Bodog Internet Gambling Investigation Leads to Money-Laundering Charges

By Van Smith

Published by City Paper, Oct. 30, 2008

Federal authorities in Maryland have filed money-laundering charges against two men, Edward Courdy and Michael Garone, who have figured in an ongoing investigation into the internet gambling empire Bodog. Both men were described in two forfeiture proceedings earlier this year, which resulted in the seizure of a total of $24 million from numerous bank accounts, as processors of illegal gambling transactions in the United States on behalf of Bodog.

The charges against Courdy and Garone were filed on Sept. 29, though the filings were not publicized and were found yesterday by City Paper on the online federal courts web site, known as PACER.

Courdy is charged with transferring $2,380,273 in April from Dublin, Ireland, to a Nevada State Bank account held by Zaftig Instantly Processed Payments Corporation (ZIP Payments), and then to Maryland and elsewhere, to promote the carrying on of an illegal gambling business [Courdy Info]. Garone is charged with the same general scheme, alleged to have occurred in April 2007, involving the transfer of $1,499,975 from Frankfurt, Germany, to Branch Banking and Trust Bank account in Georgia held by JBL Services, Inc. [Garone Info].

The U.S. Attorney’s Office in Maryland confirms that the two men are not currently in custody on the charges, and that no court dates have been set in the cases. Spokeswoman Marcia Murphy says that the office cannot discuss the matters other than what is contained in the court filings.

The Sept. 29 filing the of Courdy and Garone charges coincides with the date that Courdy and ZIP Payments filed a claim in forfeiture proceedings involving $9,869,283.05, which was seized in July from several bank accounts tied to Courdy. Courdy and ZIP Payments, through their California attorney, Stanley I. Greenberg, are seeking the return of the seized money. Also filing a claim that day was 1st Technology, LLC, which recently won a $46,597,849 Nevada court judgment against Bodog and is seeking to collect part of the money by intervening in the ZIP Payments forfeiture proceeding.

Garone and his company, JBL Services, did not contest the federal forfeiture of $14,200,195.73 in alleged Bodog-related proceeds [Bodog Affadavit $14.2M]. In mid-July, Maryland U.S. District Court Judge Catherine Blake finalized the forfeiture of those funds.

Garone and Courdy could not be reached for comment. Greenberg, Courdy’s attorney in the forfeiture case, did not immediately return a phone call for comment.

The affidavits supporting the forfeiture proceedings describe in great detail the lengthy, convoluted efforts of Internal Revenue Service criminal investigator Randall S. Carrow to bring to light the global movement of money in support of Bodog’s on-line gambling activities. The documents also indicate that the case is being brought in Maryland because on-line gambling via Bodog was conducted by an undercover agent working in Maryland.

Bodog founder Calvin Ayre, a Canadian now living in Antigua, became a world-famous billionaire from online gambling and other entertainment enterprises. He was featured on the cover of Forbes magazine in 2006. Carrow writes in his affidavit that investigative interest in Bodog and Ayre started in 2003, but the passage of a 2006 federal law that strengthened prosecutors’ ability to go after on-line gambling activities kicked a formal investigation into gear.

GoldenCasino.com’s Payment Processor Targeted in Latest On-Line Gambling Seizures in Maryland

By Van Smith

Published by City Paper, Oct. 28, 2009

As the Maryland-based federal probe of on-line gambling continues, the latest move to show up in court records in Baltimore is the seizure of $365,366.69 from two bank accounts in the name of Atrium Financial Group (AFG). According to the affidavit in the case (below), Delaware-based AFG disburses money to on-line gamblers, including those who try their luck using GoldenCasino.com. City Paper has been unable to reach representatives of AFG and GoldenCasino.com for comment.

The AFG seizure—unlike several others reported recently by City Paper—is supported by an affidavit that was not sealed (see Atrium Financial Group affidavit). The 13-page sworn statement by Immigration and Customs Enforcement (ICE) special agent Augusta Ferenec, who is based in New Orleans, La., provides a peek into the complexities of the investigation. Signed on Sept. 4 by U.S. District Court magistrate judge Beth Gesner, the warrant was filed in the court records on Oct. 22.

According to Ferenec’s affidavit, the investigation leading to the AFG seizures dates to July 14, 2008, when Louisiana State Police (LSP) officers opened an “undercover gambling account” with GoldenCasino.Com, and then later requested a payout. The first check–from a Canadian outfit called Interco Finance Corporation (IFC)–bounced. Eventually, a second check came, this one from AFG. Thus, the investigation established that GoldenCasino.com was using both IFC and AFG as payment processors for its on-line gambling patrons. Ferenec explains in the affidavit that a fourth business–Con-Tex Converters, another Canadian firm–entered the picture as investigators followed the global movement of funds.

For instance, an AFG account with Mercantile Bank received wire transfers between Dec. 2008 and Jan. 2009 amounting to more than $1.5 million. The money came from a Con-Tex bank account in Cyprus and a combined Con-Tex/IFC bank account in Canada. During the same timeframe, Ferenec’s affidavit continues, AFG cut 1,473 checks from that account, at least two of which went to people in Maryland. In Aug. 2009, investigators talked to one of the Maryland recipients, who admitted the proceeds had come from gambling.

