MULTI-BIL­LION-DOL­LAR CHARGES FOR B.C. MAN

Salt­spring man al­leged to have pro­moted il­le­gal gam­bling through his In­ter­net com­pany

Vancouver Sun - - Front Page - BY DAVID BAINES

Salt­spring Is­land res­i­dent John Lefebvre hit the jack­pot in Novem­ber 2005 when he cashed in $123 mil­lion worth of shares of his off­shore com­pany, NETeller Inc., which han­dles bil­lions of dol­lars of money trans­fers for In­ter­net gam­blers.

The bo­nanza en­abled him to pur­sue a life of lux­ury, in­clud­ing a beach house in Mal­ibu (which ac­tress Jen­nifer Anis­ton was also eye­ing), and to sup­port var­i­ous a c a d e m i c , p h i l a n t h ro p i c a n d po­lit­i­cal en­deav­ours, in­clud­ing a $170,000 do­na­tion aimed at helpi n g V i s i o n Va n c o u v e r ’ s Jim Green win the mayor’s chair in the last civic elec­tion.

But in a sud­den re­ver­sal of for­tune Mon­day, Lefebvre, 55, was ar­rested by FBI agents at his Mal- ibu home and charged with con­spir­ing to pro­mote il­le­gal gam­bling by trans­fer­ring bil­lions of dol­lars of cy­berspace bets placed by U.S. cit­i­zens with off­shore gam­ing com­pa­nies.

He was jailed at the Metropoli­tan Cen­ter, the fed­eral hold­ing fa­cil­ity in down­town Los An­ge­les, and ap­peared in Los An­ge­les Court Tues­day af­ter­noon. Bail was set at $5 mil­lion US. At press time Tues­day, it was not clear whether he posted that bail.

NETeller co-founder Stephen Eric Lawrence, 46, for­merly of Cal­gary, was also ar­rested in the U.S. Vir­gin Is­lands and sim­i­larly charged with trans­fer­ring funds with the in­tent to pro­mote il­le­gal gam­bling. He was to ap­pear in fed­eral court in St. Thomas to­day.

If con­victed, both men face a max­i­mum sen­tence of 20 years in prison.

Based in the Isle of Man, NETeller de­scribes it­self as “the largest in­de­pen­dent on­line money trans­fer busi­ness in the world” with more than three mil­lion cus­tomers in 160 coun­tries, 3, 500 mer­chants and more than $7 bil­lion US in an­nual trans­ac­tions. The com­pany’s shares are listed on the Lon­don Stock Ex­change’s AIM mar­ket.

In a re­lease Tues­day, the U.S. Jus­tice De­part­ment said 95 per cent of NETeller’s rev­enues are de­rived from In­ter­net gam­ing, and the ma­jor­ity of those rev­enues come from U.S. res­i­dents.

Mark Mer­shon, FBI as­sis­tant di­rec­tor in New York, said the bil­lions of dol­lars wa­gered by U.S. cit­i­zens with off­shore gam­ing com­pa­nies, and fun­nelled through com­pa­nies like NETeller, “amounts to a colos­sal crim­i­nal en­ter­prise mas­querad­ing as le­git­i­mate busi­ness. . . . The FBI is adamant about shut­ting off the flow of il­le­gal cash.”

Michael Gar­cia, U.S. at­tor­ney for the south­ern dis­trict of New York, said that when the two men took their com­pany pub­lic in Lon­don in 1999 (in a deal brok e r e d b y Va n c o u v e r - b a s e d Canac­cord Cap­i­tal Corp.), they ac­knowl­edged in of­fer­ing doc­u­ments that In­ter­net gam­ing, and t ra n s fe r r i n g t h e p ro ce e d s of In­ter­net gam­ing, were il­le­gal and there­fore rep­re­sented an in­vest­ment risk.

“Bla­tant vi­o­la­tions of U.S. law are not a mere ‘risk’ to be dis­closed to prospec­tive in­vestors,” Gar­cia said. “Crim­i­nal prose­cu­tions re­lated to on­line gam­bling will be pur­sued in cases where as­sets and de­fen­dants are posit i o n e d o ut s i d e of t h e Un i te d States.”

The NETeller ar­rests are the latest in a se­ries of U.S. fed­eral ini­tia­tives to com­bat il­le­gal In­ter­net gam­ing:

In July 2003, Pay­Pal (an ecom­merce com­pany sim­i­lar to NETeller) set­tled charges that it aided il­le­gal off­shore gam­ing by for­feit­ing $10 mil­lion US of ill­got­ten gains.

