Wednesday, July 19, 2006
Damn Bible Thumpers
Online Casino Markets React To Arrest.
ONLINE CASINO MARKETS REACT TO CARRUTHERS ARREST (update)
London and Canadian online gambling stocks take the hit from DoJ action
Online gambling executives and investors alike will be anxiously watching the stock market scene today (Wednesday) in the wake of stock declines that have hammered the industry following the arrest and continued detention of Bet on Sports CEO David Carruthers over the weekend.
Late Tuesday, London gambling stocks and to a lesser extent Canadian gambling shares had declined sharply, presumably as a result of nervous investors dumping their holdings.
BetonSports shares fell by as much as 25 percent before trading was halted at the company's request, but the biggest fallout hit Sportingbet, where shares fell by 100p to 282p, almost half their level before BetOnSports announced on Monday that Carruthers, had been detained. The stock fell 36 percent Tuesday after falling 13 percent on Monday.
Although it does not offer sport betting, PartyGaming, the internet poker company, fell 17¾p to 85¼p, down from a flotation price last year of 116p. Almost GBP 1 billion has been wiped from its market value in two days. Shares dropped 17 percent on Tuesday on the London Stock Exchange and played a role in dragging the FTSE index lower.
888 Holdings, fell 24½p to 168½p.
Leisure and Gaming shares fell 21p to 71½p.
In Vienna, BetandWin.com Interactive Entertainment AG (newly branded Bwin) tumbled 24 percent
Playtech lost almost a third of its price, as confusion reigned about the scope of the DoJ's planned actions
BetOnSports asked for trading in its shares to be suspended because of uncertainty over its future. The company also temporarily closed its main website to business, and said that its lawyers were reviewing implications of a federal temporary restraining order to stop it taking bets from Americans and require it to return punters’ money held in accounts.
A federal court issued the temporary restraining order to prevent BetOnSports from accepting bets in the United States, which is reported to be the company's biggest market. In terms of the order, it is understood the company is required to stop accepting bets from the US; to place notices on its US-based websites saying it does not accept bets on sporting events and to place full-page newspaper adverts saying telephone betting services are "a violation of US law".
Canadian stocks also took a few dents, although to a lesser extent than the London companies.
Cryptologic shares dropped $3.66 to $21.22 or 14.7 percent on the Toronto Stock Exchange, while Fun Technologies saw less of a drop but still lost 3.7 percent as their shares dropped 20¢ to $5.20.
Chartwell Technology, Inc., a Vancouver-based company, was also down 2¢ to end up at $2.35, and shares in LasVegasFromHome.com Entertainment Inc. were down 15 percent, dropping to 17¢.
CryptoLogic said Tuesday it did not expect a serious impact. "While there's no question this news has created volatility in the broader Internet gaming market, we anticipate little or no long-term impact on our customers, who have no involvement in sports betting in the U.S," a spokesman for the Toronto-based company said.
"For the Internet casino market, little has changed - the uncertainty in the U.S. continues, and this validates CryptoLogic's long-standing focus on the UK and Europe, and on blue-chip customers that operate in markets that embrace Internet gaming."
Before trading in London started on Wednesday, the dismal picture looked like this:
Playtech down 28 percent (down 33 percent at one stage)
Neteller down 15 percent
Fireone down about 20 percent
Empire Online down 8 percent
SportingBet down 44 percent
888.com down 16 percent
Partygaming down by over 17 percent, a drop of over 22 percent in 2 days
Betonsport down 16 percent
Fairgound down 5 percent
UK FALLOUT OVER THE TWO DAYS
PartyGaming
Market value: GBP 3.41billion: –22 percent
Sportingbet
Market value: GBP 768 million: –44 percent
888 Holdings
Market value: GBP 568 million: –16 percent
City analysts were divided over implications for other internet gambling companies that have American customers. Some felt that the language of the US indictment amounted to a warning to the wider industry, but others said it appeared to be a company-specific issue relating mainly to BetOnSports’ American founder and former owner, Gary Kaplan.
The indictment claims that Kaplan, who was first arrested in 1993 over illegal gambling, failed to pay excise taxes on more than $3.3 billion of wagers from the US. The Department of Justice is claiming $4.5 billion forfeiture from Kaplan, who still has a 15 per cent stake in BetOnSports. Kaplan who remains free is believed to reside in Costa Rica, and has declined to comment on the affair.