In all, Ferenec’s affidavit maps out a total of nearly $6.3 million wired internationally by either Con-Tex or IFC to AFG bank accounts in the U.S. The AFG accounts, which the affidavit says have all been closed by the banks due to suspicions that the money was tied to illegal gambling, were held with Mercantile, Sovereign Bank, Wachovia Bank, National City Bank, and TD Bank North. The international wire transfers from Con-Tex and IFC were the sole sources of funds in the AFG accounts, the affidavit explains.

The two AFG bank accounts targeted for seizure are with Fifth Third Bank and Wilmington Savings Fund Society. The Fifth Third account, from which $124,028.88 was seized, received about $3.3 million in wire transfers from Con-Tex and IFC between Dec. 2008 and June 2009, the affidavit explains. Nearly 4,000 checks were cut from the account, totaling about $3.1 million disbursed to people in the U.S. During July and Aug. 2009, 35 of those checks were issued to Marylanders. The amount of money entering AFG’s Wilmington Savings account is not specified in the affidavit, which explains that about 575 checks were cut from the account, one of which was mailed to a Texan who “confirmed to the bank that the check was proceeds of online gambling.”

Ferenec’s affidavit says it’s likely that money will continue to enter the targeted accounts “for a period of time” after the warrants are executed, because those involved “will be unable to promptly stop the flow of funds or inform all of their contacts of this investigation.” Thus, Ferenec requests that the warrant order the banks to allow the deposits to continue, but not any attempted debits, and that “ICE be allowed to periodically remove such funds” during a 21-day period after the warrants are executed.

The Ghost Hand: Maryland Law Enforcers Aim to Take the Pot by Secretly Sitting at the Online Gambling Table

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By Van Smith

Published by City Paper, March 24, 2010

On Dec. 21, 2006, someone in Maryland opened an account with bodog.com, an online gaming site whose customers bet on sports and horse-racing and play poker and casino games on their computers. The same day, that same someone placed two online bets on football games with Bodog. Over the course of 2007, after more wagering, the online gambler requested and received two payout checks from Bodog: one for $1,500 and another for $700.

Mundane as they may seem, the Maryland gambler’s wagers and payouts have had major repercussions in the online-gambling world. That’s because, starting in 2008, the details of that person’s online betting activities were included in meticulous affidavits supporting warrants to seize the contents of bank accounts said to be tied to illegal gambling. The Maryland gambler was actually a special agent working undercover for the U.S. Internal Revenue Service (IRS) Criminal Investigation Division.

Under U.S. law, facilitating transactions tied to online gambling is illegal. Yet, due to the immense popularity among Americans of wagering over the internet, the overseas companies that provide this kind of entertainment continue to seek ways to do business with U.S. customers. In order to pay out winnings to gamblers in this country, they have to hire U.S. companies willing to operate as payment processors–middle-men who take foreign casino companies’ money and disburse it to players when they want to cash out their online gambling accounts. These payment processors are taking a risk that U.S. law enforcement will detect the transactions and seize the money while it’s sitting in the payment processors’ accounts–which is exactly what federal investigators in Maryland, and elsewhere, have been doing–but due to the lucrative nature of the business, both the payment processors and the online-casino companies have been willing to take that gamble.

In the post-Sept. 11 world, the U.S. government has developed a heightened interest in augmenting its ability to track the ways and means of global money-moving. Though the motivation is to protect the world from terrorists by interrupting their finances, this trend also means that financial crimes of all kinds–including the movement of online gambling money into the United States–face a greater risk of detection. In the world of internet wagering, whenever money is sitting in a U.S. bank account, it is exposed to possible seizure by the authorities. And, as investigators’ successes mount, it’s clear they are getting better at it.

IRS criminal investigators in Maryland “opened a formal investigation of Bodog in 2006,” court records state, after having “conducted interviews regarding Bodog.com, Calvin Ayre, and Bodog’s operations in approximately 2003.” Ayre, a Canadian who’s been living in exile for several years now, is the founder of Bodog, which is based in Antigua and has operations in Costa Rica.

Bodog, a 15-year-old company which claims to be the world’s pre-eminent online gambling site and whose operations span the globe, is not the first to be targeted by American law enforcement’s crackdown on internet gambling. That honor goes to Jay Cohen, who in 1998 was indicted in New York along with numerous other defendants for violating the federal Wire Wager Act in running the Antigua-based World Sports Exchange. Cohen fought the charges, saying federal laws prohibiting wire transfers of gambling proceeds do not apply to the internet. He lost and was sentenced to 21 months in prison. Since then, the feds have continued to focus on an industry that, in effect, presents opportunities for people to gamble anywhere and anytime, despite the laws of any particular country or state.

