Whose $24 Million Was That?

IGamingNews has secured copies of the court documents covering Wednesday's news on seized money that is believed to belong to Bodog Entertainment Group.

The documents, filed with Federal District Court in Maryland, do not definitively connect but rather strongly suggest the $24 million in seized funds are proceeds generated by Bodog.

Due to deadline and staff constraints, IGN has yet to conduct its own exhaustive investigation into these documents and the media attention they've generated.

We would, though, like to point readers to a number of information sources.

First, a copy of the forfeiture complaint can be viewed here; a copy of the status report can be viewed here; and a copy of the default decree of forfeiture can be viewed here.

Second, a response from Alwyn Morris, the chief executive of Morris Mohawk Gaming Group in Kahnawake, can be viewed here. Calvin Ayre, the former chief executive of Bodog, had transferred operational control of Bodog to Mr. Morris' company in 2007.

Third, three reactions from United States legal experts whom IGN contacted Thursday. To them, we posed three questions:

1. Why were the documents filed in Maryland?

2. What's your read -- big picture -- of these documents?

3. We saw mentioned in a Forbes magazine article on this development that, with these seizures, Bodog's United States players may face problems on payouts. From what you can gather from these documents, do you share this opinion?

Anthony N. Cabot: The case is in the Federal Court in Baltimore because it was assigned to the IRS office in Baltimore for investigation.

Apparent from this action is that the Federal government is continuing to conduct investigations into offshore Internet gambling businesses. The recent inactivity since the in prosecutions since the Neteller case should not be seen as an indication of disinterest by Federal regulators. Other current IRS and DOJ investigations are virtually certain.

Seizures may prove unfortunate for depositors with the gambling sites. Initially, the seizures generally eliminate the banking channels that the offshore business uses to pay customers. In the long term, if the business does not have sufficient reserves, the customers may not get paid. You cannot assess this risk without knowing the financial status of the offshore operator. Assuming the money is forfeited, a $14 million loss may not be significant.

Mr. Cabot, an attorney with Lewis & Roca in Las Vegas, has practiced gaming law for over 23 years with an emphasis in traditional gaming law and Internet gaming, sweepstakes and contests.

I. Nelson Rose: I was involved about six years ago in a case where law enforcement was tracking a drug dealer's money, when they stumbled upon $734,578.82 in a bank account in New Jersey. The dealer was a big bettor and his and other patrons' money was stored temporarily in that bank. The bets were made with Gary Bowman's licensed U.K. sports books.

We tried everything to get the money back. I raised the point that the US & UK have a Mutual Legal Assistance Treaty that says the US cannot impose criminal punishments against a UK resident in the UK without top government to government discussions. The Court ruled that this was a civil forfeiture. The case is reported as United States v. $734,578.82 in United States Currency [286 F.3d 641 (3rd Cir. 2002)].

I wrote the Legal Opinion for Calvin Ayre which convinced him to stop coming to the US. Two weeks later, David Carruthers was arrested changing planes in Dallas. It's too bad Calvin did not tell me he had cash held in US banks, so I could have warned him that it could be seized.

By the way, I don't see how $14 million is going to be a problem for a multi-hundred-million dollar operation.

Mr. Rose, an attorney specializing in gambling law, is a professor at Whittier Law School in Costa Mesa, Calif.

Martin D. Owens: My only question is: Why didn't they get that money out of Uncle Sam's reach while the getting was good?

Just as a purely practical matter, not even opening a law book, the Neteller affair was surely the handwriting on the wall. Whether or not it is later adjudged that the seizures were wrong (and there's damn little chance of that), I cannot help but think that after Neteller, it was clearly risky to leave online gambling money like Bodog's in an American bank -- period.

After all, it had already been demonstrated that 1) whatever the legalities, the Department of Justice did not and does not like the activities of operations such as Bodog, and will 2) cheerfully stretch the legal envelope -- hell, step entirely outside it if need be -- in order to strike at such operations.

Many other operators who offer bets within this "gray area" have been careful to structure their payment solutions to avoid precisely this risk. And it works. I must say I am surprised to hear that Bodog, one of the older and savvier operations in our industry, developed this vulnerability.

But as Professor Rose says, Bodog is a billion dollar operation (or close to it). This is hardly a mortal blow, either to Bodog or to online gaming generally.

Mr. Owens, whose practice is based in Sacramento, Calif., is an attorney who specializes in gambling and Internet gambling law.