CALGARY HERALD: Men caught in U.S. push to crush online gaming

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Men caught in U.S. push to crush online gaming

Deborah Tetley
Calgary Herald


Thursday, January 18, 2007

Last Aug. 24, an FBI operative in Miami placed a $250 online bet on a National Football League game and won $200. Two weeks later, the operative logged onto the same website in Costa Rica and placed another $250 football bet. This time, he lost.

A month later, FBI special agent Maryann Goldman met the operative at a public library computer in Westchester County, N.Y., and watched as the man transferred winnings from a wagering account to an account created at NETeller.com.

Several similar online transactions were followed from the same library on Dec. 29. And, according to the FBI, those transactions allowed them to follow a money trail that led to the arrest of two former Calgarians who founded NETeller PLC in 1999.

The men face up to 20 years in prison if convicted of the money-laundering charges laid against them this week in the United States.

University of Calgary alumni John Lefebvre and a business partner, Stephen Lawrence, are accused of funnelling billions of dollars in illegal Internet gambling proceeds to overseas betting operations from July 2000 until December 2006 through their online payment company.

"The U.S. is exerting its long arm in an effort to totally stamp out online gaming in their country and in this case are pushing as hard as they can," said Michael Lipton, a Toronto lawyer who specializes in gaming law.

While Lefebvre, 55, was released from a California jail Wednesday on $5 million US bail, Lawrence was led into a U.S. Virgin Islands court in leg irons.

The 46-year-old will learn today whether he's granted bail, also expected to be set at $5 million US.

Both men are scheduled to appear in a New York court on Jan. 26.

Lefebvre's release is conditional on relinquishing his passport and he can't leave Los Angeles, except for his New York court hearing. Lefebvre has a home in Malibu, Calif., where he was arrested, and another on Saltspring Island, B.C.

Lipton predicts the Canadians are "in for a good fight" and are being used as examples by American authorities eager to stamp out online gambling in their country.

"They used to go after the operators of these sites. Now, they are focused on the facilitators who profit. This is a serious attempt to run it out of the States. These Canadian citizens are in for a good fight," Lipton said.

Part of the nearly year-long FBI investigation led authorities to an account in the name of Cardload at the National Bank of Canada in Calgary, according to the indictments filed in U.S. District Court in New York.

The FBI allege $50 million US was transferred from an account in the U.S. to the Calgary branch between March and April of last year and that Cardload is a wholly owned subsidiary of NETeller.

Records of wire transfers from a U.S. bank show that between January and March 2006, another $98 million US was transferred to an account under a different name, but affiliated with the accused, again to the National Bank in Calgary, according to court documents obtained by the Herald.

The men are former directors of the company and knowingly broke the law, according to an FBI special agent based in New York.

"Public filings acknowledge that a large chunk of their business was derived from handling wagers from American customers," James Margolin said Wednesday.

"Under U.S. law, gambling is a very tightly regulated industry and the solicitation of American bettors by offshore companies is illegal."

The company is located on the Isle of Man and publicly traded in the United Kingdom.

NETeller allows users to transfer money to global companies for a fee.

The Herald was unable to reach Lawrence's lawyer, Peter Neiman, on Wednesday and calls to Lefebvre's Malibu and Saltspring Island residences went unanswered.

On his voice-mail recording in Malibu, a male voice says: "Hi, it's John on the beach at Malibu."

Meanwhile, officials at the U of C, where Lefebvre donated more than $1.2 million to the faculty of fine arts in 2005, say they have never been in a similar situation, where a multimillionaire philanthropist is accused of laundering money.

"The funding has been provided, so we have no concerns about Mr. Lefebvre's commitment," said Roman Cooney, the university's vice-president for external relations.

He and others at the U of C declined to comment on the charges, or speculate on what might happen should the donor be found guilty.

"It's not a situation that's arisen at the U of C before, so we don't have a policy on it," said Cooney.

Lefebvre donated the money after cashing in $123 million worth of NETeller shares in November 2005. He still holds a stake of less than six per cent.

Lawrence resigned as non-executive director of the company in October 2006, but also holds less than a six per cent stake.

According to the company's 2005 annual report, payment services were provided to more than 95 per cent of gaming merchants around the globe, amounting to roughly $7.3 billion in financial transactions.

In the first half of 2006, the company reported processing $5.1 billion in transactions.

"There is ample indication these defendants knew the American market for their services was illegal," Michael Garcia, U.S. attorney for New York, wrote in the indictment.

The FBI's Margolin declined to say whether more charges are pending, saying only that the investigation is ongoing.