“If you’re in Antigua running a casino, that’s fine,” says Maryland U.S. Attorney Rod Rosenstein. “But if you’re actually operating a casino in someone’s bedroom in Montgomery County over the internet, that’s illegal.” Thus, any proceeds that can be traced to gambling activity that takes place in Maryland–whether it’s actual betting over the internet, or just the arrival of checks in the mailboxes of Maryland gamblers cashing out their online-gambling accounts–could end up seized by Maryland authorities.

Since early 2008, according to federal court records, the ongoing federal investigation of online gambling based in Maryland–which, in addition to the IRS, also involves members of a Department of Homeland Security Immigration and Customs and Enforcement (ICE) task force–has brought at least $29,206,594.62 in alleged gambling proceeds into federal coffers. The latest warrant in the investigation was signed by U.S. magistrate judge Paul Grimm in early February, and it targeted the contents of a Mercantile Bank account in Tampa, Fla. The account, held in the name of a company called Direct Channel LLC, yielded $860,335.90 on March 5. Direct Channel, like the other companies included in the Maryland internet-gambling seizures, allegedly provided payment-processing services in the U.S. for gambling web sites based in other countries. Though the Maryland investigation initially appeared to focus on payment processors for Bodog, such as Direct Channel, it has since broadened to include funds held by companies serving another gambling site, goldencasino.com, which is also based in Antigua.

Any U.S. bank account used by a payment processor working with online casinos could be targeted by investigators, potentially wiping out millions of dollars when a seizure warrant arrives at the bank. But due to the magnitude of online gambling in the United States–half of the $16 billion per year that internet gambling is estimated to generate is believed to originate in the United States–the risk may be worth it. Though federal investigators in Maryland and elsewhere, including New York, Missouri, and Florida, go for the money, there’s so much in play at any given moment that what they seize is only a small portion of money flow.

So far, after several years of effort, Maryland law enforcers have seized nearly $30 million in suspected online-gambling proceeds. That’s equal to less than one half of one percent of the $8 billion that U.S. online gamblers are estimated to spend each year. But it’s a start. And as the effort builds and grows more sophisticated and nimble with experience, the potential is as vast as the American online-gambling economy itself.

“There are very big numbers in internet gambling,” say Rosenstein, acknowledging the sizeable cut the government could get through seizing and forfeiting assets, which are funneled into law-enforcement budgets to support the efforts of the agencies that seized them. Asked if seizures, in the long run, could undermine gambling web sites’ ability to pay out to U.S. customers, he says: “That’s a possibility, and it’s certainly a risk for customers. And it’s a pretty effective deterrent, since customers have no remedy if the gambling operator fails to pay. They won’t be able to go into court and enforce that. It’s an illegal contract.”

Seizing and forfeiting criminally derived assets, including those from online gambling, has been made a priority by Rosenstein’s office. Last year, he hired the nation’s top asset-forfeiture prosecutor–Stefan Cassella, who literally wrote the book on the subject, a 950-page tome entitled Asset Forfeiture Law in the United States–to lead the effort. Among Cassella’s achievements is the largest forfeiture in U.S. history: $1.2 billion from the Bank of Credit and Commerce International in the 1990s. Given the size of the online-gambling industry’s assets, Cassella may have an opportunity to break his own record while working in Maryland.

Law-enforcement efforts to interrupt internet-gambling money flowing in and out of the United States were ramped up after the 2006 passage of the Unlawful Internet Gambling Enforcement Act (UIGEA), which was signed by President George W. Bush in October that year. Before that law was passed, the federal Wire Act, which dates back to 1961, already prohibited the transfer of gambling proceeds via wire communications. That law had been used to go after internet gambling prior to the UIGEA’s passage. But unlike the Wire Act, the UIGEA specifically outlaws internet-gambling transactions and requires financial operators, such as banks and payment processors, to determine which transactions are tied to online gambling and report them to regulators.

The banking industry, concerned that UIGEA requirements would be difficult to enforce and would force bankers to become anti-gambling police, persuaded the Obama administration to postpone the law, scheduled for implementation in December 2009, for six months. U.S. Rep. Barney Frank (D-Mass.), meanwhile, is currently trying to usher through legislation that would repeal the UIGEA and instead set up a regulate-and-tax scheme for the industry, arguing that online gambling is a liberty–and a potentially large source of public revenues–that the government should not prohibit.

But Rosenstein contends that going after the illegal profits gained from the U.S. market for internet gambling is a matter of fairness. “What Americans find particularly galling,” he says, “is when something is criminalized, honest people don’t engage in the activity, but criminals do, so they get excess profits because their only competition is from other criminals.”

Those seeking to legitimize aspects of online gambling, though, have other thoughts on the matter. Last year, in trying to persuade a federal judge to release funds seized from a payment processor allegedly tied to online gambling, lawyers for the Poker Players Alliance (PPA), a Washington, D.C.-based interest group, argued that online poker is a game of skill, not of chance, and thus is not illegal gambling. They also contended that the UIGEA establishes criminal culpability for “persons who operate illegal gambling sites, rather than those who process payment transactions,” and that restricted transactions under the UIGEA do not include funds going to a gambler because a gambler is “not engaged in the business of betting or wagering.”

