Gaming Law "In the News" ...
A Catania Consulting Group Client Newsletter June 17, 2008
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
Appeals Court Drops Charges against Safavian; Orders Retrial
A new trial has been ordered for David Safavian, the former Chief of Staff of the General Services Administration. Safavian was convicted of lying to investigators about Jack Abramoff’s lobbying activities and sentenced to 18 months in prison. Safavian, who has been free on bail pending appeal, was granted a new trial and some of the charges were thrown out by the federal appeals court. It is now up to the Department of Justice to decide whether to retry Safavian on whether he lied to the Senate.
NCLGS Hears Panel on Internet Gaming; However, No Action Taken To Change Its Position
The National Council of Legislators from Gaming States (NCLGS) met in Napa, California on June 13 & 14. Internet gaming was one of two general session topics. Speakers included Frank Catania, Catania Consulting; Ken Kirchner, FalKirk International; Ted Kitada, Wells Fargo; John Pappas, Poker Players Alliance; Bruce Zagaris, Berliner, Corcoran & Rowe; and Rev. Jim Butler, California Coalition against Gambling Expansion. The consensus among the panelists was that Internet gaming should be regulated, although there was some difference of opinion as to whether such regulation should be federal or state. Frank Catania gave the status of the current and pending laws in the United States and recommended state regulation. Bruce Zagaris gave a detailed explanation of the World Trade Organization (WTO) case of Antigua v. United States and the inability of the United States to settle the matter. Ted Kitada presented the banking industry’s opinion that it was an impossible task to implement regulations as required by the Unlawful Internet Gambling Enforcement Act (UIGEA) and indicated that regulation was a better alternative than leaving enforcement to the banks. Ken Kirchner touched on horsemen's issues, stating that the WTO not an issue regarding online horserace wagering but that the real issue was online gaming, which he said should be regulated. John Pappas gave the poker players’ views and their support for the Franks bill that would have federal regulation. Reverend Jim Butler’s position was basically that gambling promotes suicide and foreclosure and disrupts the family. NCLGS took no action to change its position on Internet gambling.
Washington State Court Upholds Law Making Online Gambling a Felony
A Washington State lawyer and the state Director of the Poker Players’ Alliance vows to appeal the decision of the King County Superior Court upholding Washington State’s criminalization of Internet gambling. Lee Rousso had argued that the law discriminates against Internet companies in order to protect local card rooms and casinos. The law, passed in 2006, makes Internet gambling a felony. To date, however, no players have been charged.
Internet Gaming Rules Face Long Odds
The Federal Reserve Board and the Department of the Treasury still have not been able to adopt rules to enforce UIGEA since they cannot agree on the law. As the American Bankers Association commented on the previously issued draft regulations: “If the federal agencies themselves cannot agree on the law, what hope is there that banks can resolve these confounding legal issues?" "What is legal now?" said Joe Kelly, "God only knows."
Supreme Court Denies Review of Appeals Court Decision Regarding Fantasy Sports
The United States Supreme Court denied review of the decision of a federal appeals court that allows fantasy sports sites to continue without making payments for licensing fees to any sports league such as Major League Baseball. Major League baseball had tried to collect licensing fees from the fantasy sports sites for the use of major league player’s names and statistics. The decision was based on the First Amendment guarantee of free speech, which means it is not subject to legislative overruling. The ruling may stimulate other promoters to create their own fantasy sports games.
Supreme Court Defines “Proceeds” for Purposes of Federal Money Laundering Statute
The United States Supreme Court issued a full decision interpreting the term “proceeds” as used in the federal money laundering statute. United States v. Santos, 128 S. Ct. 2020 (June 2, 2008), involved an illegal lottery. Based on payments to runners, collectors and winners, Santos was convicted of violating the money laundering statute, which prohibits use of the “proceeds” of criminal activities for various purposes. Although “proceeds” could be read to mean either receipts or profits, a plurality of the Court interpreted the term to mean profits, in the absence of Congressional guidance. This interpretation may have significance in the Internet gambling area, insofar as it suggests that an operator’s payment of winning bets and other business expenses will not constitute money laundering under federal law.
The Court also based its decision on what it referred to as the “merger issue,” that is, the fact that a defendant convicted of gambling and money laundering would have the gambling conviction merged into the money laundering conviction for purposes of sentencing. That would mean that a 5 year gambling sentence could end up in a 20 year money laundering sentence if conduct inherent in the gambling charge was also charged as money laundering. The Court found that result to be anomalous and not the intention of Congress. This prong of the Santosholding could have implications for online gaming operators as well.
CCC Principals Appear at NAGRA Conference
Two Principals of Catania Consulting Group appeared in June at the annual conference of the North American Gaming Regulators Association (NAGRA) in New Orleans as a joint project with the International Masters of Gaming Law. Gary Ehrlich appeared on a general session panel discussing Legal Internet Games of Skill vs. Illegal Internet Gambling, and Keith Furlong appeared on another panel addressing Internet Gaming Effects on Youth.
ESI Entertainment/Citadel Pleads Guilty
ESI Entertainment/Citadel, a publicly-traded Canadian corporation, has pleaded guilty in New York federal court to a conspiracy count in a deferred prosecution agreement and forfeit over $9 million. ESI has also agreed to cooperate for the next 18 months. Joe Kelly of Catania Consulting said that the federal crackdown is like" trying to empty the ocean with a teaspoon."
Partygaming Close To Settlement with DOJ
Partygaming is reportedly close to a settlement with the Department of Justice of all criminal issues based on conduct taking place prior to the enactment of UIGEA for a rumored $1 billion. Joe Kelly was quoted in the New York Post (May 31, 2008) suggesting that a settlement will not get Partygaming "closer to online betting here anytime soon," but that "its executives can stop looking over their shoulders when they come to the U.S."
