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The Facts Behind the Gold Technologies Indictment

5 September 2003

The indictment that U.S. Attorney Kevin Ryan filed in the San Jose’s U.S. District Court against four Rhode Island men and their businesses on charges related to illegal online gambling incorporates some heavy federal charges, but unless the prosecutor can prove that certain Rhode Island and California state statutes were broken, the whole thing will unravel.

Background

As noted by U.S. Attorney Ryan, the four men, Joseph A. Tedeschi, Jr., Peter V. Tedeschi, Rocco A. DeLuca, and Rocco A. DeLuca, II, established their main administrative offices in Providence Rhode Island at a company dubbed Gold Chip Technologies, Inc. A corporate summary of Gold Chip Technologies claimed that the company "develop[ed] and maintain[ed] online gaming software designed to give a virtual look and feel of the real casinos. This gaming software included casino games of Slots, Black Jack, Poker, Baccarat, Craps, Roulette, Acey Duecy, Spin the Wheel, and one House game, in addition to professional sports betting. Our customers are a wide variety of people who want practical and functional online games that accomplish the simulation of being in the casino without the cost of travel, lodging and food."

The men also established a second company in Rhode Island called Internet Ventures, LLC for the purpose of "developing and operating Internet businesses."

A third part of the business, which was established in the Dominican Republic and named Tecnologia JPR, was the actual site of the gaming server that hosted casino gambling and sports betting.

The two other servers that completed the operation-- a credit card transaction server to process financial transactions between players and Gold Chips Technologies and a data base server to record account and client information-- were located at the Rhode Island businesses.

Around May of 1997, Tedeschi, Jr., presumed to be the chief business conductor of the four defendants, entered into a license agreement with Sunnyvale, California-based Handa Lopez, Inc. to purchase and use software and equipment for the online gambling business. Handa Lopez was also contracted for maintenance and support in the event of malfunctions.

If the indictment alleges correctly, the defendants' operation grossed over $7 million while paying out approximately $900,000 from 1997-2000. The defendants may have also formed other companies that licensed Internet gambling software.

The Case

A series of overt acts are listed as evidence of an illegal gambling operation. These include the establishment of the three businesses, the crediting of user accounts and issuing of checks, wire payment transactions from the Dominican Republic to California, requests from Handa Lopez for maintenance repairs, plus more.

The crux of the indictment is the federal Anti-gambling Act-- Title 18, United States Code, Section 1955. If successful in establishing that the defendants broke this code, the prosecutor can press several other charges, such as conspiracy, Travel Act, money laundering, and aiding and abetting infringements.

To prove that the defendants did in fact violate the federal anti-gambling act, however, the prosecutor must first prove that they violated California Penal Code Sections 330, 330a, 330b, 330.1 and 330.4. If this cannot be proven, the federal gambling charge cannot be held. The traveling, laundering, and aiding and abetting charges would then be deemed invalid since no illegal business was established.

Similar to the California state violations, certain Rhode Island statute violations (Rhode Island State law, Tile 11, Chapter 51, Sections 1 and 2) must be proven before the Travel Act becomes applicable.

The Travel Act prohibits traveling or mailing in interstate commerce to further an illegal operation. So if the anti-gambling charges stick, then the Travel Act violations will be pushed. And in this case, several overt acts are listed as evidence of traveling and mailing to increase the finances and operability of the business. Tedeschi Jr. actually faces several more counts of Travel Act violations than the other defendants because of his role as representative in dealings with Handa Lopez.

Forecast

The man best able to explain the indictment, U.S. Attorney Kevin Ryan, has not returned any of IGN's requests for interviews.

Lawyers for the defendants have also been reluctant to comment. Charles A. Tamuleviz, who is representing Rocco DeLuca, has said he will provide a public statement when the arraignment begins in October.

But if the past can give any indication of how events may unfold, we should perhaps look toward the case of James Truesdale in Texas, 1998. Truesdale was convicted on charges of operating an illegal gambling business, traveling in furtherance of the illegal business, and laundering. However, the decision was later reversed on appeal by the 5th Circuit Court. The prosecutor was not successful in proving that Truesdale had violated certain state statutes. As a result, the entire case collapsed.

Paul Hugel, a New York lawyer who's worked with I-gaming clients, speculates that something similar could happen here. He says there is nothing in the indictment that explicitly indicates a violation of the state statutes. After all, he says, the gambling server was not physically located in Rhode Island.

Handa Lopez

It is worth noting at this point that Handa Lopez and the software programmer who controlled it, David Brown, were indicted in the same San Jose court in June 2000 on charges of gambling and conspiracy to gamble. Prosecutors alleged that Brown had registered several gambling Web sites in offshore locations such as the Dominican Republic and operated as many as 17 from his office in Sunnyvale, CA. He was also issued a second indictment for failing to report more than $330,000 in income during 1997.

Brown entered a guilty plea in his own indictment in 2000, but was never sentenced. Dockets show several sealed filings by the prosecutor. The man who prosecuted Brown in 2000, Carlos Singh, will also prosecute the four men from Rhode Island.

Supplementary Documents:

  • The Indictment
  • The U.S. Travel Act
  • The Facts Behind the Gold Technologies Indictment is republished from iGamingNews.com.
    Bradley Vallerius

    Bradley P. Vallerius, JD manages For the Bettor Good, a comprehensive resource for information related to Internet gaming policy in the U.S. federal and state governments. For the Bettor Good provides official government documents, jurisdiction updates, policy analysis, and many other helpful research materials.

    Bradley has been researching and writing about the business and law of internet gaming since 2003. His work has covered all aspects of the industry, including technology, finance, advertising, taxation, poker, betting exchanges, and laws and regulations around the world.

    Bradley Vallerius Websites:

    www.FortheBettorGood.com
    Bradley Vallerius
    Bradley P. Vallerius, JD manages For the Bettor Good, a comprehensive resource for information related to Internet gaming policy in the U.S. federal and state governments. For the Bettor Good provides official government documents, jurisdiction updates, policy analysis, and many other helpful research materials.

    Bradley has been researching and writing about the business and law of internet gaming since 2003. His work has covered all aspects of the industry, including technology, finance, advertising, taxation, poker, betting exchanges, and laws and regulations around the world.

    Bradley Vallerius Websites:

    www.FortheBettorGood.com