The lawyers for the PPA (whose motto is “Poker is not a crime: Join the fight.”) did not prevail. But their efforts–and the well-heeled existence of the PPA, which has its own lobbying arm, PokerPAC, and whose board is chaired by former U.S. Senator Alfonse D’Amato (R-New York)–indicates that powerful forces in American society don’t like the online-gambling crackdown. Recent public-opinion polling, though, indicates the prohibition of online gambling is popular; two-thirds of those responding to a Fairleigh Dickinson University poll released on March 11 say they do not favor legalizing it.

Though online gambling is legal in many parts of the globe, enjoyed by many Americans, and accepted in many cultures–to the point that online-gambling companies’ stocks often are publicly traded in other nations–its continued prohibition in the United States may be explained by the longtime association of the gambling industry with unseemly characters making obscene profits.

Recent cases against internet gambling operations, for instance, give a sense of the profit potential the business presents and sometimes allege organized-crime ties. In New York in October 2009, the operators of Panama-based betonline.com were charged with illegal online gambling; authorities claimed the group made $587 million in 28 months and was linked to the Gambino and Genovese crime families. In a 2006 Missouri case against the longtime gambling figures who ran Costa Rica-based betonsports.com, the indictment states that the company’s promotional materials boasted “100,000 active players, who placed 33 million wagers, worth over $1.6 billion” in 2003, before the company went public on the London stock exchange. In February, Missouri authorities indicted the operators of Costa Rica-based Elite Sports, which ran the web sites best24b.com and best24b.net, and among the defendants were members of the Kansas City’s storied Cammisano crime family.

In addition, federal authorities in New York have charged two men–Anurag Dikshit in 2008 (Dikshit NY info) and Douglas Rennick in 2009 (Rennick indictment)–with illegally running online-gambling ventures. Dikshit, who was born in India and is one of the youngest billionaires in the world thanks to the success of his online-gambling business, is co-founder of the Gibraltar company that operated partypoker.com; charges against him include the forfeiture of $300 million in gambling revenues. Rennick, a Canadian, ran a series of payment-processing companies that allegedly served the internet-gambling industry, and the government is seeking to forfeit more than a half billion dollars of the proceeds from his financial dealings.

Another alleged payment processor was charged in Florida in February, when a bank alerted federal authorities that customers were trying to cash large checks they said were the payouts from online-gambling winnings. Michael Olaf Schuett, a German man living in Naples, Fla., had set up hundreds of companies and had dozens of bank accounts that were allegedly used to operate the scheme since 2007. The complaint against him (Schuett FL complaint) says that he transferred online-gambling payments to about 23,000 people, mostly in the United States, and that the total amount of money involved was $70 million.

In what may have been the first federal gambling case involving the internet in Maryland, IRS investigators and Montgomery County police teamed up to bust a ring that, in 2003 and 2004, handled action from Maryland customers on behalf of a Dominican company called World Wide Wagering, which runs the web site wager.dm. The conspiracy case, which ended with the convictions of seven men from Montgomery County, Baltimore, and Florida, followed the money flow to and from bettors and the defendants. The case included the cashing of more than $150,000 worth of checks at University Liquors in Hyattsville.

Just as IRS agents in Maryland were cracking the World Wide Wagering case, they started looking into Bodog. But it wasn’t until December 2006, shortly after the UIGEA was signed into law by then-President George W. Bush, that the Bodog investigation got serious–it began with an investigator logging onto the web site, posing as a customer, and starting to gamble.

Once the investigator started receiving payout checks in 2007, the money trail could be tracked. In the meantime, the investigation gained a cooperating witness from inside the internet-gambling industry, who corroborated facts about Bodog’s operations, including the contention that “Bodog takes in from $250,000 to millions per day on sports bookmaking alone,” court records show. An informant also helped out by corroborating facts based on experience using Bodog’s site to gamble in Florida. The informant was able to explain the betting process to investigators; additional information was gleaned from investigators working online-gambling probes in other jurisdictions.

By 2008, sufficient cause had been established by Maryland IRS investigators to seize funds from the bank accounts of three payment-processing companies suspected of handling funds for Bodog: JBL Services and Transactions Solutions in Georgia (JBL forfeiture), and a California company called ZAFTIG Instantly Processed Payments Corp., operating as ZipPayments.com.

On Jan. 18, 2008, U.S. District Court magistrate judge Beth Gesner signed a search-and-seizure warrant application for bank accounts in the name of JBL Services and Transactions Solutions; $14,200,195.73 was seized. On June 28, 2008, U.S. District Court magistrate judge Susan Gauvey signed another warrant application for ZipPayments.com bank accounts, which yielded another $9,869,283.05. By July 2008, the U.S. Attorney’s Office in Maryland had filed forfeiture actions against both pots of money. The legal actions were based on lengthy affidavits written by IRS criminal investigator Randall Carrow.

