The Perplexing Priorities of the DOJ and the SDNY

I plan to cover a wide-range of topics on this blog, mostly involving legal issues that might be of interest to me or my clients. For my first, I thought it would be interesting to make a couple of initial observations that are brought to my mind by Friday’s indictment of key executives at Poker Stars, Full Tilt Poker, and Absolute Poker. I hope to examine the legal issues raised in more detail in some future posts.

The indictment, which was unsealed on Friday, charges a number of violations of the Unlawful Internet Gambling Enforcement Act (UIGEA) and conspiracy to violate the act, among other things. The indictment is built upon the premise that internet poker is unlawful gambling as defined by the act. The act defines a prohibited “bet or wager” as “the staking or risking by any person of something of value upon the outcome of a contest of others, a sporting event, or a game subject to chance…” 31 U.S.C. 5362(1)(A).

It seems to me that this definition includes not only poker, but also a significant percentage of the economic activity of the United States. This fact was not lost on the drafters of this law, who specifically exempted securities and commodities exchange and the insurance industry, among other activities. This is essentially an acknowledgement that legislators were unable to come up with a definition of gambling which did not also prohibit securities and commodities exchange activities, the insurance industry, and the other exempted activities. Which is interesting, and brings me to my second observation.

The Southern District of New York (SDNY), which covers Manhattan, the Bronx, and several outlying counties, was apparently in charge of the online poker investigation and indictment. The SDNY issued a press release additionally thanking the “Complex Frauds” and “Asset Forfeiture” divisions for their help in putting a stop to the online menace. Which got me thinking: weren’t there some other complex frauds committed in that general neighborhood recently? Perhaps some that might be more destructive to the country at large? Like maybe at 70 Pine Street, where AIG houses their international offices? Or perhaps 383 Madison Avenue, the former home of Bear Stearns, whose executives are accused by civil plaintiffs of cheating and defrauding investors through the sale of securities that they characterized themselves as a “sack of s__t”[1]? These executives landed nice new gigs within the friendly confines of downtown Manhattan. Meanwhile, the SDNY Complex Frauds division has put a stop to the agony of the bad beat by arresting two guys (in Utah and Nevada), convincing a third (from Illinois) to surrender in Manhattan, and indicting 8 others who are presently outside the reach of U.S. law enforcement.

Probably I’m just missing something. Right?


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