More information was beginning to surface during the late night hours regarding the arrests of two NETeller founders. The company is the biggest third party money processing company catering to the online gambling industry.
John Lefebvre was reportedly taken into custody at his Malibu home during the early morning hours of Monday January 15 according to sources close to Gambling911.com.
"Both (founders of NETeller) have houses in the USA," the source disclosed. "That is why they were in the US...they spend a great deal of time there."
While a bill to curb some forms of online gambling went into effect this past October, these arrests indicate a more prolonged investigation.
Lefebvre, a one time acid loving hippie, started the hugely successful company with Steve Lawrence in 1999 but retired in 2002 in Costa Rica. Lefebvre loved recounting his days as a flower child and rebel, who did have brushes with the law during his most rebellious years in the 1960's.
Lefebvre, now in his 50's, shaved his heavy disheveled bush of hair a few years ago. The frolicking fun man eventually settled down and got married. He was once a favorite personality heavily profiled by the Gambling911.com website, but in recent years Lefebvre has maintained a relatively low profile.
Unless government officials are torturing or starving him, he is probably the last person in the world who will back down, though it should be pointed out that our initial sources have stated that Lefebvre is yet to be charged with any offense.
Steve Lawrence served as Chairman of Neteller until October 13, 2005.
"He (Lawrence) resigned and both men have substantial holdings of stock as well," another source disclosed to Gambling911.com Monday evening.
NETeller is a publicly traded company on the London Stock Exchange. Most of the company's current executives reside in and around the Isle of Man, a crown dependency of Great Britain, right off its coast, which serves as a primary online gambling jurisdiction. The Isle of Man is also home to PokerStars.
NETeller executives were expected to issue a statement regarding the arrests some time after midnight Eastern Time.
Likewise, online gamblers who have become dependent on NETeller, fear for the worst. NETeller was one of the few publicly traded internet gambling related firms to continue doing business with US citizens.
Details of the arrest were not known at press time late Monday evening.
Individual US states have frowned upon NETeller and other similar third party money transaction companies in the past. Maryland, for example, requires that banks be physically based in the state in order to conduct business with its citizens. NETeller voluntarily stopped accepting customers from that state a few years ago.
In 2002, New York State's then Attorney General, Eliot Spitzer, went on a rampage against PayPal, forcing that third party money transaction firm to stop taking business from New York citizens of the purposes of online gambling. Spitzer also demanded banks in the state do the same.
Then there is Louisiana State, which seems more concerned with going after online gambling company operators than cleaning up the mess left by Hurricane Katrina.
It has issued numerous arrests warrants against online gambling executives including a former Sportingbet non-executive chairperson who was arrested during a routine check at New York's JFK airport this past summer. He was later released after New York State cited inadequate laws to have him extradited to Louisiana.
Last July, now defunct BetonSports CEO David Carruthers, was arrested and charged while changing flights in the United States on various charges including money laundering and tax evasion. He has plead "Not Guilty" and intends to fight the case. Carruthers is a British national who remains under house arrest outside St. Louis, Missouri.
Last week PinnacleSports stunned an already shell-shocked industry by announcing it would part ways with US customers effective immediately this past Thursday. The US made up an estimated 60% of its customer base.
Pinnacle claimed that the recent legal environment in the States made it difficult to process transactions, though other online gambling companies have suggested it is no more difficult than prior to the passing into law a measure that would curb some forms of internet gambling by holding banking institutions responsible.