In September 2008, the case against ZipPayments.com’s money suddenly heated up. A claim for nearly $10 million was filed by ZipPayments.com and Edward Courdy, a California man who sought to have the money returned, saying it was lawfully his. Within days of filing his claim, Courdy was charged with money laundering, as was Michael Garone, a Georgia man connected to JBL Services and Transaction Solutions (“Bodog Internet Gambling Investigation Leads to Money-Laundering Charges,” Mobtown Beat, Oct. 30, 2008). In February 2009, as a result of a forfeiture settlement negotiated by Courdy’s attorney, Stanley Greenberg, and assistant U.S. attorney Richard Kay, the government returned $200,000 of the ZipPayments.com money to Courdy, and kept the rest.

Today, the status of the criminal cases against Courdy and Garone is unclear. Some time in the fall of 2009, a little over a year after they were filed, the online records of the cases against them disappeared from the federal court-records database system, known as Public Access to Court Electronic Records (PACER). Since Maryland’s federal courts handle only electronically filed documents, PACER is the only repository of its records. The disappearance from PACER of Maryland criminal case numbers 08-454 (against Courdy) and 08-455 (against Garone), creates the illusion that they were never filed at all–though City Paper still has copies of the documents charging them, which bear Rosenstein’s signature. Despite City Paper‘s requests for explanation, the U.S. Attorney’s Office in Maryland has remained mum about what happened.

Courdy’s lawyer, Greenberg, has consistently declined City Paper‘s request for comment about his client’s troubles in Maryland. Efforts to contact Garone, and to identify his lawyer in the Maryland case, have been unsuccessful.

After the money seizures and criminal charges involving Courdy and Garone were filed, the online gambling investigation in Maryland appears to have shifted from the IRS to Immigration and Customs Enforcement–and the level of secrecy surrounding the investigation increased. Though numerous search-and-seizure warrants have been filed for the contents of bank accounts and an e-mail account associated with payment processors since last summer, nearly all of them were granted under seal, so probable cause for the seizures has not been revealed to the public.

Despite the secret nature of many of the seizure filings, certain information about them is available. Three ICE task force members in Maryland–Maryland State Police trooper Robert J. Mignona, ICE special agent M. Lisa Ward, and Anne Arundel County Police detective Richard S. Gunn–and one ICE special agent in Louisiana, Augusta B. Ferenec, filed the warrant applications. The companies whose bank accounts have been seized–HMD, Forshay Enterprises , and Electracash in California; Atrium Financial Group (AFG) in Delaware; and Direct Channel in Florida–are in the payment-processing business. The amounts seized so far from these companies’ bank accounts add up to $5,137,115.84. And, in the case of Electracash–a business that has past associations with Courdy–warrants have been issued not only to seize the contents of bank accounts, but of an e-mail account the company has with Intermedia, a New York City communications company. (The Electracash e-mail warrant, unlike the bank-account seizures, so far has yielded nothing, court records show.)

One of the unsealed search-warrant affidavits–the one filed early this year against Direct Channel’s bank account in Florida–was written by Ward, but draws directly from the IRS affidavit in the Courdy and Garone seizures, and thus sheds no new light on the investigation’s details. The other unsealed warrant, against Atrium Financial Group and written by Ferenec, shows that ICE’s financial-investigations group in New Orleans, La., along with the Louisiana State Police, are in on the Maryland probe (“GoldenCasino.com’s Payment Processor Targeted in Latest OnLine Gambling Seizures in Maryland,” The News Hole, Oct. 28, 2009).

The Louisiana end of the Maryland investigation began on July 14, 2008, when Louisiana State Police officers opened a gambling account with goldencasino.com. They did not immediately succeed, because the bank they were using to deposit $100 into the gambling account apparently blocked the transaction. On the second try, though, they succeeded. They then requested a payout.

The first payout check bounced, but the second one, from AFG, cleared, and the investigators, using information they gleaned from their transactions, used their investigative powers to start on up the money trail. They discovered funds moving between Canadian companies’ bank accounts in Canada and Cyprus and on to AFG bank accounts in the United States, which then issued checks to U.S. residents, including in Maryland. The transactions they tracked involved millions of dollars zipping across the globe.

“Because of enhanced monitoring of financial transactions since Sept. 11, we have a much better handle on the movement of funds,” Rosenstein says about the ability of investigators to dig into the online-gambling industry. In fact, the affidavits of investigators Carrow and Ferenec indicate that initiating a successful seizure of funds from payment processors doesn’t require particularly sophisticated investigative techniques. The trick, it seems, is trying to pinpoint where the money will be at any given moment, hoping to gain court orders to freeze it, and seize it before it shifts yet again.

Rosenstein points out another challenge investigators face in trying to seize online gambling funds: While it’s relatively easy to go after funds in U.S. accounts, going after offshore accounts–where the big money is, since that’s where the online gaming companies operate–is tricky.

