3 online poker houses face fraud charges

A woman who wants to remain anonymous plays poker online.

Federal authorities busted the three largest online poker websites in the United States on Friday with charges of bank fraud and illegal gambling against 11 people, accusing them of manipulating banks to process billions of dollars in illegal revenue.

Prosecutors in Manhattan said they've issued restraining orders against more than 75 bank accounts in 14 countries used by the poker companies, interrupting the illegal flow of billions of dollars.

U.S. Attorney Preet Bharara said the defendants "concocted an elaborate criminal fraud scheme, alternately tricking some U.S. banks and effectively bribing others to assure the continued flow of billions in illegal gambling profits."

The companies, all based overseas, were identified as PokerStars, Full Tilt Poker and Absolute Poker. The indictment sought $3 billion in money laundering penalties and forfeiture from the defendants.

The indictment said the companies ran afoul of the law after the U.S. in October 2006 enacted the Unlawful Internet Gambling Enforcement Act, which makes it a crime for gambling businesses to knowingly accept most forms of payment in connection with the participation of another person in unlawful Internet gambling.

Authorities said Absolute Poker responded by saying in a release after the new law was enacted that it would continue its U.S. operations because "the U.S. Congress has no control over" the company's payment transactions.

Late Friday, Full Tilt Poker released a statement defending its executives named in the indictment, including Nelson Burtnick and its CEO, Raymond Bitar.

"I am surprised and disappointed by the government's decision to bring these charges," Bitar said in a statement. "I look forward to Mr. Burtnick's and my exoneration."

Bitar is accused of arranging for money received from American gamblers to be disguised as payments to online merchants that didn't exist.

The company said it has suspended play for real money on its site in the United States but would continue offering gambling on poker in other countries.

Efforts to reach the other companies were not immediately successful. Phone calls either went unanswered or messages were not immediately returned. An attempt to look at the website for PokerStars.com was met with a message from the FBI saying the domain name had been seized as part of a criminal probe. In all, authorities said they had seized five Internet domain names used by the poker companies to operate illegally in the U.S.

The indictment said the defendants turned to fraudulent methods to trick financial institutions into processing payments on their behalf after the law was passed.

It said they sometimes arranged for money from U.S. gamblers to be disguised as payments to hundreds of non-existent online merchants purporting to sell merchandise such as jewelry and golf balls.

Prosecutors said about a third or more of the billions of dollars in payment transactions that the poker companies tricked U.S. banks into processing went directly to the poker companies as revenue. They said the money represented the "rake" charged to players on almost every poker hand played online.

Two arrests occurred Friday in Las Vegas and Utah, while another man was expected to surrender in Utah on Monday. Eight others were not yet arrested. Chad Elie, 31, arrested in Las Vegas, was freed Friday on his own recognizance. Prosecutors said he obtained accounts at U.S. banks for the poker companies after lying to banks about the nature of the financial transactions they were processing.

Prosecutors said Elie and others in September 2009 approached John Campos, the vice chairman of the board and part-owner of SunFirst Bank, a small private bank based in Saint George, Utah, about processing Internet poker transactions. The government said Campos expressed "trepidations" but agreed to process the transactions in return for a $10 million investment in SunFirst by Elie and an associate. Authorities say Campos also received a $20,000 "bonus" for his assistance. It was not immediately clear who was representing Campos in court. The bank referred questions to the bank president but said he would not be available for comment until Monday.

Authorities say Elie's associates bragged about buying the bank and said they were looking to buy as many as three more to process poker revenue.

Elie's lawyer for the court appearance, Craig Denney, said Elie planned to fight the charges. The lawyer said Elie was arrested at a home, where he lives with his fiancée.

Meanwhile, the casino companies that once partnered with the poker companies in online poker have backed away.

Wynn Resorts Limited and Fertitta Interactive had deals in place with PokerStars and Full Tilt Poker, respectively, in the hopes of partnering on online poker if it were made legal in the United States.

Michael Weaver, a spokesman for Wynn Resorts, run by billionaire Steve Wynn, announced Friday that it had terminated its alliance with PokerStars as a result of the criminal indictment.

Caren Bell, a spokeswoman for Fertitta Interactive, owned by brothers who own Station Casinos Inc., said the deal between Full Tilt Poker and Fertitta Interactive was contingent upon the passage of federal legislation legalizing Internet poker, along with its internal due diligence and a finding of suitability for gaming licensure.

Frank Fahrenkopf, chief executive of the American Gaming Association, the commercial casino industry's main trade group, said the prosecution shows a "clear need to strengthen laws to address illegal online gambling in the U.S."

He added: "Tough law enforcement is the key to making such a system work, and the AGA supports strong enforcement against illegal online gambling activity in this country. But illegal activity _ and the risk of consumer fraud, money laundering and underage gambling _ will continue until the U.S. passes laws ensuring that only licensed, taxed and highly regulated companies can operate in the U.S. market."

Nevada Gov. Brian Sandoval said the allegations made by federal prosecutors against the three companies were of "grave concern." But he added that he remained committed to the possibility that federal legislation will eventually permit Internet gambling in a way that matches the same rigorous standards that apply to traditional gaming institutions.

Gaming

Share

Previous Discussion:

Discussion 1 comment

Only trusted comments are displayed on this page. Untrusted comments have expired from this story.

  1. Any form of online gambling is a JOB KILLER for Nevadans. Any form! The Federal Government has a duty to stand up and say to NO to Online Gambling. Allowing gambling directly into the bedrooms of ordinary regular USA citizen will, will reduce USA productivity and promote other illicit activity such as freely accessing internet pronography. Online gambling is the gate way drug to kill the mind our youth. Online gambling will give the impression it is ok to doing anything on the internet.

    We will lost productivity! We will lost the minds of young people! We will lose 30% of the gaming work force in the State of Nevada if online gambling is legalized. The proponents of online poker are willing to kill off the future protential of this country because they want to make more money. The argument that millions are going somewhere else because the USA will not legalized online poker is Bull! This is not the way you build and strengthen a county by spreading bad profits.

    Las Vegas is here for a reason. Other states tired to legalized gaming, and look at them, problems, problems, problems. The online proponent are telling us nothing of the effects of legalizing online gambling!!! So your telling reasonable people in this country, and in Nevada who refuse to let people under the age of 21 NOT play in our casinos. The people of Nevada are diligent in upholding the rule, this law, or underage gambling because we know gambling is not for young people. This will stop the growth in all areas of their life. Then, we turn around and hear people like Steve Wynn and Harrah's are willing to accept bets over the internet from anyone to make a buck!!!! Give us a a freaking break!!! You cannot monitor who has access to the internet, you cannot...Period!

    Internet gambling is a JOB KILLER FOR NEVADANS, and will stop our youth from realizing any protential for the future.. The internet is for many things. The internet is not for legalizing online gambling in the USA. You can bet, you can be sure, there will be a ground swell of opposition if somehow our lawmakers sneak any type of online legalization through congress. Starting right here in Nevada, we will hold Senator Reid responsible, John Ensign, Shelley Berkely, Dean Heller, and Joe Heck. You mess with the bull, you get the horns!