I started looking into the previous cases with the DOJ SDNY/USAO particularly in the case of NETELLER (and to a lesser extent other processors) with respect to which laws they were charged under, the process and time frame leading to repayment of players.
This is primarily for those that wished to see the similarities/differences between that and the current Black Friday situation. It should be noted that the Company Neteller still exists although within the Neovia Optimal payments group and has grown in services and countries served. All references are to the company “NETELLER”/"Neteller" are as it existed at the time. Any errors are my own so please post corrections or omissions.
Neteller was started in 1999 in Canada and was publicly listed in the United Kingdom on April 2004 on the LSE AIM small cap market with primary offices located in the Isle of Man. 75% of their revenue was derived from the US and the vast majority were from gambling related company transactions at the time (2006
interim accounts)
16th January 2007 Criminal Charges brought against the founders of NETELLER
USAO Press release
The founder individuals Canadians Mr Stephen Lawrence and and Mr John Lefebvre were charged under section 1956(a)(2)(A) of Title 18, United States Code (laundering of monetary instruments) and Prohibition of illegal gambling businesses (section 1955 of same code) in the Southern District of New York.
They were arrested whilst traveling in the US and detained - at the time they were no longer directors involved in the management of the company just the leading shareholders. Lawrence was the biggest shareholder with 21.9% of shares and Lefebvre second with 13.44%. At the time of the arrests the UIGEA hadn't been passed as a law. The evidence provided by the USAO was transferring money to sites for sports betting on NFL matches.
There was also a
Civil Forfeiture defendant in-rem claim for United States of America v. Mr John Lefebvre.[Could someone confirm this was a standard in personam civil action. There was one likely for Mr Lawrence too.]
No criminal action or proceedings were brought against the Group, its current officers or directors by the USAO at this time. Neteller serivce continued uninterrupted for the rest of the world whilst US players were forbidden to have payments processed.
8th February 2007 NETELLER Works to Return Funds to US Customers After US Withdrawal
Quote:
To the best of the Group’s knowledge, it believes that the amount of funds seized by the USAO or otherwise restricted by third parties does not exceed US$ 55 million.
As a result of the restrictions placed by third parties, court-ordered seizures, and related legal concerns, the Group is currently unable to make payments to US customers. Nevertheless, the Group is in discussions with the USAO to manage an orderly return of funds to US customers. As part of these discussions, it is contemplated that the USAO will engage a forensic accounting
It is emphasized that in line with the Group’s standard business practices for all customers, funds held by the Group for US customers are held in segregated trust accounts.The Group’s own cash position remains strong and the Group currently has sufficient working capital to fund all its customers’ balances as well as ongoing requirements of the business.
So ~ 1 month after the orders Neteller knew approximately the amount seized/restrained and was in discussions with the USAO to return US players funds of which it had sufficient capital to cover them and since they were held in trust so were legally the property of players and ultimately unforfeitable.
March 21st 2007 NETELLER Takes Positive Step Towards Returning US Customers’ Funds
Quote:
“We continue to be committed to returning funds to our US customers and working with the US Attorney’s Office,” said Ron Martin, Group President and CEO. “Progress, while not always visible to the outside observer, has been steady and these agreements mark a milestone in the process.”
"The Group is pleased to announce that on 20 March 2007, it signed agreements with the U.S.A.O. and Navigant[Monitor & forensic accounting] which, among other things, outline terms and a timeline under which NETELLER will work toward the orderly distribution of funds to its U.S. customers. Per the agreements, the Group anticipates that within the next 75 days it will announce a plan by which the funds will be distributed to US customers
June 4th 2007 NETELLER Announces Agreed Plan to Return US Customers’ Funds
Quote:
On 21 March 2007, the Company announced that it signed agreements with the USAO and Navigant Consulting, Inc. (“Navigant”) with respect to, among other things, developing a plan for the distribution of funds to US customers. Since then, in accordance with the agreements, the Company has worked with the USAO and Navigant to develop the plan. The Distribution Plan is now agreed upon, and the Company anticipates implementing the plan upon the resolution of the investigation
July 10th 2007 Founders plead guilty (USAO Press release)
Quote:
LEFEBVRE pleaded guilty to one count of conspiracy to use the wires to transmit in interstate and foreign commerce betsand wagering information; to conduct illegal gambling businesses;to engage in international financial transactions for the purpose of promoting illegal gambling; and to operate an unlicensed moneytransmitting business. LEFEBVRE, 55,faces a maximum sentence of 5 years’ imprisonment and a fine of$250 thousand, or twice the gross gain or loss from the offense,when he is sentenced before United States District Judge P. KEVINCASTEL on October 29, 2007.