“It’s similar to the challenges we face with child pornography, which is often stored overseas and transported to the United States over the internet,” Rosenstein says. “The degree of international cooperation with regard to child pornography is far greater than with offshore gambling, though. But we can readily intercept the money flowing through financial institutions that we have jurisdiction over.”

Rosenstein says online gambling can be prosecuted anywhere that customers are located, and that the public should expect to see more enforcement efforts taking place in more jurisdictions. He says that criminal activity is increasingly becoming more internet-based, and that investigative agencies are becoming more focused on financial crimes. They’re also becoming more sophisticated when it comes to following the money.

“Anything that illegally generates large amounts of money is a concern on many levels,” Rosenstein says. “People engaged in such conduct may be committing other crimes. They may not be paying taxes, and they may be investing in other illegal activities.”

The Rake’s Helper: California man to cooperate with federal online gambling probe as part of plea deal

By Van Smith

Published by City Paper, Jan. 12, 2011

“Yes, your honor,” James Davitt said, over and over again, as he answered U.S. District Judge Catherine Blake’s questions during his Jan. 4 hearing in the federal courthouse in Baltimore. He was in Blake’s court to plead guilty to a single count of conducting an illegal gambling business. The hearing revealed that the 38-year-old California man—one of five people charged publicly in connection with an ongoing federal probe of online gambling staged by Maryland’s U.S. Attorney’s Office (“The Ghost Hand,” Feature, March 24, 2010)—signed an agreement in November to cooperate with federal authorities in Maryland and New York, where a high-profile online gambling investigation is also underway.

Davitt’s plea agreement, as summarized by Blake during the hearing, may require him to testify in court and turn over documents. “If truthful in your cooperation,” Blake explained to Davitt, then the documents and information that he may provide “cannot be used against you” by prosecutors, though if he breaks the agreement or fails to be truthful, she continued, he could face new charges based on that same information. Davitt’s “sentencing might be delayed until your cooperation is complete,” Blake said. The prosecutor, Richard Kay, told Blake that Davitt’s cooperation will “take up at least the next several months.”

Davitt—a square-faced, broad-shouldered fellow with a close-cropped beard, wearing a brown suit—was released on his own recognizance while the charges are pending against him. His release form indicates he resides in La Habra, Calif. A portion of the hearing was spent addressing the fact that he keeps a gun in a safe at his home, which he is required to relinquish under the terms of his supervised release.

The other four people charged so far in Maryland are Edward Courdy, Michael Garone, Kenneth Wienski, and Martin Loftus. The cases against them, and related forfeiture cases in which the government seeks to keep seized cash, are part of a federal push to interrupt the flow of international online gambling money when it is in the United States, where the proceeds are considered illicit gains. The companies that provide online gambling services tend to be foreign entities that allegedly rely on facilitators, called “payment processors,” to conduct gambling transactions in the massive U.S. market, which is estimated to account for about 70 percent of the $4 billion-a-year industry.

Courdy, of California, and Garone, a Georgian, were charged with money laundering in 2008 (“Bodog Internet Gambling Investigation Leads to Money-Laundering Charges,” Mobtown Beat, Oct. 30, 2008). The cases against both men were initially filed publicly, but disappeared from the court docket in late 2009, presumably after having been placed under seal by a judge. Courdy’s case appears to still be under seal, but Garone’s re-emerged on the public docket in December, when he was sentenced to a year of probation. He signed his plea agreement in September 2008, when the charges were first filed against him, and the agreement’s statement of facts describes a scheme in which he helped launder money used as payouts in 2007 to online gamblers who wagered on sites operated by Bodog, a company based in Canada and Costa Rica. The transactions amounted to at least $7.9 million.

Gambling and money-laundering charges were leveled against Wienski, a Missourian, in May 2010 (“Billing Complaint,” Mobtown Beat, May 24, 2010). The 12-page criminal complaint against Wienski accuses him of using a medical-billing company, SNR Inc., and a check-processing company where he worked, Diversified Check Solutions, to move online gambling funds in 2009. The complaint also summarizes how federal law enforcers in Maryland have gone after the industry since 2006, when then President George W. Bush signed the Unlawful Internet Gambling Enforcement Act (UIGEA) prohibiting internet gambling-related transactions in the United States. To date, Wienski has not had any court appearances related to the Maryland charges.

Davitt’s name was mentioned numerous times in the complaint against Wienski, though Davitt himself was not formally charged until Dec. 7 (“Superfecta,” Mobtown Beat, Dec. 10, 2010). In the Wienski complaint, Davitt is described as using two California companies, HMD Inc. and Forshay Enterprises—both of which have had funds seized by investigators (The News Hole, Sept. 24, 2009)—to facilitate online gambling transactions. In particular, Davitt and Wienski are alleged to have moved funds for two of the world’s largest online poker sites—Ireland’s Full Tilt Poker, and Poker Stars, based in the Isle of Man—in 2009 via HMD and SNR. Davitt’s plea agreement says $3.9 million in Full Tilt Poker money was involved in the transactions for which he pleaded guilty.

