The Jay Cohen Trial

Greetings from the Southern District of New York. After a three-day weekend, the Jay Cohen trial resumed today at full speed. I've got a lot of ground to cover, so for the sake of keeping it simple, I'll summarize today's proceedings chronologically.

In short, the defense cross examined the final Government witness and brought all three of its witnesses to the stand. The day ended amid the government's cross examination of the defendant, Jay Cohen. In between, the defense motioned for an acquittal on all counts and introduced a few new lines of defense. Additionally, the Government has motioned to bring a new witness to the stand. If the motion is granted, the defense will counter with a motion for an additional witness or two as well.

The day began with the defense's cross examination of FBI Special Agent Lisa Ference. Defense attorney Benjamin Brafman kept it short and sweet, verifying through questioning that the FBI made no effort to inform Cohen and his associates that what they were doing was illegal.

Judge Griesa recessed the jury after Ference's testimony, and once again, the meat of the day's proceedings came in the jury's absence. During this first recess, Brafman motioned for an acquittal on all counts. Brafman argued that counts 7 and 8 should be dismissed because evidence was collected after Cohen's surrender and that count 7 consisted of the transfer of information and not an actual bet. Griesa denied both motions and reminded the court that WSE continued to operate after Cohen's surrender. He also said that calls in which no bets were taken could be considered as aiding and abetting.

Brafman motioned to have counts 3, 4 and 5 dismissed on the grounds that they relate to betting over the Internet, an activity which the defense believes does not clearly fall under the description of a wire communication facility given in the Federal Wire Act. Judge Griesa denied those motions as well.

Brafman then moved to have counts 2, 6 and 7 dismissed again on the grounds that no bets were placed or taken. Cohen's defense, in this case, relies on §1084B, which states " [n]othing in [Section 1084] shall be construed to prevent the transmission in interstate or foreign commerce ... of information assisting in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal."

Judge Griesa deferred his decision on these motions until after he has read a letter submitted to the court today by the defense. The letter could play an integral role in Cohen's defense depending on how Judge Griesa interprets section B. The defense argues that section B exempts WSE because taking sports wagers is legal in Antigua and placing sports wagers, according to the defense, is legal in New York. The government disagrees, as outlined by a letter it submitted to the court Monday. (IGN will make a copy of the defense's Feb. 22 letter, and possibly the Government's Feb. 21 letter as well, available for viewing tomorrow.)

The defense's first letter to the court, submitted last week, was discussed as well. Judge Greisa again confirmed that he does not agree with the defense's interpretation of the statute. He also criticized the government for not responding to the letter and for not researching the matter.

Later during the recess, the government motioned that two of the defense's witnesses are not qualified to be third parties because they are both investors in WSE. Preserving the theme of the day, Judge Griesa denied the motion.

Finally, Brafman introduced another new defense--that WSE was modeled after the New York Off-track Betting services. He mentioned that nobody has been charged with violating 1084 for accepting OTB wagers and pointed out that NY OTB is allowed to take bets in New York from jurisdictions where pari-mutuel wagering is not legal. The government countered by suggesting that pari-mutuel betting is legal in New York but sports betting is not. Brafman replied, "Yes, but sports betting is legal in Antigua."

Brafman additionally pointed out that WSE was advised by respectable accounting and law firms and advised that that one of WSE's competitors--Sports International (SBET) was publicly held and that even the SEC considered such a business to be legitimate.

After several minutes of spirited argument, Judge Griesa ruled that he will allow the defense to go forward with its testimony, however, he said that the defense's argument that legal and financial advisors did not believe Cohen was breaking the law is not relevant.

After the lengthy first recess, the defense called Gary Sparks and Richard Grebe, Cohen's associates from his former employer, Group One, a trading firm on the Pacific Stock Exchange. Both witnesses are also investors in WSE. Sparks testified that Cohen was making between $500,000 and $600,000 annually before leaving the firm in '96 to start WSE. Both Sparks and Grebe were involved in drafting the private placement memorandum for WSE.

Sparks testified that Cohen looked at Costa Rica and Belize before choosing to locate WSE in Antigua. He also testified that Cohen borrowed $100,000 from Group One to post bond.

Brafman asked Sparks during his direct examination whether Cohen had consulted a lawyer while determining whether a business like WSE would be illegal and the government objected. The objection was sustained, however, Judge Griesa dismissed the jury following Sparks's testimony to solicit the intention of the question. Brafman explained that the defense was based on advice of counsel (that Cohen was advised incorrectly by attorneys) and the government argued that this is not a valid defense in the case of statute 1084. Judge Griesa ruled that the objection was sustained for the moment, but told the defense it could renew the point upon supplying further details and allowing the government time to research the point since the government was not informed that it would be used.