Online gambling companies said that they were analysing implications with their lawyers. Unsurprisingly, no executives had any immediate plans to travel to America.
Carruthers, a British citizen was detained Sunday by FBI and IRS officials as he transited the USA at Dallas airport on his way home to Costa Rica from the UK. After several hours held incommunicado and in detention in Tarrant County jail, the businessman appeared briefly in a local court on a 27 page grand jury indictment against himself and 11 other people believed to be associated with the company in the past.
The 22 charges included racketeering, tax evasion and wire fraud accusations, running an illegal gambling operation and money-laundering. The high-profile case is being prosecuted by a newly appointed U.S. Attorney in St. Louis, Catherine Hanaway, and accuses Kaplan of taking bets from undercover federal agents.
Tim Evans, an attorney for Carruthers, said a detention hearing would be held Friday in Fort Worth to determine if Carruthers must remain in jail. Carruthers will be arraigned in St. Louis on the racketeering charges at a future date, he said.
"The view of the Department of Justice is and has been that Internet gambling is illegal," said Brian Sierra, a spokesperson for the DoJ. According to Sierra, the new laws and Congress' interest in online gambling have nothing to do with the latest round of charges lodged by the Department of Justice.
"We're not trying to send a grand scale message here," he said. "We've been saying it for years: Internet gambling is illegal."
Sierra says the department's position is and has always been that anyone either in or outside of the U.S. who operates illegal online gambling operations to take bets from U.S. residents is committing a crime. Period.
The CATO Institute, an organisation that scrutinizes public policy has a different view. "It's a moral crusade," claimed Radley Balko, a policy analyst. "These guys have a personal opposition to gambling and they want to impose that on the rest of the country."
American anti-online gaming legislators such as Sen. Jon Kyl and Rep. Bob Goodlatte were quick to seize on the action to publicise their attempts to ban Internet gambling.
"This recent indictment of online gambling executives strengthens the need for legislation to ban Internet gambling," Kyl said in a statement. "I am hopeful that legislation I intend on moving through the Senate this year will provide the Justice Department with the tools necessary to continue aggressively pursuing those that wish to circumvent the rules and engage in this sort of illegal activity," he said.
Goodlatte praised the prosecution. "We're very pleased that the Justice Department is taking action here with the laws they have available," he told Reuters. "We join with them in trying to make it clear that the law covers all forms of gambling. It is quite clear that the Wire Act covers sports betting," Goodlatte said. "But the Wire Act because it was written in 1961 is not at all clear as to whether it covers other forms of gambling."
The existing law does not clearly ban such things as a virtual roulette wheel, poker and other kinds of online gaming, Goodlatte said, also drawing attention to the fact that executives with other overseas gambling companies should take note of the prosecution.
"They should be wary of the United States exercising its treaty rights to seek extradition," he said. "Knowingly taking bets from U.S. citizens is against the laws of many states, and they should be prosecuted."
However, the Costa Rican based CEO of the Bodog group, Calvin Ayre, who had reportedly travelled through the US only days before Carruthers, said in a media statement that although the arrest could appear "ominous" to other businesses, this was not the case at all. "The charges are specific to the person and company at issue, and has nothing to do with Bodog.com's current or previous business practices," he claimed.
In his statement, he defended Bodog.com, saying that it has "...an innovative and different business model that allows us to run our entertainment enterprise within the laws set out in each of the jurisdictions where we conduct our business.
"Bodog.com will continue to carry on its business as usual and our organisation is confident the U.S. government's actions will have no impact on our operations," he added.
Antiguan Finance Minister Errol Cort said he would closely monitor the legal action against BetOnSports plc following the arrest. "This is of major concern to us," Cort told reporters Tuesday during a break in a government economic forum. "This could have implications on individuals who are doing business in Antigua."
Antigua and Barbuda has licensed 30 online gambling firms, including BetOnSports, and has welcomed the industry as a way to diversify its economy. The island government has filed a challenge against U.S. restrictions on online gambling with the World Trade organisation.
Leading online gambling legal expert Lawrence Walters told the Guardian newspaper: "This case is going to be watched very carefully. It is going to set a precedent for an entire multibillion-dollar industry."
