Readers may remember that in October, Congress passed the SAFE Port Act, which contained an anti-online gambling section that was appended right before passage.  President Bush then signed the Act into law.  The provisions create civil and criminal liability for "financial transaction providers" who knowingly control bets and wagers and "operates, manages, supervises, or directs an Internet website at which unlawful bets or wagers may be placed, received, or otherwise made, or at which unlawful bets or wagers are offered to be placed, received, or otherwise made."

On Monday, the U.S. Department of Justice arrested two Canadian founders and current shareholders of Neteller Plc, the PayPal of Canada and the UK (incorporated in the Isle of Man).  Neteller is part of the Neteller Group, which is regulated by the UK Financial Services Authority and listed on the UK AIM stock exchange.  After PayPal exited the online gambling market a few years ago at the insistence of New York regulators, Neteller became the online payment system of choice for online gamblers.  Stephen Lawrence was arrested in the U.S. Virgin Islands, and John Lefebvre was arrested in Malibu, California.  Neither men are currently officers, directors or employees of Neteller, although prior to October, Lawrence was a nonexecutive director and prior to December 2005, Lefebvre was a nonexecutive director.  Following these arrests, Neteller announced today that it would no longer accept U.S. customers.

Interestingly, the two men were not charged with violating the SAFE Port Act.  The two were charged with money laundering.  Perhaps this charge is more compelling after the passage of the SAFE Port Act specifically criminalizes online gambling.  Note that money laundering carries a maximum 20-year sentence whereas the SAFE Port Act provides for a mere 5-year maximum.

What I'm most interested in knowing is under what theory are these shareholders liable?  Neither man owns more than 6% of the company, and each man owns that indirectly.  Neither man was acting as an agent of Neteller.  The release from the Southern District of New York says this:

“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, 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.”

I cannot find a charging instrument on Pacer as of this morning.  If someone understands more about money laundering and how charges can extend to nonparticipant shareholders, please enlighten!

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