In May 2006, the U.S. Jus­tice De­part­ment un­sealed an in­dict­ment against Antig ua-based Wo r l d w i d e Te l e s p o r t s I n c . , owned by Bet­corp, a com­pany l i s t e d o n t h e Au s t ra l i a St o c k Ex­change.

I n Ju ly 20 0 6 , t h e Ju s t i ce De­part­ment un­sealed an in­dictm e n t a ga i n s t L o n d o n - ba s e d BetonS­ports PLC. Shock­waves rip­pled through the In­ter­net gam­ing com­mu­nity when one of the com­pany’s ex­ec­u­tives, David Car­ruthers, was ar­rested by FBI agents at the Fort Worth, Tex., air­port en route to Costa Rica, where the com­pany has bet­ting op­er­a­tions, and thrown in jail.

In Septem­ber 2006, the U.S. Cong ress passed leg­is­la­tion specif ically pro­hibit­ing credit card com­pa­nies and e-com­merce c o m p a n i e s s u c h a s N E Te l l e r f ro m t ra n s fe r r i n g m o n ey fo r In­ter­net gam­ing pur­poses.

This ini­tia­tive sent the share price of pub­licly trad­ing com­pa­nies in­volved in In­ter­net gam­ing, in­clud­ing NETeller, reel­ing.

But by this time, Lefebvre and Lawrence had sev­ered most of their ties with the com­pany and had cashed in most of their shares. Their tim­ing ap­peared im­pec­ca­ble, un­til Mon­day’s ar­rests.

Con­tin­u­ing U.S. pres­sure on off­shore gam­ing op­er­a­tors is causi n g m a ny o t h e r In­ter­net gam­ing com­pa­nies to change t h e way they do busi­ness.

One of those com­pa­nies is Bodog.com, one of the big­gest In­ter­net gam­ing com­pa­nies in the world. In 2005, it took in $7.3 bil­lion US in wa­gers, 95 per cent from U.S. res­i­dents.

Bodog is owned

by part-time Van­cou­ver res­i­dent Calvin Ayre, who owns some ex­pen­sive real es­tate in the Lower Main­land, in­clud­ing two pen­t­house apart­ments in Yale­town.

He also owns Rip­town Me­dia, a Van­cou­ver com­pany that pro­vides mar­ket­ing, ad­ver­tis­ing and pro­mo­tion sup­port for Bodog, and Triple Crown Cus­tomer Ser­vice, a Burn­aby call cen­tre for cus­tomers who want to set up bet­ting ac­counts or to ask ques­tions about their ac­counts.

A f te r Ca r r ut h e rs ’ a r re s t in Texas, Ayre can­celled an In­ter­net gam­ing con­fer­ence Bodog had planned to hold in Las Ve­gas. He also stopped trav­el­ling to the United States.

In De­cem­ber, he an­nounced he would pull all Bodog’s U.S. gam­ing-re­lated ad­ver­tis­ing and move t h e f i r m’s h e ad q u a r te rs f ro m Costa Rica to An­tigua, which he v i ews a s a “ sa fe, re l i a b l e a n d well-reg­u­lated ju­ris­dic­tion.”

Ayre is now look­ing to Europe and Asia, rather than the United States, for fu­ture gam­ing growth, and is di­ver­si­fy­ing into mu­sic, film pro­duc­tion and other nongam­ing pur­suits such as mixed mar­tial arts.

How­ever, his firm con­tin­ues to take bets from U.S. res­i­dents, rais­ing the ques­tion as to whether he will be the U.S. Just i ce D e pa r t m e n t ’s n ex t tar­get.

STU­ART DAVIS/VAN­COU­VER SUN FILES

John Lefebvre is pic­tured in the front row at a Sept. 9, 2006 event at GM Place fea­tur­ing the Dalai Lama. Lefebvre is wear­ing a white scar f, called a kata, that the Dalai Lama be­stows upon those he meets in per­son in a tra­di­tional Ti­betan farewell.

CHUCK RUS­SELL/VAN­COU­VER SUN

For­mer U.S. Pres­i­dent Bill Clin­ton signs his book, My Life, for John Lefebvre, who bid thou­sands of dol­lars it at a Van­cou­ver char­ity ben­e­fit last May. Lefebvre has been ar­rested in the U.S.

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