Great article in American magazine Reason here about the arrest of David Carruthers, CEO of the BetOnSports online gambling business. Following hard on the heels of the arrest of the three Natwest bankers on charges connected with the collapse of Enron, it seems the British state is steadily losing the ability to protect its citizens from being grabbed by U.S. authorities for arrest for offences which are not offences in this country and where the domiciles of a person’s businesses are outside the United States.
Carruthers was on his way from London, where his company is headquartered, to Costa Rica, where its online betting operations are based. The business is perfectly legal in both of those places, but not in the United States. And since most of its customers are Americans, Carruthers is guilty of about 20 different felonies.
Or so the FBI and the Justice Department say, and they are the ones with the guns and handcuffs. Catherine Hanaway, the U.S. attorney for the Eastern District of Missouri, accuses Carruthers and 10 other people associated with BetOnSports, including company founder Gary Kaplan, of violating the 1961 Wire Act, which prohibits using “a wire communication facility” to accept bets on “any sporting event or contest.”
Despite the talk of fraud, BetOnSports is not accused of ripping off its customers. This case has nothing to do with consumer protection, except in the sense of protecting consumers from their own desire to bet on sports.
These cases present a number of difficulties. I think American authorities are entitled to crack down on crimes of theft, fraud and violence even if those crimes have not occured on U.S. soil but involve injury to a U.S. citizen. That is fair. But the BetOnSports case suggests that, in this internet, globalised age, the writ of the U.S. legislature seems to run across the whole planet (well, most of the planet. I do not think extradition will work any time soon in North Korea).
Besides the legal niceties, there is also hypocrisy of nanny-state legislators at work here. America boasts the ultimate gambling city on the planet: Las Vegas, not to mention hosts of other places in Reno, Atlantic City and various Indian reservations. Not to mention the various state lotteries from which the U.S. tax-eaters gain a hefty income. And that is what this arrest and closure of on-line gambling is about. The faux moral scolds who decry gambling are not concerned about people pouring their hard-earned cash down the drain. No, they are worried that a nice source of tax revenue is passing them by.
Our own political masters in Britain are scarcely better in their approaches to the various ‘sinful’ activities that need to be regulated to protect a benighted populace. Drinking hours are liberalised and super-casinos are encouraged and yet smoking in a private member’s club is banned and cultivation of cannabis plants in your back yard for medical use will get you sent to jail or hit with a hefty fine. What a great world we live in.
Good to see Jonathan is making my past arguments. I would suggest that this be treated as an issue to take before the WTO, given the US government is restraining international, but not domestic, trade in gambling. One problem with this is that private individuals or groups cannot take a case to the WTO, such must be made by government representatives (unless, I suppose, that a given government passes an Act empowering any lawyer to act as a “Private Attorney General” in cases before the WTO).
I don’t see the Blair gov’t fighting Bush’s gov’t on this, though. No nads. Costa Rica, though, probably has the cojones to bring this sort of action to the WTO.
What is needed is a ‘place a bet online’ day of national protest to confound the US nanny-staters, during which every participant will place a (small) bet with an online bookie.
When you scrape away all the bullshit, the real reason they want to crack down is because they cna not collecit their baksheesh from facilities outside of the country. Morality is only a superficial issue. The real issue is that the DC Gang and the various State Gangs aren’t able to shake down the gamblers; because of that I expect the returns are better on internet gambling which puts pressure on the gambling facilities which *do* pay their protection money to the varous Mafia’s, Italian and governmental.
One might even say the US casinos are complaining: “But, but…. they don’t have any tapeworms, ticks, leeches and vampire bats! It’s, it’s just not *FAIR*!!!”
I don’t care about internet gambling but I do object to the supposition that the US has no standing to prosecute because the servers that host the gambling are outside the US.
Every internet transaction requires a client and a server each of which can be anywhere on the planet. In a truly redundant system the same transaction might even be conducted by separate servers in different countries. Given this, why is there a presumption that the laws governing the transaction are automatically and exclusively those of the jurisdiction in which the server resides?
Does that mean that laws governing financial transactions are those only of the servers physical location? How about privacy or identity theft? If some jurisdiction legalizes child porn can any other jurisdiction prosecute people locally for looking at it? Carruthers has also been implicated in Identity theft. If true, can only Costa Rica prosecute him?
These are not easily answered questions.
