Stephen Lawrence, one of the founders of payment processor NETeller announced this week that he was pleading guilty to racketeering. The plea was somewhat expected given the numerous continuances in the case, and in fact I speculated after the first postponement that lawyers were likely trying to work out a sweetheart deal for Lefebvre and Lawrence in exchange for their cooperation with the feds. It must be noted that so far John Lefebvre has not entered a similar plea.
While the guilty plea may not come as a major shock, what was surprising and disconcerting was Lawrence's statement upon making the plea. Lawrence stated to the Manhattan courtroom: "I came to understand that providing payment services to online gambling Web sites serving customers in the United States was wrong." He has to be kidding. He "came to understand?" It said right in the company's prospectus released in 2004 the following:
In the US, the Unlawful Internet Gambling Funding Prohibition Act would, if enacted, impose civil and criminal penalties on operators for accepting credit cards, electronic fund transfers, and other banking instruments to fund Internet betting or gambling transactions from residents of the United States. The Bill has passed in the US House of Representatives and the Senate Banking Committee and is currently waiting to be put on the calendar for vote by the full Senate. A lack of legislative priority and sufficient votes among US senators coupled with lobbying efforts and civil liberty concerns (freedom of speech over the Internet) may ultimately stall or derail this Bill.
It is the Directors' understanding that there has been only a small number of cases/prosecutions in relation to online gambling and that most of these have been where there have been assets or relevant individuals located in the US. The Group does not maintain offices, nor are any of its assets located, in the US. The Group has contractual arrangements with two US companies (which are related to two of the Directors as described in paragraph 7.6 of Part VI of this document) and which both clear monies through the ACH system on the Group's behalf. There can be no assurance that the US will not threaten or try to prosecute the NETeller Group under federal law at some stage under existing or future regulation. NETeller continues to monitor the position carefully.
How much clearer can that be? The company realized that it may be acting in violation of U.S. law, but was willing to take the risk, believing that eventually the congressional bills would be dropped due to lack of government interest, and also the fact that the company held no assets in the United States. They did not feel they were acting wrongly and were willing to go to bat for their beliefs, or what we thought were their beliefs. So what did Lawrence "come to understand" other than the fact that he was going to jail for a long time if he didn't cop a plea? Lawrence's decision not to fight the charges any longer may have been the best for him. No doubt the $100 million he has to give up still leaves him with a nice stipend in the bank, and he probably will face little if any jail time as a result of the plea. He'll have most of his life ahead of him and for the sake of his family and himself he may have made the right decision. But having said that, what exactly was the purpose of that statement upon entering the plea? If Lawrence had any intestinal fortitude he would have pleaded no contest to the charges and left it there. Undoubtedly Lawrence's lawyer suggested he should plead guilty and make a statement indicating some remorse in hopes of reducing his sentence. But that's where Lawrence should have had some gumption and said to his lawyer "no, I'll plead no contest, but I won't say I'm sorry for something that I have nothing to be remorseful for." Instead Lawrence gave the DOJ a statement that the government will no doubt use as fodder against other merchants, customers and groups like iMEGA that are trying to fight the UIGEA and promote online gambling regulation. One can just hear a representative of the DOJ talking now-- "clearly if the founder of a company like NETeller that processed billions of dollars in offshore gambling transactions could come to understand that what he was doing was wrong, then so must everyone involved in the industry."
But while it provided some unnecessary ammunition for the DOJ, the statement also rings of pure cowardice. Does Lawrence really believe that what he was doing was wrong? Let's be clear about something, NETeller did not take bets. They simply processed transactions between merchants in countries where the laws of those countries deemed what those merchants were doing was legal and bettors in the United States who to this day are still not acting illegally by placing bets online. The only "wrong" ones in this whole mess are the United States Department of Justice who stole $55 million from American consumers via NETeller's ACH system and then held that money hostage along with all other money in escrow at NETeller. If NETeller is "wrong" for having provided payment services to U.S. citizens long before the UIGEA was enacted, then Visa was wrong, Paypal was wrong, Mastercard was wrong, etc. for offering any online services to American citizens. After all, prior to the passing of the UIGEA there was nothing remotely illegal about providing payment services online, gambling transactions included.
The statement by Lawrence was also a slap in the face of customers who did nothing more than use a service that he developed, offered and promoted. Imagine going to Sears to purchase some furniture, paying in full for it, being nothing other than a loyal Sears customer over the years and then upon retiring from the company the former CEO of Sears makes a statement that he was wrong to have sold furniture to Americans and for supplying the products to outlets that sold to Americans. What a slap in the face! Clearly not everyone can be like Jay Cohen (the co-founder of World Sports Exchange based in Antigua that returned to the U.S. to face charges of illegal bookmaking, and was eventually jailed) and actually be willing to fight for what they believe in and for a product and industry they worked hard to develop and promote, but at the very least Lawrence didn't have to kick the American bettors and the merchants that supported him on the way out.
Nevertheless, the question that now must be answered is what does this mean for Americans with money still tied up in this cowardly operation? NETeller released the following statement on July 2nd:
NETELLER is continuing to cooperate with the investigation being conducted by the USAO, under the advice of its legal advisers and in accordance with court orders in the Isle of Man. As announced on 4 June 2007, the Company is in discussions with the USAO for the purpose of resolving the investigation and has advised the USAO that it will use its best efforts to resolve the investigation no later than 13 July 2007. The Company does not currently believe that these developments will delay its efforts to resolve the investigation by that date.
The Company's ordinary shares will continue to be suspended from trading. Further information will be announced as and when it becomes available.
The July 13th deadline is clearly important to NETeller, because if the case is held up a week longer than that, the company will not be able to resume trading on the AIM, essentially ensuring a financial death sentence. Consequently, the USAO and Navigant will almost certainly announce to the British authorities that things are resolved, which will allow the resumption of trading of NETeller stock even if the issue with American "hostages" isn't resolved by that time. Americans must be getting more upset with each passing day and rightly so. Thus far neither NETeller nor the DOJ has really stuck to a firm deadline, (the statement in June by NETeller that it was getting close and will let Americans know something soon was meaningless), and now the statement by Lawrence could actually indicate quite a few Americans may not see anything. After all, as many that read my article on whether the NETeller money was gone will recall, a former representative from the DOJ stated to me at that time "we don't give drug money seized from dealers back to the junkies, so why would we give back this money to bettors if we deem those funds to be the proceeds of crime?"
And this, after all, was the proceeds of a crime for a wrongful action on behalf of NETeller. You don't believe that's true? Well Stephen Lawrence told the judge just that this week.
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