The main prosecutor in the BetonSports case, U.S. Attorney Catherine Hanaway claimed on a CNBC report that aired Tuesday that her government went after BetonSports because they "wrongfully" claimed to be the "Biggest licensed and regulated" gambling company in the world, amongst other things. Hanaway took issue with the "licensed and regulated" claim.
Several sector observers and analysts in London opined Tuesday that investors were overreacting by selling off online gambling holdings: “The indictment seems to be very BetOnSports-specific, and the market seems to be treating all online gaming companies in the same manner,” said Wayne Brown, an analyst with Altium Securities in London.
Others were puzzled by the inclusion of tax evasion charges relating to allegedly ill-gotten gains specified in the indictment, clearly unaware that US law makes provision for this sort of questionable income to be taxed.
Some companies have steered clear of the US because of doubts about legality, while others avoid operating sports books and only take bets from the US on casino and poker games. But the DoJ indictment refers to BetonSports taking bets from the US on casino-type games as well as sports and sporting events.
Jim Halpert, partner at the DLA Pipe law firm in Washington, DC, said: "The record of enforcement in this area is one of periodic high-profile enforcement actions, designed to deter what the Department of Justice views as ongoing systematic violations of US law."
A US crackdown on online gambling could lead to extraditions from Britain even though British laws in this area are much less tough, leading lawyers said on Tuesday.
River City CEO Sue Schneider said that even if BetOnSports were shut down, there were many other offshore sites that would take its place. Some online sports books might stop taking bets from U.S. residents, but only if the United States is a small part of their business, Schneider predicted. The indictment is likely to have even less effect on online casinos — those that take bets on poker or other games, but not on sporting events.
US legal expert Anthony Cabot said that over the past decade, federal officials have prosecuted many operators of online sports books with U.S. ownership or operations because federal law prohibits using phone wires to place those bets.
In a celebrated case from 2000, prosecutors won a conviction against Jay Cohen, a U.S. citizen who ran an operation in Antigua that took sports bets from Americans over the Internet. He was sentenced to 21 months in prison. But the wire law doesn't cover other types of casino betting, a federal appeals court in New Orleans ruled. That has left some doubt about whether prosecutors can shut down poker and other casino games that target American players, Cabot said.
And unless the operators set foot in the United States — as Carruthers and Cohen did — it's difficult to extradite them, Cabot said.
ONLINE CASINO MARKETS REACT TO CARRUTHERS ARREST (update)
London and Canadian online gambling stocks take the hit from DoJ action
Online gambling executives and investors alike will be anxiously watching the stock market scene today (Wednesday) in the wake of stock declines that have hammered the industry following the arrest and continued detention of Bet on Sports CEO David Carruthers over the weekend.
Late Tuesday, London gambling stocks and to a lesser extent Canadian gambling shares had declined sharply, presumably as a result of nervous investors dumping their holdings.
BetonSports shares fell by as much as 25 percent before trading was halted at the company's request, but the biggest fallout hit Sportingbet, where shares fell by 100p to 282p, almost half their level before BetOnSports announced on Monday that Carruthers, had been detained. The stock fell 36 percent Tuesday after falling 13 percent on Monday.
Although it does not offer sport betting, PartyGaming, the internet poker company, fell 17¾p to 85¼p, down from a flotation price last year of 116p. Almost GBP 1 billion has been wiped from its market value in two days. Shares dropped 17 percent on Tuesday on the London Stock Exchange and played a role in dragging the FTSE index lower.
888 Holdings, fell 24½p to 168½p.
Leisure and Gaming shares fell 21p to 71½p.
In Vienna, BetandWin.com Interactive Entertainment AG (newly branded Bwin) tumbled 24 percent
Playtech lost almost a third of its price, as confusion reigned about the scope of the DoJ's planned actions
BetOnSports asked for trading in its shares to be suspended because of uncertainty over its future. The company also temporarily closed its main website to business, and said that its lawyers were reviewing implications of a federal temporary restraining order to stop it taking bets from Americans and require it to return punters’ money held in accounts.
A federal court issued the temporary restraining order to prevent BetOnSports from accepting bets in the United States, which is reported to be the company's biggest market. In terms of the order, it is understood the company is required to stop accepting bets from the US; to place notices on its US-based websites saying it does not accept bets on sporting events and to place full-page newspaper adverts saying telephone betting services are "a violation of US law".
Canadian stocks also took a few dents, although to a lesser extent than the London companies.