LAWRENCE also admitted to forfeiture allegations requiring him to forfeit $100 million.Former NETeller President and Board of Directors member LAWRENCE pleaded guilty on June 29, 2007 to participating in the same conspiracy and also admitted to a forfeiture allegation of $100 million for which he is jointly responsible with LEFEBVRE.
Jul 18, 2007 NETELLER Announces Settlement of US Situation
Quote:
NETELLER Plc today announces that the Company has entered into a Deferred Prosecution Agreement (“DPA”) with the United States Attorney's Office for the Southern District of New York (“USAO”). The DPA represents the resolution of the USAO’s investigation into the Company.
NETELLER agrees that it will pay an amount to the United States totalling US$ 136 million which is disgorgement of certain profits received by NETELLER from the activities described in the Statement of Admitted Facts. This amount includes the approximately US$ 60 million that the USAO has previously seized. NETELLER agrees that it will satisfy the remaining portion of its forfeiture obligation with a payment of US$ 40 million to be paid on or before 15 October 2007, and the remaining balance (approximately US$ 36 million) to be paid on or before 17 January 2008.
NETELLER agrees to cooperate fully with US authorities in all matters relating to the ongoing investigations by the USAO. The USAO has agreed to defer the prosecution of any federal charges and, as a consequence, the Company will not be convicted of any federal crime, as long the Company fulfils the set conditions of the DPA during the two year term of the agreement.
Deferred Prosecution Agreement(contains additional exhibits)
Thanks extended to Prof. Brandon L. Garrett for his collection of DPAs. Interesting quote from exhibit B pg. 10-11 of United States v. Defendant Neteller Plc:
The criminal forfeiture allegation[19] alleges as a result of committing the gambling offenses defendant Neteller Plc shall forfeit all property involved in the money laundering and gambling offenses …
Quote:
and all property, real and personal, that constitutes or is derived from proceeds traceable to violations of 18 U.S.C. § § 371, 1084, 1955, 1956 and 1960 including but not limited to, at least $1 billion dollars in United States currency.
Quote:
Substitute Asset Provision
a. If any of the above described forfeitable property, as a result of any act or omission of the defendant:
(1)cannot be located upon the exercise of due diligence;
(2)has been transferred or sold to, or deposited with a third person;
(3)has been placed beyond the jurisdiction of the Court;
(4)has been substantially diminished in value; or
(5)has been commingled with other property which cannot be subdivided without difficulty;
it is the intent of the United States, pursuant to 21 U.S.C. § 853(p) and 18 U.S.C. § 982(b),
to seek forfeiture of any other property of said defendant up to the value of the forfeitable property.
( Title 18, United States Code, Sections 371, 981, 982, 1084, 1955, 1956, 1960 and Title 28, United States Code, section 2461(c).
As I understand it this is an in personam criminal forfeiture and the DOJ/USAO was amicable or obliged in providing a clause allowing potential substitution of assets in this case. iirc no provision under the in rem civil proceedings for asset substitution has been (or may even be possible) in the civil PokerStars et al. cases.
July 30th 2007 Disribution plan implemented
US players report on
twoplustwo ability to log in and request withdrawals and are directed to sign a release agreement that both parties (player and company) consider this a final settlement. The next day ~6 months after the original charges were brought US players start reporting that they have received their balance of funds reach their US bank accounts.
