NETeller settles w/DoJ

[Mousey]

(AFX UK Focus) 2007-07-18 18:57 GMT:
NETeller says reached settlement with US authorities - UPDATE

Article layout: raw
(adds detail on Israel operations)

LONDON (Thomson Financial) - E-payment company NETeller PLC said it has reached a settlement with US authorities on the Attorney's Office probe into the alleged violation of the country's web-based gambling laws by its former directors.

The settlement takes the form of a two-year deferred prosecution agreement under which the company will forfeit 136 mln usd to the US, implement more stringent procedures, and retain forensic accounting firm Navigant Consulting Inc to monitor its compliance with these controls.

NETeller said that the Attorney's Office has agreed to defer the prosecution of any federal charges until the end of the two-year period, after which, it will not be convicted of any federal crime if it fulfils all set conditions under the agreement.

Earlier, the company had issued a "Statement of Admitted Facts" under which it admitted that it had "operated in the US an unlicensed money transmitting business and had participated in the performance of financial transactions for the purpose of promoting unlawful transactions between internet gambling merchants and persons located in the US."

The company said it will fully cooperate with US authorities and that it will seek to have its shares restored to trading on AIM.

NETeller also said it is using its best efforts to allow withdrawal requests as soon as possible, and US customers will be able to sign in to their account to request the withdrawal of their funds by no later than July 30.

The company also said it will no longer process transfers to online gambling sites on behalf of Israeli customers with effect from 0001 GMT on July 19.

However, it said these customers will still be able to ....

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From Reuters...

NETeller reaches agreement in U.S.
Wed Jul 18, 2007 6:33PM BST

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[-] Text [+] By Paritosh Bansal

NEW YORK (Reuters) - Payments processor NETeller (NLR.L: Quote, Profile, Research) will forfeit $136 million (66 million pounds) but will not be prosecuted for conspiracy under a deferred prosecution agreement with the U.S. government announced on Wednesday.
The agreement is the latest development in a U.S. crackdown on Internet gambling that began a year ago with the arrest of the then-chief executive of BETonSPORTS (BSS.L: Quote, Profile, Research), David Carruthers.

Under the deal, approved by U.S. District Judge P. Kevin Castel in Manhattan, NETeller will also pay back $94 million owed to customers.

The company pleaded not guilty to a conspiracy charge related to its handling of gambling proceeds.

The charge will be dismissed after two years if the company meets the conditions of its agreement with the U.S. Attorney's office in Manhattan.

"The company is happy to put this behind us," a NETeller lawyer said after the hearing.

NETeller halted operations in the United States in January, abandoning two-thirds of its business after authorities arrested its Canadian founders and charged them with handling billions of dollars in illegal gambling proceeds.

The co-founders, John Lefebvre and Stephen Lawrence, have already pleaded ....

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Now see... that wasn't so difficult, was it? A little coercion, a lot of intimidation... throw in a smattering of extortion and money comes pouring into the US...

[Mousey]

A few more details from the NETeller website :

Key terms of the Deferred Prosecution Agreement
The settlement takes the form of a two year DPA with the USAO. In the DPA, NETELLER has consented to the filing with the United States District Court for the Southern District of New York of a criminal information charging NETELLER with participating in a conspiracy in violation of certain US laws. If NETELLER fulfils its obligations under the DPA, the criminal information will be dismissed, following the two year term.

Specifically, the DPA contains the following main points:

NETELLER, as detailed in the “Statement of Admitted Facts” attached to the DPA, admits that it had operated in the US an unlicensed money transmitting business and had participated in the performance of financial transactions for the purpose of promoting unlawful transactions between internet gambling merchants and persons located in the US.

NETELLER agrees that it will pay an amount to the United States totalling US$ 136 million which is disgorgement of certain profits received by NETELLER from the activities described in the Statement of Admitted Facts. This amount includes the approximately US$ 60 million that the USAO has previously seized. NETELLER agrees that it will satisfy the remaining portion of its forfeiture obligation with a payment of US$ 40 million to be paid on or before 15 October 2007, and the remaining balance (approximately US$ 36 million) to be paid on or before 17 January 2008.