In preparing for Davitt to plead guilty, the Maryland U.S. Attorney’s Office filed a memorandum to persuade Blake that online poker is primarily a game of chance rather than skill, and thus is illegal under Maryland law (The News Hole, Dec. 16, 2010). The memorandum, which includes as an attachment an academic paper prepared for prosecutors by University of Maryland mathematics professor Benjamin Kedem, addresses a subject that has been hotly debated. Last year in Pennsylvania, a state judge ruled that “skill predominates over chance” in poker, though the ruling was later overturned by a higher state court.

On Dec. 8, 2010, the day after Davitt was charged, a criminal information was filed against Loftus, accusing him of a single count of money laundering in connection with the 2009 transfer of $1.5 million from Switzerland to an HMD bank account in California. Details of the accusation against Loftus are spare, though in Davitt’s guilty plea, Loftus and another man—Daward Lee Falls, the CEO of Electracash, a California company previously associated with Courdy (The News Hole, Sept. 24, 2009) —are named as having “made arrangements with representatives of Full Tilt Poker to make payments by checks to gamblers through HMD, Inc.” Loftus is scheduled to be arraigned in court on Jan. 19.

Loftus and Wienski, neither of whom have defense attorneys listed on their case dockets, could not be reached for comment, and neither could Garone. Courdy’s attorney, Stanley Greenberg, has consistently declined comment. Falls has not responded to City Paper’s numerous messages since investigators seized money from Electracash bank accounts in 2009. Davitt’s attorney, Christopher Mead, had no comment.

In addition to the five men charged in Maryland’s online gambling investigation, U.S. Attorney’s Office spokesperson Marcia Murphy writes in an e-mail that “our office has seized $65 million, some of which is still being litigated.” The amount, while large, pales in comparison to the federal investigation being conducted by the U.S. Attorney’s Office for the Southern District of New York, which Davitt will be helping under his plea agreement. There, for instance, more than half a billion dollars has been seized in connection with charges against Douglas Rennick, a Canadian, who ran payment-processing companies that served the online gambling industry, and another $300 million was forfeited by Anurag Dikshit, a founder of partypoker.com. Both men pleaded guilty in 2010. In addition, the Financial Times in London reported last year that Full Tilt Poker is under criminal investigation by New York’s Southern District prosecutors.

The fact that Davitt’s plea agreement commits him to cooperating with authorities both in Maryland and in the Southern District of New York suggests investigators in the two jurisdictions are coordinating their efforts. And, since efforts to repeal the UIGEA failed during the lame-duck session of Congress that ended in December, it appears that facilitators of online gambling in the United States will remain targeted by federal investigators for the foreseeable future. At the very least, the ongoing probe is proving lucrative to federal coffers.

Luck of the Draw: Police Bust Gunmen Robbing Greektown Poker Game

By Van Smith

Published in City Paper, June 7, 2006

IN A 15-MINUTE PERIOD AROUND 11 P.M. on Thursday, May 25, Baltimore City racked up 21 victims of violent crime in Greektown: 18 armed robberies and three attempted armed robberies. The incident is a blow to the victims and to Mayor Martin O’Malley’s attempts to reduce violent crime in the city—a central theme of his campaign for governor. Adding insult to injury is the fact that the two suspects were caught while robbing $23,827 from a high-stakes poker game, an illegal activity that O’Malley made light of last fall, after police raided two poker games that netted charges against nearly 100 players.

Last Nov. 17, O’Malley discussed the poker raids on WBAL Radio, relating cheekily how he had asked police commanders, “‘How many people do we have assigned to the poker task force? Do you think we could reassign them to the violent-crime and drug task force?’” He continued, “It seems like we’ve become obsessed with poker games. I think there are more deadly challenges facing our city and our citizens.”

As of press time, the police department had not responded to City Paper’s request for information and comment about the Greektown poker robbery. When mayoral spokeswoman Raquel Guillory was asked if the mayor’s thoughts about poker enforcement had changed after the robbery, she had only this to say: “We have a vice squad who, along with other crimes, track these as well. These particular types of games pose a risk to the players because there is usually a large amount of money and the police don’t know about them. But these are illegal.”

One of the victims, criminal defense attorney Stephen L. Prevas (a brother of Baltimore Circuit Court Judge John N. Prevas), rues that the poker-game heist chalked up a host of offenses on the city’s violent-crime tables. “One event that takes 10, 15 minutes,” he points out in a telephone interview after the robbery, “and it skews the statistics.”

Another victim, Jason Thomas Lantz, was pistol-whipped during the incident, according to a police report contained in the court records. “It opened up a nice gash on the guy’s head,” Prevas recalls. “It was ugly, but everybody remained rather calm.”

The timing of the robbery, Prevas adds, was perfect. “Of any time to strike,” he says, “that particular time on a Thursday night was good, to maximize the benefits” of a robbery, because more than the usual amounts of cash were on hand.

