US online gambling charges put 700 Irish jobs in peril
By Finfacts Team
Apr 18, 2011 - 5:53 PM

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On Friday, Preet Bharara, the United States Attorney for the Southern District of New York announced the unsealing of an indictment charging eleven defendants, including the founders of the three largest Internet poker companies doing business in the United States - - Poker Stars, Full Tilt Poker, and Absolute Poker - - with bank fraud, money laundering, and illegal gambling offenses. In Dublin, a company called Pocket Kings employs 700 people and provides services to  Full Tilt Poker.

The domain of Full Tilt Poker has been seized by the FBI and American Raymond Bitar (39), chief executive of Full Tilt Poker, and a director of Dublin-based Pocket Kings, is one of 11 charged with violating the Unlawful Internet Gambling Enforcement Act, passed into US law in 2006.

The Act prohibits the transfer of money from US financial institutions to online gambling sites.

Founded in September 2003 with the goal of creating the best online poker experience anywhere, Pocket Kings provided exclusive software development and marketing consulting services for one of the world's fastest growing poker sites, Full Tilt Poker.

Designed in conjunction with some of the world's best poker players, including Phil Ivey, Howard Lederer, Chris "Jesus" Ferguson, Jennifer Harman, and Andy Bloch, the software provides players of all skill levels with a variety of game choices, including variants on Hold 'em, Omaha, Razz, and Stud. The software features leading-edge technology, superior graphics, a user-friendly interface, and customizable avatars and backgrounds.

The company said on its website that since its official release in June 2004, Full Tilt Poker has become one of the most successful and recognizable brands in online poker, and is the only online poker community that allows players to regularly learn, chat and play poker with 28 of world's best poker professionals

Pocket Kings employs some 700 staff at the Cherrywood Science and Technology Park in south Dublin, and was established in 2006 to provide functions such as IT support, fraud detection, marketing and customer services to Full Tilt Poker, which is licensed in Alderney, Channel Islands.

Some people who have been interviewed in recent years for jobs in the company, expressed reservations about the operation.

On Friday, the United States filed a civil money complaint seeking at least $3bn in civil money laundering penalties and forfeiture against the 3 Poker Companies, their assets, and the assets of several payment processors for the Poker Companies. In addition, restraining orders were issued against more than 75 bank accounts utilized by the 3 Poker Companies and their payment processors, and five Internet domain names used by the Poker Companies to host their illegal poker games were seized.

Manhattan U.S. Attorney Preet Bharara said: "As charged, these 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. Moreover, as we allege, in their zeal to circumvent the gambling laws, the defendants also engaged in massive money laundering and bank fraud. Foreign firms that choose to operate in the United States are not free to flout the laws they don’t like simply because they can’t bear to be parted from their profits."

FBI Assistant Director-in-Charge Janice K. Fedarcyk said: "These defendants, knowing full well that their business with US customers and US banks was illegal, tried to stack the deck. They lied to banks about the true nature of their business. Then, some of the defendants found banks willing to flout the law for a fee. The defendants bet the house that they could continue their scheme, and they lost."

According to the Indictment and the Civil Complaint unsealed on Friday: On October 13, 2006, the United States enacted the Unlawful Internet Gambling Enforcement Act (UIGEA), making it a federal crime for gambling businesses to "knowingly accept" most forms of payment "in connection with the participation of another person in unlawful Internet gambling." Despite the passage of UIGEA, the 3 Poker Companies, located offshore, continued operating in the United States. In a press release dated October 16, 2006, Absolute Poker announced that the company would continue its US operations because "the US Congress has no control over" the company’s payment transactions.

Because US banks and credit card issuers were largely unwilling to process their payments, the 3 Poker Companies allegedly used fraudulent methods to circumvent federal law and trick these institutions into processing payments on their behalf. For example, defendants Isai Scheinberg and Paul Tate of PokerStars, Raymond Bitar and Nelson Burnnick of Full Tilt Poker,and Scott Tom and Brent Becjley of Absolute Poker, arranged for the money received from US gamblers to be disguised as payments to hundreds of non-existent online merchants purporting to sell merchandise such as jewelry and golf balls. Of the billions of dollars in payment transactions that the 3 Poker Companies tricked US banks into processing, approximately one-third or more of the funds went directly to the 3 Poker Companies as revenue through the "rake" charged to players on almost every poker hand played online.

As alleged in the indictment, to accomplish their fraud, the 3 Poker Companies worked with an array of highly compensated "payment processors."

The Irish Times reports that accounts for Pocket Kings for last year show the company made an operating profit of €14.9m, up from €2.7m a year earlier. In February, Pocket Kings announced plans to recruit a further 100 staff for its Irish operation. “The accessibility to a skilled and educated workforce in Ireland along with an attractive corporation tax rate continues to be deciding factors in our decision to remain here,” it said.

The Wall Street Journal reports that Bwin.Party Digital Entertainment PLC and Playtech Ltd. shares rose sharply Monday morning with expectations the latest crackdown on Internet gambling by US authorities will benefit European online-gaming groups.

European online-gaming companies that pulled out of the US a few years ago because of the government's ban on online gaming have since been less competitive than those still accepting money from US residents as their betting pool is smaller. But the US crackdown on online poker could turn the tables in favour of the European operators.

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