April 19th, 2011

Foreign Money Fuels Faltering Bid to Push Online Poker

The New York Times

For the past four years, the foreign companies that control the global Internet poker industry have helped bankroll an elaborate lobbying campaign here, seeking to keep the United States from shutting their American operations down.

Former Senator Alfonse M. D’Amato, Republican of New York, has been the public face of the effort, which has included charity poker tournaments featuring members of Congress, as well as hundreds of thousands of dollars in campaign contributions to a disparate assortment of lawmakers, including Representative Barney Frank, Democrat of Massachusetts, and Senator Harry Reid, Democrat of Nevada, the majority leader.

But late last week, the United States Justice Department delivered an unexpected thunderbolt to this huge lobbying campaign when it indicted top executives at PokerStars, Full Tilt Poker and Absolute Poker, accusing them of fraud and money laundering. In doing so the government has taken on a politically powerful industry that for a while seemed like it might transform gambling around the world.

As evidence of the industry’s shifting fortunes, major gambling operators like Wynn Resorts are already distancing themselves from the three Internet gambling companies, canceling planned business alliances. ESPN has removed poker-related content from its own Internet site.

This is exactly what the industry was trying to prevent when it set out to block enforcement of a law intended to ban Internet games or to get the law repealed. Interviews show that the companies named in the indictment, while foreign-based, have indirectly been paying more than half of the lobbying and operating bills for a nonprofit organization that is championing Internet gambling in the United States.

Mr. Frank, in an interview on Monday, said he had no plan to back down. “It is a bad law,” he said. “How is it possible that a United States attorney in New York does not have anything more to do than indict people for a full house? He should be indicting people for the empty houses we have around,” referring to the troubles in the mortgage industry.

Mr. Frank and Representative John Campbell, Republican of California, in March introduced yet another bill, backed by the Poker Players Alliance, a Washington-based nonprofit group. Its budget is subsidized by a Canadian trade association whose members include the companies that run Poker Stars and Full Tilt Poker.

As a senator, Mr. D’Amato played a regular poker game that featured lobbyists. On Friday, he said in a statement, “Online poker is not a crime and should not be treated as such.”

An estimated 10 million online poker players in the United States have turned to these Internet sites, helping generate perhaps as much as $5 billion in annual revenues for the companies.

On Friday the Justice Department said the companies had illegally moved their earnings to corporate headquarters in spots like the Isle of Man in Great Britain and Costa Rica by conspiring with middlemen who disguised them as sales of items like flowers, pet supplies and golf clubs.

Read more: http://www.nytimes.com/2011/04/19/us/politics/19lobby.html?ref=technology


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