[pokeraddict]

Was just about to post this. I keep wondering about Ecocard and ePassporte's thoughts. I know ePass has taken the opinion that if they don't handle sports gambling they are OK. At least it sound like US players will get their money. Luckily I'm not owed anything.

[silcnlayc]

The USA must get all the funds they can to cover all the lawsuits against them from other countries for WTO violations...just feathering their nests until they open USA up to all online casinos...IMHO

[Mousey]

DOJ press release:

United States Attorney
Southern District of New York
FOR IMMEDIATE RELEASE CONTACT: U.S. ATTORNEY'S OFFICE
July 18, 2007 YUSILL SCRIBNER,
REBEKAH CARMICHAEL
PUBLIC INFORMATION OFFICE
(212) 637-2600
ISLE OF MAN-BASED INTERNET PAYMENT COMPANY NETELLER PLC
ADMITS CRIMINAL WRONGDOING AND AGREES TO FORFEIT
$136 MILLION FOR CONSPIRING TO PROMOTE
INTERNET GAMBLING BUSINESSES
MICHAEL J. GARCIA, the United States Attorney for the
Southern District of New York, announced today that NETeller PLC
("NETeller") -- an Internet payment business based in the Isle of
Man and publicly traded on the Alternative Investment Market
("AIM") of the London Stock Exchange -- has admitted to criminal
wrongdoing and has agreed to forfeit $136,000,000 in criminal
proceeds as part of an agreement to defer prosecution of NETeller
for its participation in a conspiracy to promote Internet
gambling businesses and to operate an unlicensed money
transmitting business. A felony Information specifying the
charges against NETeller; a Statement of Admitted Facts by
NETeller; and the Deferred Prosecution Agreement, which was
accepted by United States District Judge P. KEVIN CASTEL, were
filed today in federal court in Manhattan.
The Charges
The felony Information filed today charges that
NETeller participated in a conspiracy, in violation of Title 18,
United States Code, Section 371, to: (i) use the wires to
transmit in interstate and foreign commerce bets and wagers on
behalf of persons engaged in the business of betting and
wagering, in violation of Title 18, United States Code, Section
1084; (ii) conduct illegal gambling businesses, in violation of
Title 18, United States Code, Section 1955; (iii) conduct
international monetary transactions for purposes of promoting
illegal gambling, in violation of Title 18, United States Code,
Section 1956(a)(2)(A); and (iv) conduct an unlicensed money
transmitting business, in violation of Title 18, United States
Code, Section 1960. The Information also contains a criminal
Forfeiture Allegation against all property involved in or derived
-2-
from the criminal wrongdoing, in the amount of at least $1
billion dollars.
The Criminal Wrongdoing
As set forth in the Information and the Statement of
Admitted facts:
In 1999, STEPHEN ERIC LAWRENCE and JOHN DAVID LEFEBVRE
began developing the Internet payment system that was used by
NETeller and its predecessors to provide online payment services
to Internet gambling companies. In April 2004, NETeller became a
public company and listed its shares for trading on the AIM of
the London Stock Exchange. At the time, NETeller openly stated
in its prospectus, issued in connection with its initial public
offering ("IPO"), that its conduct violated the law in the United
States.
At its peak in September 2005, NETeller had a market
capitalization of approximately $2 billion. Over the years,
NETeller and its predecessors processed more than $10 billion in
payment transactions for customers in the United States related
to the Internet gambling industry, and consistently derived
approximately 75% or more of its annual profits from such
transactions.
NETeller's illegal conduct in the United States did not
end until January 2007, when LAWRENCE and LEFEBVRE were arrested
on warrants issued by the United States District Court for the
Southern District of New York. Earlier this month, both LAWRENCE
and LEFEBVRE pleaded guilty to charges that they conspired with
others to operate an unlicensed money transmitting business and
to promote illegal gambling by providing payment services to
enable offshore Internet gambling businesses to access customers
in the United States. LAWRENCE and LEFEBVRE each face a maximum
term of imprisonment of five years and a maximum fine of $250,000
or twice the gross pecuniary gain from the offense. In addition,
LAWRENCE and LEFEBVRE each admitted to forfeiture allegations
requiring them to personally forfeit an additional $100 million
dollars to the United States, which they are expected to pay in
full prior to sentencing. LAWRENCE and LEFEBVRE are currently
