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Md.’s U.S. Attorney talks about why his office is targeting online gaming sites

Last week, the U.S. Attorney’s Office for the District of Maryland lobbed the first volley against one of the biggest players in the online sports betting world when it seized the website and charged four of the company’s officers with money laundering and running an illegal gambling operation.

Rod J. Rosenstein

The two-count indictment alleges that Bodog’s officers moved funds from the company’s bank accounts in Switzerland, England, Malta and Canada to pay winners in Maryland and elsewhere and also to pay for advertising for the site. From 2005 to 2008 alone, prosecutors say Bodog spent more than $42 million on advertising.

The company’s officers face up to five years in prison for the gambling charges and an additional 20 years for the money-laundering conspiracy charge. The company itself faces a $500,000 maximum fine on the two counts.

In an interview with The Daily Record on Friday, Rod J. Rosenstein sat down for a one-on-one discussion about the Bodog prosecution and why Maryland took the lead on the case.

Rosenstein is something of an anomaly, a long-serving U.S. Attorney and one who is a Republican appointee in a Democratic state under a Democratic president. He has been the U. S. Attorney for the District of Maryland since 2005. From 2001 to 2005, he served as principal deputy assistant attorney general for the Tax Division of the Department of Justice.

Asked why Maryland would tackle a player like Canadian-based Bodog, Rosenstein said the answer boiled down to enforcing laws on the books.

“When you criminalize an activity like that, what’s your enforcement mechanism? If there’s no enforcement then the people who are willing to flout the laws are able to get very rich because there’s no competition.”

His office’s bread and butter are prosecutions of violent crimes, fraud, environmental crimes, child exploitation and civil rights, while online gambling cases are more commonly associated with the larger Southern District of New York, which has handled similar prosecutions involving Full Tilt Poker, Pokerstars and many others.

But, Rosenstein said, the Maryland district is second only to that New York district in the prosecution of online gambling websites and the money-handlers they use to get funds to and from customers in the state and elsewhere.

He said Maryland’s involvement in online gambling investigations started with an IRS agent working out of the office. The agent devised a method that involves an investigator acting as a customer.

Rosenstein said the investigation is an example of the kind of collaboration with state and local law enforcement his office has made a priority. Having the resources and expertise to handle a complex case like Bodog and a similar indictment last year against online gambling site Thrillx Systems Ltd. and its principals trickles down to help local law enforcement who would have trouble carrying out an international or multijurisdictional investigation.

“The reason I support doing this here is that, number one, it needs to be done somewhere, and it’s important for the Department of Justice to be addressing crimes like this that do have a significant financial impact but are beyond the capabilities of state and local law enforcement to deal with,” Rosenstein said.

“If someone sets up a bookmaking operation on a corner in Baltimore City, the local authorities are going to crack down on it. But, if someone is doing the exact same thing, essentially, over the Internet, it’s going to be beyond the capabilities of local police and prosecutors because they don’t have the resources to investigate cases with suspects overseas and crimes occurring in multiple jurisdictions.”

He said one thing people often overlook is that this bookmaking is primarily a business — an unregulated one that leaves Maryland consumers exposed to a number of potential problems with little in the way of protections if things go wrong.

“When you have an operation like this that’s being run offshore it’s not being regulated. You don’t know if the odds are being set lawfully, you don’t know how the money is being handled, and if people feel they’ve been cheated they have absolutely no remedy.”

Just one tool

The indictment was criticized by some tech-savvy observers as a misstep, in that the website was changed to European servers and gambling itself carried out on another offshore website,

“Shutting down individual websites is not a 100 percent solution to the problem, it’s just one of the available tools we have,” Rosenstein said. “On the other hand, it is a significant deterrent if you have a customer who is deciding to use a certain provider and does a Google search and sees about all of this activity.”

When deciding on a prosecution, Rosenstein said, his office will consider how much of a deterrent it might be for others looking to engage in the same illegal behavior. He said the Bodog case and the other online gambling prosecutions were perfect examples.

“There is a high ‘bang for the buck,’ as far as deterrence goes, with these investigations,” Rosenstein said. “They have had a big impact on the industry.”

The investigation started in 2005 and culminated in the indictment that seeks not only criminal charges against Bodog founder Calvin Ayre, a Canadian citizen, and the others, but forfeiture of the illegal proceeds, estimated to be greater than $100 million.

Rosenstein said it might seem that taking on a high-profile case like Bodog would tie up the office and precious resources for years in dealing with multiple jurisdictions, the cat-and-mouse jumping around of Internet domains, and overseas defendants. But, he said, these cases do not require that much manpower. He said that normally a small team that includes one assistant attorney who also works on other cases is all that is needed.

“There’s a lot of money involved with these operations,” he said. “But that doesn’t mean the resources to handle them are commensurate with the money involved. We can carry out these investigations and they do not detract from all of the important things that we do.”

Rosenstein said the online gambling prosecutions have hurt the industry while educating potential customers that it is not only illegal but risky to patronize the sites.

“Two years ago if you did a search and were tempted by an ad to go and gamble on one of these sites, you might not realize it’s illegal,” he said. “Now, as a result of these prosecutions, there is a lot more awareness that it is a violation of federal law and it might make them less likely to consider it in the first place.”