Prevas, who represented two dealers charged with gambling in one of last November’s poker raids, would like to see poker legalized and regulated in Maryland. However, “when it is done in this fashion”—illegally, with lots of money on the table—he opines, “the biggest negative is that someone will get robbed. Any time you put a bunch of people with a lot of money in their pockets in one place, it is going to put a gleam in someone’s eye. I may start going to Atlantic City again—it keeps you honest.” Or, he adds, “I may just stay in games that are in someone’s home where I’m familiar with people.” At any rate, Prevas says, “as I understand it, the game will not reopen at that particular place.”

Prevas, who has been a member of the Maryland Bar since 1973, had $1,700 taken from him during the robbery and says that money is now in police hands. He contends that, while a poker game was in progress at the time, he wasn’t playing. “You can infer what you want,” he asserts when asked why he had so much money while watching a poker game. “But in the scheme of things, it’s not that big of a bankroll. I am used to having cash on my person.”

Another victim, real-estate investor Jeremiah B. Landsman, says he had $900 in his wallet when it was taken from him by the robbers. “I got most of it back,” he says, after the police busted the perpetrators. He, too, contends that he wasn’t playing poker. “Everybody knows gambling is illegal,” he states in a phone interview. “And I don’t want to do anything illegal.” As for the amount of money he possessed at the time, he explains that “I’m in real estate, so I always carry a lot of cash.”

While police found $23,827 in the robbers’ bag once they were detained, court records indicate that only $15,429 was attributed to the 18 individuals who were robbed. The court records don’t explain the discrepancy, but the remainder may have belonged to the game’s organizers. “I have nothing to say about the house money,” Landsman says when asked about the differing sums.

The arrested suspects are 31-year-old Todd Mikal of Glen Burnie and 27-year-old Ronnie Lee Jones of Parkville. Mikal is charged with 131 counts, including possession of a firearm by a convicted felon, although a search of court records shows that this is the first time he’s been charged with a crime in Maryland. Jones was charged with 127 counts in connection with the poker robbery. Court records reveal that, since 1997, Jones has faced 17 charges for crimes including auto theft, illegal firearms, assault, robbery, theft, and juror intimidation. He was never convicted, though in 1999 he received two years of supervised probation before judgment for assault.

According to the police report, the crime was interrupted after one of the victims, Wayne Byers Long Jr., flagged down a passing patrol car and stated that a robbery was in progress at 4600 Eastern Ave. Long’s Parkville address is an apartment a few blocks away from Ronnie Jones’ home. Attempts to reach Long, in order to ask him if he knows the suspect, were unsuccessful.

The robbers, Prevas recalls, entered the back room of the premises through a side door.

“They came in behind a guy who’d been playing in the game fairly regularly,” he says. “[Someone] saw him through the peephole [in the door] and let him in.” One of the robbers “was doing all the talking, and was very loud and intimidating, and the other was the bag man,” who put the cash and wallets into a sack.

Once Long had hailed the police, “in seconds there were bunches of police there,” Prevas continues. “The friendly perps were just finishing up their business, saying ‘Good night and thank you, gentlemen,’ or something to that effect, when three cops appeared at the landing with their guns drawn. One guy gave it up immediately, and the other guy took off out the door,” Prevas recalls. The police quickly chased him down.

“It was a sense of vindication that they actually got caught,” Prevas says.

State records show the owner of 4600 Eastern Ave. to be Pete Koroneos, whose other interests over the years include a strip club and a restaurant on the Block, a Fells Point bar, and the Broadway Diner, located just east of Greektown on Eastern Avenue. A sign for the diner graces the side of the nondescript building that hosted the ill-fated poker game, and is the only identifying mark on the newly painted building other than the street number affixed to the mailbox on the front door. Attempts to reach Koroneos at his Otterbein condominium, in order to ask him about the poker game held in his Greektown property, were unsuccessful.

Landsman and Prevas indicate that the property has long been a home for poker—though Landsman insists that it was “only for fun, only for chips, not money.”

“It’s a men’s club,” he continues, “where we would eat, drink, watch games. It was a really nice group of people and a really good time. I would go once a week. It was a great place to network with other professionals from Baltimore.”

Another victim, Gilbert Roden, is more direct. “It was a bunch of guys that get together and play poker,” he says over the phone.

The list of 21 robbery victims includes 11 people whose names also appear on the membership lists of two other poker clubs: the Owls Nest, which was raided by police last fall, and a related entity called the Orioles Nest (“Fouled Nests,” Nov. 23, 2005). Two of the Greektown victims had been arrested for gambling at the Owls Nest raid, and their charges were later dropped.

None of the poker-playing victims of the Greektown robbery has been charged with a crime—in contrast to the gambling charges that resulted from last November’s raids of the Owls Nest and another game at the Aces High Club on Harford Road. Without police comment, City Paper has not been able to determine whether the decision not to charge the gamblers resulted from O’Malley’s public statements that enforcing the law against poker games squanders police resources.

Landsman, however, says he believes “the police handled [the Greektown poker robbery] perfectly. It was a bad situation with the best possible outcome.” Nonetheless, he states, “obviously, these games draw crime. It’s unfortunate.”