scheduled to be sentenced by Judge CASTEL on October 29, 2007.
In its Statement of Admitted Facts issued in connection
with the Deferred Prosecution Agreement, NETeller admitted that
NETeller and its predecessors, through the conduct of certain
officers and directors: (i) knowingly operated an unlicensed
money transmitting business in the United States; (ii) knowingly
-3-
agreed to promote illegal Internet gambling by using the wires
and other means to transmit in interstate and foreign commerce
bets and wagers from customers in the United States to numerous
Internet gambling businesses located outside of the United
States, and payments to customers in the United States from
numerous Internet gambling businesses located outside of the
United States; and (iii) intentionally took steps to avoid
detection and jurisdiction in the United States by operating in
the United States through agents and companies that were not
owned, but were controlled, by NETeller and its predecessors.
The Deferred Prosecution Agreement
As part of the Deferred Prosecution Agreement, NETeller
has agreed to forfeit $136 million in profits from its wrongdoing
to the United States in a civil forfeiture action. In addition,
NETeller will return to customers in the United States
approximately $94 million which NETeller currently has on deposit
in a foreign bank account. NETeller has also agreed to cooperate
fully with the Government. Under the Agreement prosecution of the
criminal charges against NETeller will be deferred for a period
of two years, until July 2009, if specified conditions are met.
At the end of that period, if NETeller has fully complied with
all the terms of the Agreement, the Government will move to
dismiss the Information.
In addition to the foregoing, the Agreement also
imposes permanent restrictions and controls on the operations of
NETeller, including, among other things, that: (i) NETeller will
not participate in illegal gambling transactions involving
persons located in the United States; (ii) NETeller will maintain
procedures and controls designed to prevent its services from
being used to conduct U.S. gambling transactions; and (iii)
NETeller will monitor regularly the effectiveness of its
procedures and controls designed to prevent its services from
being used to conduct U.S. gambling transactions, and will revise
and update its procedures and controls as necessary to achieve
that purpose. In order to ensure NETeller's compliance, the
Agreement also requires NETeller to retain a monitor for a period
of at least eighteen months. The restrictions and controls on
the company's operations in the United States will remain in
effect and the company's cooperation will continue after charges
against the company are dismissed.
Mr. GARCIA said that the decision to file a charge
against NETeller was based on several factors set forth in the
Department of Justice Principles of Federal Prosecutions of
-4-
Business Organizations (the "Principles"), including: (i) the
seriousness and duration of NETeller's conduct involving the
processing of billions of dollars of gambling transactions in
violation of state and federal law, and (ii) the involvement of
senior corporate officers in the company's criminal conduct.
The decision then to enter into the Deferred
Prosecution Agreement with NETeller, Mr. GARCIA continued, was
based on a variety of factors and considerations also set out in
the Principles, including: (i) the company's frank acknowledgment
of its misconduct and its willingness to cooperate with the
investigation; and (ii) the company's remedial actions, including
cessation of its participation in illegal gambling transactions
involving persons located in the United States; implementation of
procedures and controls to prevent its services from being used
to conduct U.S. gambling transactions; retention of a monitor to
ensure compliance with those procedures and controls; and
disgorgement of $136,000,000 in criminal proceeds.
Mr. GARCIA stated, "NETeller moved billions of dollars
offshore, serving as a financial conduit that enabled Internet
gambling businesses to prosper by violating United States laws.
Supporting illegal gambling is not a business risk, it is a
crime, and today's proceedings mark yet another example of the
consequences of engaging in that conduct."
Mr. GARCIA praised the tremendous investigative work of
the Federal Bureau of Investigation in this case.
Assistant United States Attorneys TIMOTHY J. TREANOR,
CHRISTOPHER P. CONNIFF, and SHARON COHEN LEVIN are in charge of
the prosecution.
07-186 ###