Tying the gambler to the Enron financiers is as wise as attaching him to a descending anchor. Seriously, are you arguing that it is acceptable behavior for British bankers to defraud global markets as long as it is not specifically prohibited? Isn’t that an implied argument for more nanny legislation, not less?
The Natwest bankers perpetrated fraud in connection with other massive frauds committed by Enron. They knew they did it, and if they were counting on getting away with destroying the underlying trust of international fincancial markets because it is not illegal to do so in the UK, striking a blow for liberty was certainly not their goal.
In this case, your right to swing your arms ends at the tip of my wallet.
The Natwest bankers perpetrated fraud in connection with other massive frauds committed by Enron.
What’s this? Guilt by association? They are accused of fraud in a very specialised sense, and the only persons that could have been “defrauded” thereby were NatWest banks. Buying a share in an Enron venture from a third party and reslising it at a higher value could have no negative effect on Enron share- and bondholders, and, to the extent it valued Enron’s contribution more highly than otherwise, in fact assisted them.
I’ll give 8 to 5 they walk.
There was a similar issue a few years ago when the question of jurisdiction of libel claims was raised. Australia asserted jurisdiction over the libel claim of an Australian over something Barrons, a US magazine, said (Gutnick v Dow Jones) on its website. US libel laws are a lot less favorable to plaintiffs. There was also Roman Polanski’s success in bringing suit against an American magazine in the UK, despite being a French citizen and resident.
Blair should demand the release of Carruthers. Odds that he will do the right thing are at 100 to 1 with no takers.
In typical Samizdata fashion, you have ignored/missed something significant:
How does someone being arrested on U.S. soil for violating U.S. law translate into some sort of global writ?
In furtherance of your posting, how does his arrest, again, on U.S. soil for an alleged U.S. crime undermine British legal sovereignty? Secondly why is the problem the U.S. and not this character? For example the World Poker Tour has an online gambling site:
Link(Link) this quote is at the bottom og the page. Looks to me like this UK based operation has a little respect for our laws. Whether you like our laws or not isn’t relevant.
Because the US law purports to extend to acts committed abroad in places that they are not illegal.
Sure and that’s fine by me. Why should US laws be applied outside the borders of the US? Should Saudi laws be applied to people accessing a Saudi site from the USA?
Asus phreak,
The problem is that the US is pursuing the source, rather than the consumer. The US has jurisdiction to prosecute its own citizens on its own soil who access foreign websites, but no jurisdiction to prosecute foreigners with foreign websites, even if those foreigners happen to travel through US territory.
Of course, this sort of extraterritorially attacking the source began with the “War on Drugs” in Colombia, now the US gov’t takes a privilege given by one country as a right everywhere else. One recalls back in the days of Prohibition that the US couldn’t go after distillers in Canada, or prosecute US citizens for drinking vacations up there. Its jurisdiction began at the US border and in US territorial waters.
In this case, though, there is no declared “War on Gambling” to rationalize eggregious violations of foreign jurisdiction.
As for being intercepted at Dallas/Ft Worth, Customs Law treats “through” passengers, laying over from a foreign origin to a foreign destination, as outside US jurisdiction. They only get inspected by US customs when they seek to leave the terminal via a Customs Inspection point. As such, Carruthers body being outside US Customs jurisdiction (unless they snarkily arranged to cancel or otherwise change his flight so he had to layover overnight), he was not within US jurisdiction. Of course, given recent US FBI rendition practices, this isn’t surprising, Carruthers should have made other travel arrangements.
1. The State is the biggest Mob around.
2. The Mob runs numbers.
3. This guy transgressed their turf.
Qed. This dude has to be taken out.
guy,
Enron was engaged in a pattern of fraud that included unsustainable loans. The NatWest bankers were either utterly incompetant in verifying the financial position of Enron, or complicit in presenting that position inaccurately.
The argument that because NatWest helped extend Enron’s sequence of frauds and maintained their stock value makes the bankers innocent is peculiar. Enron was listing loans as profits and NatWest went along with that fraud. That harmed the global financial markets and deepened the financial crisis of the early part of this decade. I realize that only a few trillion dollars were lost in this debacle, but surely you must agree that the perpetrators deserve more than a scolding.
No. I don’t believe in collective punishment. Nor do I believe in crimes against inchoate collectivities. Injuring confidence in the financial markets is not a crime: it is up to transactors to maintain confidence in themselves.
