CITADEL SETTLES WITH DOJ, ENDS ONLINE POKER INTERNET GAMBLING PROBE
Canada’s ESI Entertainment Systems Inc., whose subsidiary Citadel Commerce is a popular online poker and Internet gambling payment processor, will pay more than $9.1 million as part of a deferred-prosecution agreement with U.S. prosecutors in a probe of illegal online gambling.
In a press release Thursday, the U.S. Attorney’s office in Manhattan said the online-payment company will avoid being prosecuted on a conspiracy charge if it avoids further wrongdoing for 18 months. As part of the agreement, the company has agreed to cooperate fully with the government’s probe.
ESI, through its wholly owned subsidiary Citadel Commerce Corp., processed more than $2 billion in illegal gambling transactions for hundreds of thousands of U.S. customers of Internet gambling Web sites between 2002 and January 2007, prosecutors said. The Web sites, which were mostly located outside the U.S., provided sports betting, casino and poker games online.
When the company went public in Canada in 2006, about 80% of its revenue was derived from the operation of Citadel, prosecutors said. About 90% to 95% of Citadel’s revenue was from payment-processing services provided to U.S. customers via Internet gambling Web sites, the government said.
In a statement of facts associated with the deferred-prosecution agreement, ESI admitted the company, through Citadel and certain employees and directors, agreed to engage in business activities that violated U.S. law, including the prohibition of illegal gambling businesses statute, the money-laundering statute and the prohibition of unlicensed money-transmitting businesses statute.
U.S. authorities have cracked down on online gambling in recent years, arresting executives of some overseas online-gambling companies when they travel to the U.S.
President Bush signed into law the Unlawful Internet Gambling Enforcement Act (UIGEA) in October 2006 that made it illegal for banks and credit-card companies to process payments from U.S. customers to online-gambling sites.
In March, the European Commission said it would investigate whether U.S. laws banning Internet gambling violate international trade rules.
The ESI pact follows a similar deferred prosecution agreement last year with online-payment services companies Neteller Inc., which agreed to forfeit $136 million.
Electronic Clearing House Inc., another online payment-processing company, entered a non-prosecution agreement with the government in March 2007 and agreed to disgorge $2.3 million. Neteller was one of its customers.
John David Lefebvre, Neteller’s former president and one of its founders, and Stephen Eric Lawrence, its former chairman and another founder, each pleaded guilty to a conspiracy charge last year.
U.K. online-gambling firm BetOnSports PLC pleaded guilty to a racketeering conspiracy charge in May 2007 in federal court in St. Louis.
In an unrelated case, Microsoft Corp. (MSFT), Yahoo Inc. (YHOO) and Google Inc. (GOOG) agreed in December to stop accepting ads for sports wagering and other online gambling as part of a $31.5 million settlement with federal prosecutors in St. Louis.
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