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There's a whole lot in there I don't like, and there's other stuff I'm not up on... like what's the Title 18 laws they've (supposedly) broken? Anyway, maybe all those who have money tied up in NETeller will be able to get it out soon.

[lojo]

Bad precedent for NLR to buckle under. Perhaps we are still a colony and police the motherland? How is it that a foreign corporation, in a sovereign land is subject to US law? Can I be prosecuted by a foreign govt. if one of their denizens participates with me in an activity illegal under their laws? How far can this concept reach?

Of course my guess is that it was all part of a deal to save the founders, but who was sacrificed on their behalf? What else is to be revealed?

This is a sad day in US-Brit financial/legal affairs, and international 'law'. The ramifications are staggering.

[EasyRhino]

Man, Neteller is jacked. Their profit in 2006 was $55 million, and liquid cash on hand was approx $135 million. And now they're going to disgorge $136 million.

[vinylweatherman]

Man, Neteller is jacked. Their profit in 2006 was $55 million, and liquid cash on hand was approx $135 million. And now they're going to disgorge $136 million.

Neteller wont be paying this though, they will pass this on through increased charges for it's services. Most likely, they will nudge up fees charged to casinos for processing transactions (players don't see this), but they will also look at extra charges for customers, although they will be careful not to drive them away.
When they DO relist, this forefiture will be a serious dent in profits for many years to come, and shares will probably open at basement prices, and will be an investment for either the very brave, or the very stupid, until such time as the positions of the other countries around the world becomes clear. They have already lost Canada, Turkey, and now Israel is for the chop

[Luigish890]

I'l be honest, I was actually expecting a heavier fine. Anyone wonder whether they'l be some information bargaining going on

I still think there will be more skeletons coming out, or maybe this has left a 'conspiracy theory' taste in my mouth!

[Mousey]

From The Register

Neteller reaches supergrass agreement with DOJUS customers to get money back no later than 30 July
By Burke Hansen in San Francisco → More by this author
Published Thursday 19th July 2007 10:10 GMT
Mobile computing: Opportunities and risk - Free whitepaper

Neteller has reached an agreement with American authorities concerning its financial transactions with American internet gambling customers.

The agreement, coming barely a week after two of its former founders reached plea agreements with the Department of Justice (DoJ), requires a forfeiture of $136m to the American government, a sum that includes approximately $60m in American customer assets frozen by the DOJ earlier in the year. Those disputed funds will be returned no later than 30 July.

The resolution of the Neteller case is good for Neteller's American customers, and good for the company itself, but very bad for virtually everyone else in the online gambling industry.

Neteller and the DOJ reached what is known as a deferred prosecution agreement (DPA), in which Neteller admits wrongdoing and agrees to cooperate with authorities in exchange for a conditional sentence. The DOJ files criminal information - basically an indictment without the grand jury hearing - in the Southern District of New York, and at the end of two years, if the DOJ considers Neteller's cooperation to have been sufficient, the charges are withdrawn.

The agreement also paves the way for Neteller shares to be relisted on the Alternative Investment Market (AIM) in London, and requires that financial auditing firm Navigant monitor its compliance with the terms of the agreement.

The end result of this is that Neteller will tell the DOJ everything it knows about the internet gambling industry regarding payment processing or whatnot. Since Neteller provided processing services for about 85 per cent of all online gambling sites, the DOJ stands to receive a treasure trove of inside information about the industry it loves to hate.

Ron Martin, president and CEO, claimed .....