The defense finally called on Jay Cohen to testified shortly after 3 p.m. When asked why he chose to testify, Cohen answered, "I feel I'm not guilty, I want to clear my name and I've waited a long time to have my day in court."

During the direct examination, Cohen pointed to SBET's involvement in Net betting as an indication that operators of offshore sports wagering websites are accepted by the SEC as a legitimate company. He also reminded the court that Tony Coelho, a former majority whip and current manager of Al Gore's campaign for the presidency, was on SBET's board of directors.

Cohen additionally testified that he personally researched all the possible locations to set up an offshore sports betting operation and he concluded that, "Antigua had the most stringent regulations." Following this comment, Antigua's gaming legislation and regulations were offered by the defense as evidence. Government objections to the use of both exhibits were overruled.

Cohen also testified that he paid taxes on his offshore business properly and that he did not try to hide WSE's activity from the government or the public.

Cohen said that he was not forced to come back to the United States, but he did anyway because he believed he was in the right. "I came back to fight it because I thought what they were doing was wrong and I still think it is wrong," he testified, "and I came back to clear my name."

Finally, Cohen attempted to testify that the company was modeled after the Capital Off-track Betting, but the Government successfully objected. He repeated several times that he did not believe he was breaking the law and that "all bets take place in Antigua." He called the style of wagering accepted by WSE "account wagering" and said it was no different from what Capital does. The defense tried to reference Capital OTB a second and third time as well, and the government objected accordingly.

During an ensuing recess, Judge Griesa ruled that he would not allow the OTB analogy because it doesn't work. He also again touched on the letter that the defense submitted to the court on Feb. 16, calling it "a dreadful argument" that is "a distortion and evasion of the statute." After further argument, he declared the argument "totally, completely, 100 percent invalid."

Brafman then turned to the argument that Cohen's actions are legal under the language of the Wire Act, arguing that the phone call is merely transferring information--a request for a bet to be made--and that the phone operator actually places the bet.

The gears immediately shifted back to the OTB argument, as Brafman explained that Cohen spent six months researching specifically so he wouldn't break the law. The government maintained that OTB wagering is not the same as offshore wagering and that OTB's are not regulated by the Wire Act.

Judge Griesa expressed his concern that the jury would get confused as to what is legal, but finally agreed to allow Cohen to use the OTB defense, telling the government that it could make its case through the cross examination.

Following the recess, Cohen testified that he was modeling the business after the New York OTB, and Judge Griesa told the jury that he will advise them later as to how the Wire Act applies.

Brafman continued with further questions regarding Cohen's extensive research including whether Cohen researched the Wire Act and if he thought WSE fell into the exception--to both of which Cohen answered, yes.

The defense then turned to a comment made by John Russel, a spokesperson for the Department of Justice, regarding his assertion that offshore wagering is out of the United State's jurisdiction.

The Kyl bill--and the assertions that it sought to amend U.S. penal code to cover Net betting--was brought up as well.

The long day ended with the government's cross examination of Cohen, which will continue tomorrow. Pesce angled to discredit Antigua as a legitimate regulator of gambling. She asked Cohen, "Didn't you get your license in two weeks?"

She continued with additional questions of the same nature:

"The government of Antigua in fact isn't that strict, is that right?"

"Antigua has the right to charge discretionary fees, isn't that right?"

"Didn't you call the Antiguan government corrupt?"

She then challenged Cohen's decision to return home. "Is it safe to say Antigua doesn't have the same amenities as the U.S.?"

Cohen replied (perhaps the quote of the day), "They don't have as good a cheesburger."

Finally, she asked, "Isn't Antigua a Third World Country?"

Following the recessing of the jury, the Government motioned to call another witness, Scott Charney of the U.S. Justice Department, to testify in response to the defense has bringing the DOJ's views into the picture. The defense said it would then wish to respond by calling Antiguan Prime Minister Lester Bird and Director of Offshore Gaming Gyneth McAllister to testify as well. If this happens the court may have to adjourn until the witnesses located in Antigua can get to New York.

Perhaps the most interesting side note of the day: After court was adjourned, Gary Collins, chairman of the Antigua Gaming Committee, voiced his adamant displeasure with the government's references to Antigua. "The Antiguan government strongly resents the government's assertion that Antigua is corrupt and that it is not properly regulated," he said. He also said that he planned to speak with the ambassador to Antigua about the matter.

The Jay Cohen Trial - Day Six