Cryptologic shares dropped $3.66 to $21.22 or 14.7 percent on the Toronto Stock Exchange, while Fun Technologies saw less of a drop but still lost 3.7 percent as their shares dropped 20¢ to $5.20.
Chartwell Technology, Inc., a Vancouver-based company, was also down 2¢ to end up at $2.35, and shares in LasVegasFromHome.com Entertainment Inc. were down 15 percent, dropping to 17¢.
CryptoLogic said Tuesday it did not expect a serious impact. "While there's no question this news has created volatility in the broader Internet gaming market, we anticipate little or no long-term impact on our customers, who have no involvement in sports betting in the U.S," a spokesman for the Toronto-based company said.
"For the Internet casino market, little has changed - the uncertainty in the U.S. continues, and this validates CryptoLogic's long-standing focus on the UK and Europe, and on blue-chip customers that operate in markets that embrace Internet gaming."
Before trading in London started on Wednesday, the dismal picture looked like this:
Playtech down 28 percent (down 33 percent at one stage)
Neteller down 15 percent
Fireone down about 20 percent
Empire Online down 8 percent
SportingBet down 44 percent
888.com down 16 percent
Partygaming down by over 17 percent, a drop of over 22 percent in 2 days
Betonsport down 16 percent
Fairgound down 5 percent
UK FALLOUT OVER THE TWO DAYS
PartyGaming
Market value: GBP 3.41billion: –22 percent
Sportingbet
Market value: GBP 768 million: –44 percent
888 Holdings
Market value: GBP 568 million: –16 percent
City analysts were divided over implications for other internet gambling companies that have American customers. Some felt that the language of the US indictment amounted to a warning to the wider industry, but others said it appeared to be a company-specific issue relating mainly to BetOnSports’ American founder and former owner, Gary Kaplan.
The indictment claims that Kaplan, who was first arrested in 1993 over illegal gambling, failed to pay excise taxes on more than $3.3 billion of wagers from the US. The Department of Justice is claiming $4.5 billion forfeiture from Kaplan, who still has a 15 per cent stake in BetOnSports. Kaplan who remains free is believed to reside in Costa Rica, and has declined to comment on the affair.
Online gambling companies said that they were analysing implications with their lawyers. Unsurprisingly, no executives had any immediate plans to travel to America.
Carruthers, a British citizen was detained Sunday by FBI and IRS officials as he transited the USA at Dallas airport on his way home to Costa Rica from the UK. After several hours held incommunicado and in detention in Tarrant County jail, the businessman appeared briefly in a local court on a 27 page grand jury indictment against himself and 11 other people believed to be associated with the company in the past.
The 22 charges included racketeering, tax evasion and wire fraud accusations, running an illegal gambling operation and money-laundering. The high-profile case is being prosecuted by a newly appointed U.S. Attorney in St. Louis, Catherine Hanaway, and accuses Kaplan of taking bets from undercover federal agents.
Tim Evans, an attorney for Carruthers, said a detention hearing would be held Friday in Fort Worth to determine if Carruthers must remain in jail. Carruthers will be arraigned in St. Louis on the racketeering charges at a future date, he said.
"The view of the Department of Justice is and has been that Internet gambling is illegal," said Brian Sierra, a spokesperson for the DoJ. According to Sierra, the new laws and Congress' interest in online gambling have nothing to do with the latest round of charges lodged by the Department of Justice.
"We're not trying to send a grand scale message here," he said. "We've been saying it for years: Internet gambling is illegal."
Sierra says the department's position is and has always been that anyone either in or outside of the U.S. who operates illegal online gambling operations to take bets from U.S. residents is committing a crime. Period.
The CATO Institute, an organisation that scrutinizes public policy has a different view. "It's a moral crusade," claimed Radley Balko, a policy analyst. "These guys have a personal opposition to gambling and they want to impose that on the rest of the country."
American anti-online gaming legislators such as Sen. Jon Kyl and Rep. Bob Goodlatte were quick to seize on the action to publicise their attempts to ban Internet gambling.
"This recent indictment of online gambling executives strengthens the need for legislation to ban Internet gambling," Kyl said in a statement. "I am hopeful that legislation I intend on moving through the Senate this year will provide the Justice Department with the tools necessary to continue aggressively pursuing those that wish to circumvent the rules and engage in this sort of illegal activity," he said.
