January 22, 2007
More Gambling Subpoenas -- This Time, the Investment Bankers
Posted by Christine Hurt

One week after arresting two non-U.S. shareholders in a non-U.S. financial services company that was used by U.S. online gamblers, the Justice Department has issued subpoenas to four firms -- HSBC, Credit Suisse, Deutsche Bank and Dresdner Kleinwort.  Each of these banks has major operations in the U.S.  What these banks have in common is that they participated in the IPOs of popular online gambling sites, such as PartyGaming.  The reporters do not know if the subpoenas are merely information-seeking or are a signal of a future prosecution of the firms.  The subpoenas may be designed to identify U.S. shareholders of online gambling companies for future arrests.

For everyone keeping score, here is the current list of DOJ anti-gambling targets:

  • Neteller's Canadian founders Stephen Lawrence and John Lefebvre, who indirectly own less than 6% of Neteller and hold no officer or director positions -- arrested Monday, January 15, 2007 while vacationing in Malibu and the U.S. Virgin Islands
  • David Carruthers, CEO of BetonSports, arrested while changing planes at DFW in July 2006.  Ten other arrest warrants were issued for non-U.S. BetonSports employees, and four have been arrested in the U.S. so far.
  • Sportingbet's CEO Peter Dicks was detained in New York on Louisiana warrant, but NY refused to extradict him and allowed him to return to his home in the UK.

At times like these, I wish I knew more about civil procedure and conflicts of laws than corporate law. The NYT article attributes to attorney Lawrence Ge. Walters the belief that these subpoenas are a radical departure "because the prevailing wisdom had been that investment in a company that is legal and licensed in its jurisdiction was not grounds for prosecution." So, if the U.S. can arrest non-U.S. shareholders of non-U.S. companies that are legal in their jurisdiction, then can these scenarios happen?

  • If a resident of Texas, where commercial casinos are not legal, buys stock in Harrah's, can the resident be prosecuted in Texas for illegal gambling?
  • If a resident of Nevada, where commercial casinos are legal, buys stock in Harrah's, but goes skiing in Utah, can Utah police arrest the NE resident for illegal gambling?
  • Can the state of Texas prosecute the editors of Texas Monthly for selling advertising space to Harrah's?
  • Can the state of Texas prosecute a private charter bus company for taking Texas residents from Houston to Louisiana casinos?

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ยป More on the new Prohibition from Houston's Clear Thinkers ...
"On the heels of this post from last week, the Justice Department is now turning on Wall Street in co ..." [more] (Tracked on January 23, 2007 @ 7:34)
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