When the Black Friday indictments against the three largest Internet poker companies and their founders were announced on April 15, 2011 by U.S. Attorney for the Southern District of New York, Preet Bharara, it was done with great fanfare. Now two years later, the case has essentially ended with a whimper. This led me to wonder what happened.
In researching the government’s record of prosecuting Internet gambling, a name kept coming up, and it ironically was Mary Jo White, herself the former U.S. Attorney for the Southern District of New York from 1993-2002. In her position as a federal prosecutor for Manhattan, she oversaw the prosecution of John Gotti, the boss of the Gambino crime family in New York City, and the terrorists responsible for the 1993 World Trade Center bombing.
However, one case in particular stood out in my research. According to an article entitled, “The Story of How the U.S. Government Waged War Against the Online Gambling Industry” on the website bettingmarket.com, “the first federal charges for Internet gambling were filed on March 18, 1998 in the United States District Court for the Southern District of New York, charging Jay Cohen with conspiracy to violate the Wire Wager Act, 18 U.S.C. 1084(a), and seven substantive counts of violating, and aiding and abetting violations of, the Wire Wager Act, in connection with his operation of World Sports Exchange (WSEX).”
Cohen was eventually found guilty of violating all three clauses of Section 1084(a) of the Wire Act and sentenced to nearly two years’ imprisonment.
The article further states that, “At the time of Cohen’s trial Manhattan U.S. Attorney Mary Jo White said the case showed that operators of illegal sports books who took bets from Americans could not avoid the federal wager law by simply moving their business offshore:
“An Internet communication is no different than a telephone call for purpose of liability under the Wire Wager Act,’’ she said. “As this case demonstrates, persons convicted of operating Internet sports books offshore face very serious consequences – imprisonment and thousands of dollars in fines.”
How times have changed. Fast forward to April 15, 2011, the day dubbed Black Friday by the poker world. Exactly one week later, on April 22, 2011, Pokernewsdaily.com reports PokerStars has retained the law firm Debevoise & Plimpton and specifically the firm’s litigation chair, Mary Jo White, who has now returned to private practice. How ironic that a federal prosecutor who took such a tough stance against Internet gambling in the 90’s is now defending the largest online poker company in the world.
A side note to this story is that on December 23, 2011, the Friday before Christmas, U.S. Deputy Attorney James Cole announced, “The Department’s Office of Legal Counsel (“OLC”) has analyzed the scope of the Wire Act…and concluded that it is limited only to sports betting.”
Newly-confirmed Assistant Attorney General Virginia Seitz of the Office of Legal Counsel (OLC) wrote the 13-page legal opinion on the matter dated September 20, 2011 (but curiously not released until three months later). Being in the office only 90 days, she authored one of the most sweeping reinterpretations of a law that had been used to fight organized crime for 50 years.
What convenient timing. At a time when the three largest online poker companies are under indictment, the DOJ decides to make a seismic shift in policy regarding Internet gambling and chooses to make the announcement in such a low-key manner as to make it seem the DOJ was hoping no one would notice.
Even Bharara in his Black Friday indictments against the online poker companies did not include any Wire Act violations. This softening of the DOJ’s stance on the Wire Act could be viewed as paving the way for the eventual regulation of online gambling in the U.S.
On July 10, 2012, PokerStars filed motions to dismiss the charges against them. On July 31, 2012, PokerStars announced it had settled the Black Friday civil case with the U.S. Department of Justice. The DOJ agreed to dismiss all civil charges against PokerStars without any admission of wrongdoing.
It would be fair to assume Mary Jo White had a significant role in these negotiations. A September 2012 article from Bluff magazine entitled, “Let’s Make a Deal,” outlines the terms of the settlement. In the end, PokerStars will end up paying $547 million to the U.S. government in four installments. But perhaps, most significant, the government and Full Tilt agreed to transfer all of Full Tilt’s assets to PokerStars, which only solidifies the company’s dominant position in the online poker market.
White has now triumphantly returned to serve her government once again. On April 8, 2013 White was confirmed by the Senate as the 31st Chairman of the Securities and Exchange Commission. An article from Rolling Stone magazine titled “Mary Jo White to Head SEC Puts Fox in Charge of Hen House” dated January 25, 2013 asserts White used her influence to protect Wall Street CEO’s from prosecution.
She assured the Senate Banking Committee that as SEC chair the American people will be her client. Based on a track record of protecting powerful clients, do you believe her?
Robert Turner is a legendary poker player and billiard marketing expert, best known for inventing the game of Omaha poker and introducing it to Nevada in 1982 and to California in 1986. In the year 2000, he created World Team Poker, the first professional league for poker. He has over 30 years experience in the gaming industry and is co-founder of Crown Digital Games. Follow him on Twitter: Twitter @thechipburner Robert can be reached at email@example.com.
Recently, Chinese officials have been emphasizing the need to scrutinize gambling activities in Macau to be sure money laundering is not taking place. This has prompted the various Macau casino operators to increase their vigilance regarding the illegal activity.
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