No Joy for Justice Dept. in WorldWide Telesports Cash Grab

A federal appeals court has stopped the United States Justice Department from seizing nearly $7 million in assets from the founder of WorldWide Telesports Inc., forcing the government to reargue its case before a lower court.

Billy Scott, regarded by an industry insider as one of the more colorful entrepreneurs in Internet gambling, founded Worldwide Telesports, the Caribbean sports book now run by Bodog. Mr. Scott was indicted in 2005 for violating the federal Wire Wager Act of 1961, and was charged with money laundering and conspiracy. He failed to appear in court.

In 2007, federal prosecutors in the United States District Court for the District of Columbia filed a motion for summary judgment that, if granted, would have allowed them to seize assets, belonging to Mr. Scott, that were being held in an offshore bank account in Guernsey. As a fugitive purposefully avoiding prosecution, prosecutors argued, the government was allowed to seize those assets.

District Judge Royce C. Lamberth agreed with the government's argument, decreeing there was no dispute as to the facts of the case, and that Mr. Scott would not be allowed to defend against the claim.

However, in an interview with IGamingNews, Paul S. Hugel, a criminal defense attorney with Clayman & Rosenberg in New York, pointed out a wrinkle in the case.

Mr. Hugel, who has represented Internet gambling clients in court here, said that that the government misapplied the fugitive disentitlement statute, a law which, when applied, strips fugitives of their right to due process. In order for that law to apply, however, five criteria must first be satisfied:

(i) A warrant for arrest must have been issued;
(ii) The claimant must have had notice or knowledge of the warrant;
(iii)The criminal case must be related to the forfeiture action;
(iv) The claimant must not be confined or otherwise held in the custody of another jurisdiction;
(v) And the claimant must have deliberately avoided prosecution by either purposefully leaving the United States or declining to enter or reenter the United States.

The one and only piece of evidence the prosecution had was a clip from a television interview Mr. Scott did in 2001. In that interview, he acknowledged the United States government had filed a complaint against him, but said there was no indictment.

Judge Thomas B. Griffith of the United States Court of Appeals for the District of Columbia, however, dismissed the clip from relevant evidence because the interview predated the 2005 indictment. The appellate court, accordingly, found that the government neither proved that Mr. Scott was aware of his indictment, nor that he was purposely avoiding coming to the United States because of it.

"A summary judgment is a shortcut," Mr. Hugel said. "It avoids trial because there are no facts in dispute. What the [appellate court] said to the district judge is, 'No, you got it wrong. You can't say for certain, based on this factual record, that Billy Scott is avoiding coming back to the U.S. to avoid arrest.' "

So now, the government must take its case back to the district court.

"They basically will start litigating from scratch, almost," Mr. Hugel said. "They'll try to develop evidence to show that he is not coming back for this. They could move for a summary judgment again if they can come up with any such evidence. And at the end of the day, they could go to trial to prove to the judge that it's more likely than not that he is staying out of the U.S. to avoid prosecution."

Meanwhile, the government's approach to seizing assets could have far-reaching effects for the I-gaming industry, Mr. Hugel observed.

"The defendant had money in an account that never touched the U.S.," he said, "but his bank had some kind of a relationship with the bank in the U.S. And that was enough for the government to come in, go to the U.S. bank and freeze the money in Mr. Scott's account. That gives them the leverage to go after any money in the world.

"This case isn't deciding how the government can proceed with seeking civil forfeitures," Mr. Hugel added. "But the way the government has proceeded in this case, it seems clear that the government has and will take the position that if they believe they have a valid civil forfeiture concerning some assets, no matter where they are located in the world, they may be successful in freezing them."

Click here to view appellate court opinion.