Monday, June 4th, marks the day that NETeller is scheduled to release information regarding its plan to return money to American customers. In March NETeller released the following statement:
"The Group is pleased to announce that on 20 March 2007, it signed agreements with the USAO and Navigant which, among other things, outline terms and a timeline under which NETELLER will work toward the orderly distribution of funds to its US 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. Navigant will also provide a report to the USAO on the Group's current financial condition."
But much has happened since the day NETeller released that statement. Well, actually nothing has happened, which is cause for concern. Upon seizing the funds, the U.S. Department of Justice stated that it was necessary for them to hold up that money to "use as evidence." There were only two real possibilities as to what type of evidence the money represented. It could either be used somehow as evidence of tax evasion by American bettors or it could be used as a form of evidence in the case against NETeller founders Lawrence and Lefevre. Many Americans with money tied up in NETeller were hoping it was the latter and a quick resolution to the case against Lawrence and Lefevre would enable the DOJ to free up the money. However, that quick resolution never happened. Since March 21, the case against Lefevre and Lawrence has been held over on 3 separate occasions, the most recent stay occurring only four days ago. So if the money is to be used as evidence in that case, it is unlikely the DOJ will allow the money to be released any time soon, and the "timeline under which NETeller will work toward the orderly distribution of funds to US customers" will be a lengthy one. In that case the announcement may be put off as well. If on the other hand, the DOJ is only interested in tax evasion and determining how much money they can squeeze out of American bettors, then the timeline may be a bit quicker assuming they were able to figure out who owes the IRS and how much.
While many Americans were hoping the "evidence" was regarding the case against Lefevre and Lawrence, common sense would have suggested otherwise. NETeller's business model was evident for all to see and was written up in their prospectus. In fact they still offer the exact same services to customers outside of the US, Canada and Turkey. Thus there is absolutely nothing that can be used from the seized funds to help the DOJ in prosecuting Lefevre and Lawrence. The only logical conclusion is that the "evidence" was actually an effort to look at every American account and determine who has had large assets and/or transactions at NETeller. When e-wallets were mentioned at the first Global Interactive Gambling Summit in 2000, a representative from the U.S. government commented "there is a pile of money sitting offshore. That is something we definitely need to look into." That comment was taken in stride by those at the conference, but leave no doubt that the U.S. government has since been looking for ways to identify exactly how much is "in that pile". The seizure of funds resulting from the UIGEA provided them that opportunity.
So the next question that must be asked is: who will the government look at and what criteria will they use? The magic amount that the U.S. government seems to focus on is $10,000. The IRS states that anyone with $10,000 or more in a foreign bank account or other financial account must check off schedule B on Form 1040. Failure to do so constitutes a violation against the tax code. Furthermore, a person must fill out Form TD F 90-22 and send it to the Treasury Department by June 30th.
The latter form is a bit confusing but the ramifications of not filing it are explained in the tax section of about.com
[i]The law governing form TD F 90-22.1 "provides for a non wilful penalty of up to $10,000 per violation. This penalty will be waived, however, if the person can show reasonable cause for the violation and if the person provides a late-filed [Form TD F 90-22.1] with the information that should have been reported earlier. "IRS will consider the facts and circumstances of each case in determining whether penalties are appropriate. Persons who have not timely filed [Foreign Bank Account Reports] should attach a statement explaining why the [Form] was not timely filed."[/i]
One also can't forget FBI agent Neil Donovan's comment upon the seizure of the funds that "some people may get their money back." In calls to Navigant, I was told that they couldn't comment presently about the NETeller issue, and of course trying to get NETeller to comment on anything is like trying to get blood from a stone. So that only leaves speculation as to what will be announced on Monday. My hunch is that the company will announce that anyone with small amounts of money in NETeller will get money back in short order, as will those with larger amounts of money, but only if they sent off the required forms. What will happen to the rest is anyone's guess.
One thing that is almost certain to be announced is the "great health of the NETeller group." The last statement in their March press release that Navigant will provide a report on the Group's financial condition is absolutely irrelevant to the issue at hand. If Navigant's job is to consult on ways to redistribute funds to bettors then who cares what condition NETeller is in? It's almost certain that NETeller threw in that last sentence to reassure its investors. NETeller was suspended from trading on the AIM stock exchange shortly after the seizure of funds and have a deadline of July 16th to resume trading. It's only logical, therefore, that in negotiations with the DOJ they worked out an agreement that the USAO would give the company a clean bill of health and state that by cutting off U.S. and Canadian customers from using NETeller for gambling transactions that they were no longer in violation of the UIGEA. This would open the door to resume trading and allow them to continue focusing on their European and Asian clients. Regardless, on June 4th everyone will know for certain what the plans are to return funds to most Americans... Or maybe not.