Goodlatte praised the prosecution. "We're very pleased that the Justice Department is taking action here with the laws they have available," he told Reuters. "We join with them in trying to make it clear that the law covers all forms of gambling. It is quite clear that the Wire Act covers sports betting," Goodlatte said. "But the Wire Act because it was written in 1961 is not at all clear as to whether it covers other forms of gambling."
The existing law does not clearly ban such things as a virtual roulette wheel, poker and other kinds of online gaming, Goodlatte said, also drawing attention to the fact that executives with other overseas gambling companies should take note of the prosecution.
"They should be wary of the United States exercising its treaty rights to seek extradition," he said. "Knowingly taking bets from U.S. citizens is against the laws of many states, and they should be prosecuted."
However, the Costa Rican based CEO of the Bodog group, Calvin Ayre, who had reportedly travelled through the US only days before Carruthers, said in a media statement that although the arrest could appear "ominous" to other businesses, this was not the case at all. "The charges are specific to the person and company at issue, and has nothing to do with Bodog.com's current or previous business practices," he claimed.
In his statement, he defended Bodog.com, saying that it has "...an innovative and different business model that allows us to run our entertainment enterprise within the laws set out in each of the jurisdictions where we conduct our business.
"Bodog.com will continue to carry on its business as usual and our organisation is confident the U.S. government's actions will have no impact on our operations," he added.
Antiguan Finance Minister Errol Cort said he would closely monitor the legal action against BetOnSports plc following the arrest. "This is of major concern to us," Cort told reporters Tuesday during a break in a government economic forum. "This could have implications on individuals who are doing business in Antigua."
Antigua and Barbuda has licensed 30 online gambling firms, including BetOnSports, and has welcomed the industry as a way to diversify its economy. The island government has filed a challenge against U.S. restrictions on online gambling with the World Trade organisation.
Leading online gambling legal expert Lawrence Walters told the Guardian newspaper: "This case is going to be watched very carefully. It is going to set a precedent for an entire multibillion-dollar industry."
The main prosecutor in the BetonSports case, U.S. Attorney Catherine Hanaway claimed on a CNBC report that aired Tuesday that her government went after BetonSports because they "wrongfully" claimed to be the "Biggest licensed and regulated" gambling company in the world, amongst other things. Hanaway took issue with the "licensed and regulated" claim.
Several sector observers and analysts in London opined Tuesday that investors were overreacting by selling off online gambling holdings: “The indictment seems to be very BetOnSports-specific, and the market seems to be treating all online gaming companies in the same manner,” said Wayne Brown, an analyst with Altium Securities in London.
Others were puzzled by the inclusion of tax evasion charges relating to allegedly ill-gotten gains specified in the indictment, clearly unaware that US law makes provision for this sort of questionable income to be taxed.
Some companies have steered clear of the US because of doubts about legality, while others avoid operating sports books and only take bets from the US on casino and poker games. But the DoJ indictment refers to BetonSports taking bets from the US on casino-type games as well as sports and sporting events.
Jim Halpert, partner at the DLA Pipe law firm in Washington, DC, said: "The record of enforcement in this area is one of periodic high-profile enforcement actions, designed to deter what the Department of Justice views as ongoing systematic violations of US law."
A US crackdown on online gambling could lead to extraditions from Britain even though British laws in this area are much less tough, leading lawyers said on Tuesday.
River City CEO Sue Schneider said that even if BetOnSports were shut down, there were many other offshore sites that would take its place. Some online sports books might stop taking bets from U.S. residents, but only if the United States is a small part of their business, Schneider predicted. The indictment is likely to have even less effect on online casinos — those that take bets on poker or other games, but not on sporting events.
US legal expert Anthony Cabot said that over the past decade, federal officials have prosecuted many operators of online sports books with U.S. ownership or operations because federal law prohibits using phone wires to place those bets.
In a celebrated case from 2000, prosecutors won a conviction against Jay Cohen, a U.S. citizen who ran an operation in Antigua that took sports bets from Americans over the Internet. He was sentenced to 21 months in prison. But the wire law doesn't cover other types of casino betting, a federal appeals court in New Orleans ruled. That has left some doubt about whether prosecutors can shut down poker and other casino games that target American players, Cabot said.
And unless the operators set foot in the United States — as Carruthers and Cohen did — it's difficult to extradite them, Cabot said.
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