no problem. What happens in Antigua, stays in Antigua.
But this case was brought under the Money Laundering Act, 18 U.S.C. §1956 (b), as supercharged by the PATRIOT Act. That means the USA can now assert its jurisdiction over ANY alleged money launderers anywhere in the world, provided the transaction took place even partly in the USA, an American bank account was involved at any point, or– talk about a dragnet clause– possession of “assets” wherein the U.S. government has asserted ownership interests by an order of confiscation. This assertion of jurisdiction clearly includes, by the way, foreign banks and financial institutions. All that is required is acceptable service of process, either by the U.S. or the other country’s rules. And, whaddya know, the definition of “money laundering” means proceeds of any activities which are crimes under U.S. law (§ 1956(c)(7)). This includes I-gaming– at least as Illinois law figures into the State/ Federal mix. Why doesn’t Antigua’s law control, regarding activities that admittedly happen in Antigua?
Of course, the real-life chances of the US getting its hands on either defendants or their money are problematical. Despite the existence of a Mutual Legal Assistance Treaty (MLAT) between the two countries, Antigua will probably be unwilling to lend the services of its government departments for this purpose. Why?
Because as applied in this case, the Patriot Act’s money laundering section is much less a protection of American interests than an encroachment on the national sovereignty of another country. Antigua does not merely tolerate but formally approves and licenses online gambling businesses under its powers as a sovereign nation. Whatever the USA may think of I-gaming, it is legal there. Meaning that, since proceeds of Internet gaming are legal in Antigua, actions involving those proceeds do not fit under the definition of money laundering. But Washington’s position here would seem to be “it doesn’t matter what your law says, in case of conflict, our law controls.” This is, of course, contradictory to the first fundamental rule of international law: that the duly constituted governmental authorities of Country X have as much sovereignty in Country X as U.S. authorities do in the USA, and are entitled to as much respect.
Clearly this is an overreaching of U.S. domestic law into the international arena. It is not only hypocritical (after all, 48 of 50 states now back some form of gambling, including formats which use the Internet), it is selective. Under Britain’s new Gaming Act, a licensed I-gaming operator can take bets from anywhere, including the Home of the Brave. But it is hard to imagine an American warrant issuing for a Sussex, U.K. enterprise with the same speed, vigor and vindictiveness as for one from St. John’s, Antigua.
The whole idea behind the expanded powers of the PATRIOT Act was (on paper) to protect America’s people against terrorist outrages. And to be sure, there is a point at which necessity knows no law. Few would argue with riding down the rules to prevent an imminent catastrophe or massacre. But to assert, as the U.S. DOJ now seems to be doing, that anything goes because genuine bad guys do exist and there just might be one out there someplace, is to melt the rule of law down and cast it into bullets which can be shot at anybody, anytime, for any reason–or no reason.
Indeed, one of the recurrently disturbing features about the PATRIOT Act is that while it was ostensibly written to defend the United States against terrorist attacks, it has been used far more often against offenses and defendants that have nothing to do with that struggle (in fact before 9/11 such measures were rejected as excessive). This WWTS case is a perfect example. Neither Scott nor Davis has connections to so much as an Oriental carpet shop, let alone a terrorist cell. No one is alleging they have. Yet the measures supposedly engineered to confound and trap Bin Laden are being let loose upon Americans who have done no more than take the point spread on the Bengals. And when there’s an office pool for that in every large building in America, including the Capitol and the Supreme Court and probably even the White House, punishing one sector of the market is not only unfair– it’s silly.
I say America does itself more harm than good with this super-aggressive approach, especially since Igaming will probably be broadly legalized at the State level in a few years anyway. If ever there were a time to exercise benign neglect and let nature take its course, it has come for the U.S. government and online gaming.
Martin Owens is an attorney who specializes in the problems of operating gambling businesses online. Services emphasize strategic planning and preventive action in such areas as legal compliance and proper corporate structuring, as well as contracts, intellectual property protection, technology transfer, domain names, and the assorted other ramifications of operating online. Feel free to address questions and comments to [email protected].
Lawrence Walters: The greatest significance of this case, as I see it, is the heightened level of cooperation provided by foreign governments and banking institutions in regards to the forfeiture investigation. Guernsey apparently provided complete cooperation and turned over several million dollars from an offshore account there. The DOJ is also seeking cooperation from other countries in its attempt to seek forfeiture of funds held in accounts located in Antigua, St. Kitts, St. Maarten, Singapore, Canada, Australia, and the Channel Islands. We may see more of this kind of cooperation as the U.S. uses its political clout to pressure smaller countries into turning over information about online gambling operations.
The Leach Bill, HR 4411, includes language that “encourages” foreign governments to cooperate with U.S. efforts to stamp out online gambling. It will be interesting to see the opposing forces in action, as certain Third World countries try to preserve their economic position via online gambling licensure in the face of mounting pressure by the United States to criminalize this activity. Thus far, the prevailing view in the industry has been that individuals are safe from government prosecution if the Internet gaming operations are run from an offshore corporate structure. The DOJ is apparently doing what it can to change that attitude.
Lawrence G. Walters, Esq., is a partner in the national law firm of Weston Garrou, DeWitt & Walters, www.GameAttorneys.com. He has been practicing for over 15 years, and represents clients involved in all aspects involved in the online gambling industry. Nothing contained in this article constitutes legal advice. Please consult with your personal attorney regarding specific legal matters. Mr. Walters can be reached at [email protected], or via AOL Screen Name: “Webattorney.”
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