Updated 1/16 2:30pm
United States Attorney
Southern District of New York
FOR IMMEDIATE RELEASE CONTACT: U.S. ATTORNEY’S OFFICE
U.S. CHARGES TWO FOUNDERS OF PAYMENT SERVICES COMPANY
WITH LAUNDERING BILLIONS OF DOLLARS OF
INTERNET GAMBLING PROCEEDS
MICHAEL J. GARCIA, the United States Attorney for the
Southern District of New York, and MARK J. MERSHON, the Assistant
Director-in-Charge of the New York Office of the Federal Bureau of
Investigation ("FBI"), announced today that STEPHEN ERIC LAWRENCE
and JOHN DAVID LEFEBVRE were arrested yesterday in connection with
the creation and operation of an internet payment services company
that facilitated the transfer of billions of dollars of illegal
gambling proceeds from United States citizens to the owners of
various internet gambling companies located overseas. According to
the two criminal Complaints unsealed yesterday:
Neteller PLC ("Neteller"), formerly known as Neteller,
Inc., is an internet payment services company that was founded by
LAWRENCE and LEFEBVRE in 1999. Neteller is based in the Isle of
Man and is publicly traded in the United Kingdom. Neteller began
processing internet gambling transactions in approximately July
2000. Internet payment services companies, like Neteller, allow
gambling companies to transfer money collected from United States
customers to bank accounts outside the United States. According to
Neteller’s 2005 annual report, LAWRENCE and LEFEBVRE, through
Neteller, provided payment services to more than 80% of worldwide
gaming merchants.
Since founding Neteller, LAWRENCE and LEFEBVRE have held
numerous senior management positions at the company. For instance,
LAWRENCE served as Chief Executive Officer of Neteller until
December 2002; as executive director of Neteller from 2001 to
August 31, 2003; and as Chairman of the Board of Directors of
Neteller until May 11, 2006. LAWRENCE left the Board of Directors
on October 13, 2006. LEFEBVRE served as President of Neteller from
2000 to 2002; and was a member of the Board of Directors until
approximately December 2005.
Furthermore, LAWRENCE and LEFEBVRE have both held
significant ownership interests in Neteller. As of December 31,
2004, LAWRENCE was the largest shareholder of Neteller, owning
21.94% of the outstanding shares of Neteller PLC. As of the same
date, LEFEBVRE was the second-largest shareholder of Neteller PLC,
owning 13.44% of the outstanding shares of the company.
At the time that the defendants took Neteller public, the
company acknowledged in its offering documents that United States
law prohibited persons from promoting certain forms of gambling,
including internet gambling, and transmitting funds that are known
to have been derived from criminal activity or are intended to
promote criminal activity. The company’s directors, including
LAWRENCE and LEFEBVRE, also conceded that they were risking
prosecution by the government of the United States under existing
or future federal laws.
In 2005, Neteller processed over $7.3 billion in
financial transactions. According to reports issued by Neteller,
95% of its revenue was derived from money transfers involving
internet gambling companies. On September 11, 2006, the President
and Chief Executive Officer of Neteller described the "online
gaming market" as Neteller’s "main market," and stated that, in the
first half of 2006, Neteller processed $5.1 billion in financial
transactions. As charged in the complaint, approximately 85% of
Neteller’s revenue during that period derived from individuals in
North America, and 75% of its North American revenue was generated
in the United States. Both the operation of an internet gambling
operation and the transferring of the proceeds from these
businesses overseas are illegal under United States law.
LAWRENCE and LEFEBVRE are both charged with conspiring to
transfer funds with the intent to promote illegal gambling. If
convicted, both defendants face a maximum sentence of 20 years’
imprisonment.
LAWRENCE, 46, was arrested yesterday in the United States
Virgin Islands and will be presented in federal court in St. Thomas
by tomorrow. LEFEBVRE, 55, was arrested yesterday in Malibu,
California and will be presented in Los Angeles federal court later
today. LAWRENCE currently resides in Paradise Island, Bahamas.
Both are Canadian citizens.
-3-
This prosecution is part of the United States Department
of Justice’s effort to combat unlawful internet gambling through,
among other things, the implementation of the federal anti-money
laundering statutes. Other recent examples of the Justice
Department’s efforts in this regard include the indictments of two
offshore internet gambling companies – Worldwide Telesports, Inc.,
(indictment unsealed on May 17, 2006 in the United States District
Court for the District of Columbia) and BetonSports, PLC, a
publicly traded holding company that owns a number of Internet
sportsbooks and casinos, and its founder, Gary Stephen Kaplan
(indictment unsealed July 17, 2006 in the United States District
Court for the Eastern District of Missouri). Additionally, in July
2003, one of Neteller’s competitors, PayPal, and its parent eBay,
entered into a civil settlement agreement with the United States
Attorney’s Office for the Eastern District of Missouri to settle
allegations it aided in illegal offshore and on-line gambling
activities. As part of the agreement, PayPal agreed to forfeit $10
million, representing proceeds derived by PayPal from the
processing of illegal gambling transactions.
