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Gaming Guru

Jeff German

Federal judge recommends tossing out evidence in sports betting case

3 February 2015

LAS VEGAS -- A federal judge Monday recommended tossing out the brunt of the evidence against a wealthy Malaysian businessman and his son in what authorities say was an illegal sports betting operation run out of Caesars Palace luxury villas.

U.S. Magistrate Judge Peggy Leen found that "false and misleading statements" were made by FBI agents in a sworn affidavit they submitted in seeking a judge"s permission to search the villas in July.

She concluded that the search warrant affidavit, without the errors and false statements, was "fatally flawed" and lacked probable cause to support the search.

"This is a triumph for citizens everywhere, showing that courts will enforce the constitution," said attorney David Chesnoff, who represents the businessman, Paul Phua. "I'm pleased that her honor recognized that law enforcement must not be reckless nor omit vital information when seeking a warrant."

Leen's decision follows four days of hearing evidence that included testimony from FBI Agent Minh Pham, who prepared the still-sealed search warrant affidavit.

Federal prosecutors have the option of lodging objections to the recommendations with U.S. District Judge Andrew Gordon, who is presiding over the case.

Nevada U.S. Attorney Daniel Bogden said prosecutors are reviewing Leen's findings and have 14 days to respond.

Prosecutors have previously said in court that they would have a tough time proving the case against the Phuas without the evidence seized in the July 9 raid. FBI and state gaming agents seized dozens of cell phones, computers, iPads and other electronic equipment from the three high-roller villas during the raid.

Phua, 50, and his son, Darren Phua, 22, were among eight defendants charged in the multimillion-dollar betting scheme alleged to have accepted wagers on last year's World Cup in Brazil.

Five defendants from Malaysia and China pleaded guilty in December and were each fined and sentenced to five years of probation with the condition they stay out of the United States during that period. The case against a sixth defendant was dismissed.

Paul Phua, who is widely known at Las Vegas poker tables, and his son are free on a combined $2.5 million bail posted by World Series of Poker bracelet winner Phil Ivey and another poker professional.

Chesnoff and co-defense counsel Thomas Goldstein argued that agents conducted an unconstitutional warrantless search to gather evidence before the July 9 raid.

FBI agents cut Internet service to the villa on July 5, then posed as computer technicians working to fix the problem. They failed to disclose that visit to the villa in getting authorization for the July 9 raid.

In her 32-page decision, Leen said the failure to disclose the ruse was the only "material omission" in the search warrant affidavit.

She said the magistrate judge who approved the search warrant, Nancy Koppe, should have been given that information to help her determine whether agents had demonstrated probable cause for the July 9 search.

"The investigators' suspicions that Phua was engaged in illegal sports betting at Caesars Palace may be borne out by the evidence recovered in the execution of the warrant," Leen wrote. "However, a search warrant is never validated by what its execution recovers."

She said the remaining errors and misleading statements in the search warrant affidavit "were not intentional, but reckless."

Leen explained that the affidavit was written in a way that suggested investigators had much more information linking Paul Phua to the sports betting operation.

"The affidavit's repeated use of the phrase 'Phua and his associates' or 'Phua's associates' or 'at the behest of Phua or one of his associates' suggests that Phua was making requests and engaging in conduct which he was not," she said.

In a separate decision filed Monday, Leen found that FBI agents were within their authority to carry out the ruse as technicians on July 5 when they obtained consent from the Phuas to enter the villa. The ruse itself did not violate the constitutional rights of the defendants, she said.

Leen said the Phuas were "tricked," but "assumed the risk" when they let the agents inside the villa.

Prosecutors have alleged that Paul Phua has ties to an Asian crime syndicate and his group made a $13 million profit in June and July accepting World Cup bets in the scheme that stretched to Macau. Phua and his lawyers strongly deny the organized crime ties.

Leen said in one of her decisions that agents failed to explain in the affidavit how they know that Phua is a member of the notorious 14K Triad, which is based in Hong Kong.

The sports betting case has attracted media attention in Malaysia, where a top government official and potential prime minister has come under fire for writing to the FBI to rebut the 14K Triad allegations.

Ahmad Zahid Hamidi, the minister of home affairs, said he wrote the letter on behalf of Phua's lawyers. Opposition leaders in Malaysia have forced Zahid, who oversees intelligence and security services in that country, to publicly defend his actions.