Federal indictments targeting top executives of three top online poker companies aren't attacks against Internet gambling itself, a defense lawyer known for handling complex financial and corporate crimes cases told a gambling industry group Tuesday.
Fred Heather of K&L Gates LLP told casino executives, government regulators and others at the iGaming North America conference in Las Vegas that the case against 11 people associated with PokerStars, Full Tilt Poker and Absolute Poker hinges on financial crimes that are separate from the act of wagering money on games online _ which has become a multibillion dollar industry in the U.S.
"The heart of this case is this collateral activity, which constitutes bank fraud and money laundering," Heather said. "One of the indications of that is the fact that the government isn't resisting the return of money to the players through their deposits."
Several executives under indictment but living in other countries will likely resist extradition to the U.S. because of severe penalties they face, Heather said.
The indictments unsealed last month charge company executives and their associates with defrauding banks into processing illegal gambling transactions. Federal prosecutors in New York say the companies and payment processors used elaborate schemes _ including creating fake online businesses purporting to sell sports accessories and flowers _ to mask transactions that financial institutions would normally avoid.
Through related civil cases, prosecutors are going after $3 billion in restitution.
The laundering and fraud charges boosted the case beyond simple accusations of running an illegal Internet gambling business, said Paul Hugel, a civil and criminal lawyer who specializes in securities fraud, bank fraud and enterprise corruption.
Hugel said the bank fraud and money laundering charges create the potential for 20- or 30-year prison sentences, far beyond the maximum five years for running an illegal Internet casino.
"That is one of the reasons why the cases are unlikely to proceed to trial _ there's going to be tremendous incentive for these defendants to be trying to work out a deal," said Hugel, a partner in Clayman & Rosenberg LLP.
Hugel said the bank fraud charges are unusual because they don't involve theft. He said a potential defense could be to show that bank executives knew what kind of transactions they were really processing _ though it'd difficult to prove.
Heather, however, sees potential in the strategy.
"You've got to sell a lot of golf balls to process millions of dollars," he said.
The companies involved have said little about the legal cases, but players and others in the industry have shown outward anger toward the Justice Department and the U.S. attorney's office in New York's southern district, which is handling the case.
PokerStars and Full Tilt have since shut down their offerings to American players, while Absolute has stopped letting U.S. players deposit or register for its sites.
Heather said the prosecutors in charge of the case have a recent history of going after fraud involving financial institutions _ including cases that involve many complex layers.
Hugel and Heather made the point that more prosecutions are likely if authorities think operators and banks are doing business in the same way as those indicted.
"They will pull the trigger on very complicated cases," Heather said. "They're sophisticated. And they're good. And they're successful."
Oskar Garcia can be reached at http://twitter.com/oskargarcia.