Mr. GARCIA praised the investigative efforts of the FBI
and thanked the United States Custom & Border Patrol, United States
Coast Guard, and Virgin Islands Police Department for their
assistance in the investigation. Mr. GARCIA added that the
investigation is continuing.
Mr. GARCIA stated, "Internet gambling has become a
multibillion-dollar industry that derives a major portion of its
revenues from United States citizens. STEPHEN ERIC LAWRENCE and
JOHN DAVID LEFEBVRE knew when they took their company public that
its activities, as well as those of the internet gambling companies
it assisted, were illegal in the United States. Blatant violations
of U.S. law are not a mere ‘risk’ to be disclosed to prospective
investors. Criminal prosecutions related to online gambling will
be pursued even in cases where assets and defendants are positioned
outside of the United States."
FBI Assistant Director MERSHON stated: "Internet gambling
is a multibillion-dollar industry. A significant portion of that
is the illegal handling of Americans' bets with offshore gaming
companies, which amounts to a colossal criminal enterprise
masquerading as legitimate business. There is ample indication
these defendants knew the American market for their services was
illegal. The FBI is adamant about shutting off the flow of illegal
cash."
-4-
Assistant United States Attorneys TIMOTHY J. TREANOR,
CHRISTOPHER P. CONNIFF, and CHRISTINE MEDING are in charge of the
prosecutions.
The charges contained in the Complaints are merely
accusations, and the defendants are presumed innocent unless and
until proven guilty.
07-012 ###
Update 3
According to a complaint unsealed Tuesday against two founder of NETeller.com, a publicly traded third party cash processor catering to the online gambling industry, an investigation into the company was begun prior to laws passed in the US that attempt to curb some forms of internet gambling.
Lefebvre and another man, Stephen Lawrence, were arrested Monday morning on opposite sides of the US.
While many companies panicked and pulled out of the United States following the signing into law of this act, Gambling911.com has long pointed out that the US Justice Department always considered certain activities illegal and that the passage of this new law would do little to change this stance.
The Unlawful Internet Gambling Enforcement Act of 2006 requires banking institutions to monitor internet gambling transactions. The banking sector has claimed they do not have the necessary means to do so. The law was tacked onto a Port Security Act and written hastily by politicians with what many believe to be ulterior motives (i.e. horse racing was exempt from the new law as were state lotteries).
The US Justice Department, often acting in conjunction with local law enforcement agencies, regularly attempt to draw ties between organized crime and money laundering with online gambling activity, mostly because some "offshore" establishments are known to employ "agents" or "runners" who collect monies within the United States.
Even BetonSports, a publicly traded company indicted this past July, was later shown to be scrutinized as a result of engaging in credit businesses within the United States.
The Justice Department, in its case against NETeller, appears to find that the company was a major facilitator of such transactions. The complaint further alleges that defendant "STEPHEN ERIC LAWRENCE, the defendant, and others known and unknown, would and did transport, transmit, and transfer monetary instruments and funds from a place in the United States to and through a place outside the United States and to a place in the
United States from and through a place outside the United States
with the intent to promote the carrying on of specified unlawful activity."
Of interest is the fact that this investigation did not begin until June 2006.
"Since in or about June 2006, the Federal Bureau of Investigation ("FBI") has been conducting an investigation of Neteller PLC, a company that is based in Isle of Man and is publicly-traded in the United Kingdom. The investigation has revealed that Neteller PLC conducts and facilitates illegal
financial transactions between gambling customers in the United
States and numerous offshore online gambling businesses."
NETeller was one of the few publicly traded internet gambling related firms that did not pull out of the US market following the signing into law of UIGE. Shareholder pressure forced most firms such as BetCorp and PartyGaming to abandon their US customer base. Most of these firms are publicly traded on the London Stock Exchange where online gambling is viewed as a legal and highly profitable industry. PartyGaming was the single largest IPO when it went public in 2005.
What most of these companies fail to realize is that pulling out of the US market will not make them less vulnerable to prosecution assuming an investigation was ongoing prior to the passage of UIGE.
Gambling911.com will continue to monitor this story as it develops.