BODOG THE SUBJECT OF MAJOR U.S. INVESTIGATION?

1 August 2008

Millions seized from banks and payment processors in anti-online gambling moves


Industry observers have been saying for some time it that it would not be long before the U.S. Department of Justice caught up with the Bodog online gambling group founded by high profile Canadian entrepreneur Calvin Ayre (47), and this week it happened.

The U.S. government has seized $24 million from bank accounts linked to Bodog, and federal filings all point to a major ongoing criminal investigation driven by the U.S. Attorney's office in Baltimore, which launched two lawsuits leading to the asset seizures. When InfoPowa went to press the federal authorities had yet to make a statement.

However, Baltimore federal court filings revealed that seizures were made at major banks like Wachovia, Bank of America, SunTrust Banks and Regions Bank. Media reports reprised speculation that Ayre would be personally pursued, and that there may already be a sealed indictment awaiting execution by federal officials.

Ironically, some of the most in-depth reportage was carried by Fortune Magazine, which in 2006 featured Ayre on its cover as one of the up-and-coming new billionaires. Ayre's penchant for high personal media coverage at one stage ran to a "Catch Me If You Can" taunt regarding Bodog and United States enforcers.

Since then, a great deal of water has flowed under the bridge with Internet gambling operations in the United States becoming increasingly difficult following the 2006 Unlawful Internet Gambling Enforcement Act, which prohibits financial transactions with online gambling companies.

Controversial arrests of online gambling executives transitting the USA created further stress and it is thought led ultimately to a recent announcement by Ayre (see previous InfoPowa report) that he had retired from the industry, leaving Bodog's North American activities in the hands of Alwyn Morris, a businessman operating the Morris Mohawk Group from the Kahnawake First Nation enclave in Quebec, Canada.

It is known that Bodog was also making a major push into the European market.

Bodog has also faced civil action on a patents issue launched by First Technologies LLC, an American company. Default judgements of $48 million and the confiscation of Bodog domains were made in two American courts, leading to a bitter public exchange between Ayre and First Technolgies head Scott Lewis. Public debate on the issue has since quietened down amid speculation that a settlement may have been reached.

Fortune Magazine reports that the flamboyant Ayre is now believed to be in Antigua and Barbuda, where he is apparently maintaining an uncharacteristically low profile, failing to respond to requests for comment by the prestigious business magazine.

Avoiding countries within the reach of the U.S. government's long extradition arm is a difficult proposition, if that is a strategy being considered by someone like Ayre. Possible havens include mainly developing nations in Africa and Asia.

In its article, Fortune recounts the dramatic rise of the Bodog empire, with its Internet gambling operations turning over billions in wagers every year, and Ayre's personal fortunes rising. It goes on to cover the official pursuit of other companies involved in the industry such as Neteller and Canada's ESI Entertainment Systems, which coughed up millions of dollars to U.S. authorities in settlements to avoid further federal action.

The report covers court filings in Maryland to the effect that in January and February a total of $14.2 million was seized from accounts in the name of JBL Services and Transaction Solutions at Wachovia, Regions Bank, Bank of America and Sun Trust Bank.

In July, the filings reveal, another $9.9 million was found in eight accounts at Nevada State Bank, where a unit of Zion Bancorporation, in the name of Zaftig Instantly Processed Payments, doing business as ZipPayments.com - itself the subject of recent industry publicity. The companies are described as helping to facilitate parts of the Bodog operation.

The court papers quoted by Fortune detail an elaborate international structure put together to allow Bodog to collect money and write checks to winning gamblers in the U.S. One affidavit by Randall S. Carrow, a special agent with the U.S. Internal Revenue Service's Criminal Investigation Division, said that $248 million involving entities linked to Bodog was processed through Wachovia Bank, from which $11 million of the $24 million was seized.

In a statement to Forbes, Wachovia said the bank cooperated with law enforcement, doesn't knowingly allow Internet gaming operations to open accounts, and the funds ending up at the bank were in accounts of a third-party credit card servicer. The statement also hinted that various accounts might have been kept open at the request of investigators to aid their efforts.

According to Agent Carrow's detailed sworn statements, the IRS's Criminal Investigation Division started looking at Bodog in 2003 and opened a formal probe in 2006. The extensive sleuthing has involved close examination of public and bank records, the enlisting of unnamed cooperating witnesses and informants, and undercover efforts to make bets on football and collect winnings.

Carrow's statement alleged that Ayre is president of Middleton Financial, a Nevada corporation described as a key cog in the U.S. Bodog machinery, as well as Stratham Finance, said to be based in Malta. Other entities linked to Ayre in the court filings are Gateway Financial Services, EBanx Ltd., Gregor Financial Ltd. and Calvtek Industries. The filings list dozens of businesses involved in processing Bodog transactions.

A break in the inquiry came in May, one of Carrow's affidavits says, when an undercover operative for "another state's gambling commission" received a check that didn't bounce from an account at Nevada State Bank, which is headquartered in Las Vegas. That led to the $9.9 million seizure this month. The bank had no immediate comment.

Carrow's affidavits were filed in connection with the successful efforts by federal officials to get a federal judge to authorise the seizures. But to keep the money permanently, federal prosecutors must file a civil lawsuit and allow a challenge by anyone with a claimed interest. No one fought the $14.2 million seizure, and it was ordered forfeited to federal authorities.

The lawsuit over the $9.9 million - its official title is United States of America v. $9,869,283.05 - has now been filed.

The Fortune report ends with a brief look at what it refers to as the "considerable baggage" carried by Ayre, pointing out that close family members were convicted of drug trafficking, although Ayre himself was never charged. "In 1996 Ayre was banned for 20 years from the British Columbia securities industry for stock market offenses. By that time, he was already moving into online gaming," it claims.

See the full Forbes story at: http://www.forbes.com/businessinthebeltway/2008/07/30/calvin-ayre-bodog-biz-beltway-cx_jn_wb_0730ayre.html

Online Casino News courtesy of InfoPowa