Gaming Law "In the News" ...
A Catania Consulting Group Client Newsletter April 22, 2009
Integrity, Leadership, Experience ...
Frank Catania, Esq. President, former Assistant Attorney General, Director NJ Division of Gaming Enforcement, VP Compliance Players International. frank@cataniaconsulting.com
Gary Ehrlich, Esq. VP, former Assistant Attorney General, Deputy Director NJ Division of Gaming Enforcement. gary@cataniaconsulting.com
Keith Furlong, VP, former Public Information Officer & Legislative Liaison NJ Division of Gaming Enforcement. keith@cataniaconsulting.com
Joseph Kelly, Esq., Associate, Professor of Business Law, SUNY College Buffalo. jkelly@cataniaconsulting.com
Lenders Bid for AC Tropicana
A consortium of lenders, including billionaire financier Carl Icahn, has made a $200 million bid for the Atlantic City Tropicana Casino and Resort. The consortium is widely regarded as having assumed the role of "stalking horse" in the Tropicana bankruptcy auction, establishing the minimum bid for the property.
Gary Stein, the conservator overseeing the AC Tropicana sale, said the process is now "moving forward" following the agreement with Icahn's group. "It is my expectation that this stalking horse bid will generate substantial interest from multiple bidders, leading to a robust auction that achieves the highest price possible in light of current conditions in the gaming industry," he said.
BetonSports' Ex-CEO Pleads Guilty
David Carruthers, former CEO of online gambling firm BetonSports, has pled guilty in federal court in Missouri to racketeering conspiracy charges. The company itself had pled guilty to racketeering conspiracy in 2007.
Under the plea agreement, prosecutors agreed to drop other charges in return for Carruthers' pledge to cooperate in the further prosecution of figures involved with his former company. A sentence in excess of two years imprisonment is possible. Carruthers was arrested in July 2006 while in transit through Dallas, and has remained under house arrest in St. Louis for almost three years. The time spent under house arrest will not be taken into account at sentencing later this year.
With Carruthers’ guilty plea, attention will now focus on the other BetonSports defendants, including founder Gary Kaplan, who face trial in September.
PartyGaming Signs Non-Prosecution Agreement with US
On April 7, Internet gambling company PartyGaming entered into a Non-Prosecution Agreement with the US Attorney’s Office in New York. Under the terms of the agreement, the US government will not prosecute PartyGaming for providing Internet gambling services to customers in the US prior to enactment of the Unlawful Internet Gambling Enforcement Act (UIGEA) in October 2006.
As part of its agreement, the company accepted a Statement of Facts regarding its business activities prior to the enactment of UIGEA, and agreed to pay the government $105 million over a period of three years, representing proceeds of PartyGaming’s US Internet gambling operations. The government cited PartyGaming’s “early and full cooperation with the … investigation,” and agreed to “bring the co-operation and remedial actions of PartyGaming to the attention of other licensing and regulatory authorities.”
Commenting on the agreement, Jim Ryan, Chief Executive Officer of PartyGaming said: “The resolution of our position with the US authorities marks an important day for PartyGaming. It has been a long and complex process but we have reached an amicable solution with the US [Attorney’s Office] that makes commercial sense for our business and is in the best interests of shareholders. We are now well-placed to seize organic as well as strategic opportunities that previously were beyond our reach.”
Forbes, April 4, 2009,"Party Gaming Plays Nice with U.S. Justice Department," suggests the settlement may help the company should Internet gambling become legalized in the US. Professor Joseph Kelly, associate of Catania Gaming, was quoted as stating that because prohibition has failed, a regulatory bill stands a better chance than it had in the past. The Washington Post, April 7, 2009,"Online Poker Settlement Could Shake Industry," suggested that the settlement could have a significant impact on the US gaming industry. Professor Kelly was quoted there as indicating that the US policy "has not decreased online gambling, but has reduced the ability to monitor suspicious transactions"
The agreement by PartyGaming may pave the way for more such deals by other publicly traded Internet gambling companies which have done business in the US previously, but which may be seeking to “clear their records” in anticipation of the potential future legalization of one or more forms of Internet gambling in the US.
iMEGA Challenge to UIGEA To Be Heard by U.S. Court of Appeals in July
iMEGA’s challenge to UIGEA has been scheduled to be heard by the US Court of Appeals for the Third Circuit in Philadelphia in July. The lower court granted standing to iMEGA to represent the interests of its members, but upheld UIGEA against all constitutional attacks. As part of its appeal, iMEGA has sought to supplement the appellate record to bring before the Court information concerning complications arising in certain state lotteries. It appears that, pursuant to the regulations adopted under UIGEA, credit card companies are blocking all gambling transactions, including those related to legal gambling. Such “overblocking” has resulted in steep declines for lotteries that do a large Internet business. iMEGA’s position is that this consequence supports its argument that UIGEA is void for vagueness. The Court has sent iMEGA's motion, which is opposed by the Department of Justice, to the Merits Panel for a decision. There is no indication of when the motion will be decided.
The appeal is entitled iMEGA v. Attorney-General et al. (No. 08-1981).
iMEGA and New Jersey File Lawsuit Challenging Professional and Amateur Sports Protection Act
Along with New Jersey horse racing interests and a New Jersey State Senator, iMEGA has also filed a complaint in federal court in New Jersey seeking the invalidation of the Professional and Amateur Sports Protection Act (PASPA) on multiple constitutional grounds. iMEGA et al. v. Attorney General et al. (D.N.J. 2009).
The main thrust of the case is that, by permitting sports betting only in the four states that happened to have it at the time PASPA was enacted, Congress is unconstitutionally discriminating against the citizens and public officials of all other states. As expressed in a resolution of the New Jersey Legislature urging Congress to lift the ban on sports wagering:
Although sports wagering is illegal under federal law, the prohibition has failed to curb that activity. It is estimated that Americans wager about $380 billion each year on sports alone, and the legal wagers on sporting events placed in Nevada amount to only 1% of that total. By legalizing sports wagering, state gaming enforcement agencies could finally properly regulate and police this illegal activity, and states could also tax it and thereby generate needed tax dollars to alleviate states’ budget gaps.
