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Emily D. Swoboda
 

Former Neteller Execs Charged With Money Laundering

16 January 2007

The United States Attorney for the Southern District of New York, Michael J. Garcia, has charged former Neteller directors Stephen Lawrence and John Lefebvre with conspiracy and money laundering in connection with illegal gambling.

Garcia said today in a prepared statement that Lefebvre and Lawrence were charged in connection with the creation and operation of an Internet payment services company that facilitated the transfer of billions of dollars in illegal gambling proceeds from U.S. citizens to the owners of overseas Internet gambling companies.

The charges were contained in two criminal complaints, unsealed on Monday in U.S. District Court in Manhattan, Garcia added.

Yusill Scribner, a spokesperson for Garcia's office, explained that there are a number of ways criminal charges can be brought. In this case, Lawrence and Lefebvre have been charged by complaint, which gives the government a certain number of days to bring forth a Grand Jury indictment.

The two men, who are also major shareholders in the company owning as much as 35 percent in outstanding shares, were arrested on Monday while traveling separately. Lawrence was arrested in St. Thomas, Virgin Islands, and will appear in federal court on Wednesday. Lefebvre was arrested in Malibu, Calif., and is scheduled to appear in federal court in Los Angeles County today.

It will be up the respective courts to decide whether each of the men can go on his own recognizance, but they will ultimately be required to appear in New York, Scribner explained, adding that the next court date will not necessarily be an arraignment.

Garcia said the men were fully aware of the illegal nature of their business when they took their company public.

"Blatant violations of U.S. law are not a mere `risk' to be disclosed to prospective investors," he said. "Criminal prosecutions related to online gambling will be pursued even in cases where assets and defendants are positioned outside of the United States."

Lawrence and Lefebvre founded Isle of Man-based Neteller in 1999. The company began processing Internet gambling transactions in approximately July 2000, allowing companies to transfer money from U.S. customers to bank accounts overseas.

Scribner could not confirm the length of the investigation leading up to the arrests.

The complaint cites Neteller's 2005 annual report, alleging that Lawrence and Lefebvre enabled the company to provide payment services to more than 80 percent of worldwide gaming merchants. Further, the complaint says that Neteller in 2005 alone processed more than $7.3 billion in financial transactions, 95 percent of which was derived from money transfers involving Internet gambling.

Garcia said the company acknowledged when it went public in 2004 that U.S. law prohibited people from promoting certain forms of gambling, including Internet gambling and transmitting funds that are known to have been derived from criminal activity.

Lawrence resigned as a non-executive director of Neteller on Oct. 13, 2006, the day the U.S. Unlawful Internet Gambling Enforcement Act (UIGEA) was signed by President George W. Bush. Lefebvre, however, resigned as a non-executive director on Dec. 15, 2005.

Lawrence and Lefebvre could face a maximum prison sentence of 20 years if convicted.

Ken Dreifach, an Internet lawyer who previously served as chief of former New York Attorney General Eliot Spitzer's Internet Bureau, is concerned about what has not been revealed.

"Why didn't they (U.S. government) indict the company?" Dreifach said. "Is there a sealed indictment that they haven't unsealed? Have they simply decided that they are going to exercise their leverage against individuals by scaring officers, directors and major shareholders from coming into the U.S., or get them to divest or change corporate strategy?"

Dreifach pointed out the differences between this case and the BetonSports (BoS) case, in which the U.S. government indicted the company along with individuals associated with the company on charges of fraud, conspiracy and racketeering.

"Clearly they are trying to send a signal," he added. "But are they trying to send a signal to individuals, to shareholders, to Neteller itself or to all of the above?"

Dreifach feels that the Department of Justice will likely go after Neteller, but it will not be as simple to serve the company as it was to serve BoS because the government was able to serve BoS through its then CEO David Carruthers, who was also indicted.

"Because Lawrence and Lefebvre are only shareholders in the company the government cannot affect service through them," Dreifach said. "So, it's possible what's going on is that they have to try to serve the company some other way, such as through the Hague Convention or through service of process under U.K. law. Those are the two options."

This case is not related to the UIGEA, as the regulations have not yet been implemented.

Neteller's board of directors requested an immediate temporary suspension of its shares on the London Stock Exchange (AIM) until the situation is clarified.

Click here to view U.S. Attorney Michael Garcia's press release.

Click here to view the complaint against John Lefebvre.

Click here to view the complaint against Stephen Lawrence.

Former Neteller Execs Charged With Money Laundering is republished from iGamingNews.com.
Emily D. Swoboda
Emily D. Swoboda