To the extent that there was fraud in the Enron case, it took its opportunity from precisely from confidence in finance. It was a grand example of the sort of scandal that frequently afflicts finance: making ever riskier bets chasing losses you dare not admit, and meanwhile finding means to hide those losses. See Joe Jett; see Nick Leeson.
I’m inclined to believe that Enron, and anyone remotely associated with Enron has been so fiercely pursued pursued more fiercely than it would have been otherwise is the nature of the investors who were fooled. Had the money that disappeared belonged largely to private investors, and the executives had their photos taken with fading sports stars, then those suckers would have born part of the blame. (Cf BCCI – Asian shopkeepers rooked in Ponzi scheme, “should have known” deposit rates well above market suspicious, say professionals.) Because the board of Enron were associates of big pols, and its incautious investors were the really powerful players in the markets, the pension funds managers and their external supervisors, ALL the blame has to be attributed to deliberate deception by actors as far away as possible from these paradigms of probity and investment wisdom.
The NatWest three, and others, are paying a heavy price because they are taking the rap for for someone ( who fears they should have done) failing to ask, “How do you do it, Kenny-boy?” at the right time. Small embarrassment projected via a long, long lever.
The Natwest Three case is more about the limitation of state power than about the case itself. The extradition treaty that they found themselves extradited under was brought about by a request to quicken the extradition of terrorist suspects. The fact that the UK parliament ratified this treaty while the US congress has not is a relative indication of the two democracies value for their own citizens rights and freedoms.
Laws intended to be used to pursue terrorists ahve been used to pursue fraud suspects. Just another example of increased state power having unintended consequences.
The arrest of the British internet gambling businessman for “wire fraud” is another example demonstrating unintended consequences of laws passed 3 generations ago. The tentacles of state will use anything at their disposal to exercise their power.
Limit state power, NOW.
While I applaud Brenden’s general sentiment, it is important not to let the canard that the Extradition Act 2003 was somehow intended to deal with terrorism pass unchallenged. That may have been a pretext in presentation by government, which has found it extremely useful to label everything an anti-terrorist measure and then smear opponents as “soft on terrorism”, but the Act itself very clearly much much broader than that. It is even worse with respect to EU jurisdictions than it is with respect to the enlightened regimes of the US and Albania and Zimbabwe (all of which fall into the second category) where at least some sort of dual crimminality must be made out. The Home Office’s explanatory notes at the time made no reference to terrorism. Its pretext was as follows:
It goes on to explain how a process of review (consulting officials about what they’s like) was started in 1997. Why (on the other hand) is limited to implying that the consolidating statute of 1989 was oudated and unworthy for incorporating some elements of Victorian jurisprudence. [New Labour, New Britain?]
That may have been a pretext in presentation by government, which has found it extremely useful to label everything an anti-terrorist measure and then smear opponents as “soft on terrorism”, but the Act itself very clearly much much broader than that.
Exactly my point – terrorism has been used as a smokescreen in this case. After all, who would oppose extradition of a potential or even real bin Laden?
The result of the treaty is to put the onus on the accused to defend himself from extradition, not on the accuser to justify the extradition. In this case the state is abrogating even its most honourable reason to exist – the defence of its citizens liberty within its jurisdiction, which is probably the reason the US congress has not ratified the treaty. The British have put blind trust into the hands of US lawmakers and law enforcers.
Me, for a start.
1. The potential one, certainly. I only want people punished for actual crimes, thank you.
2. The actual one I’d refuse extradition, just like anyone else, if he could put up a case that he wouldn’t get a fair trial. Since the US has offered ample evidence that it doesn’t intend to give anyone a fair trial if it chooses to classify them as an “unlawful combatant”, then bin Laden almost certainly should get stay of extradition till someone shows a case to answer that will be tried fairly.
But then I’m not a politician, so I don’t have to worry about Tony Blair or David Blunkett invoking mob sentiment on the other side of the argument.
There is a lot wrong with the David Carruthers arrest, but one of the things untouched as yet (in all except a passing mention in Walter Olson’s recent Times article) is that the US Federal machine wants to have its cake and eat it too.
On one hand they rebuff Carruthers’ lobbying for US regulation including payment of US tax, but on the other they indict his company for non-payment of that very same tax.
Did you know that as of 1983, the US revised the Federal wagering excise tax so legal wagers are taxed at 0.25% but *illegal* wagers at 2%? It’s there on the statue books in black and white.
They can earn more from illegal wagers than legal ones.
Of all the hypocrisy in this case, this is the hugest, and most damning fact that will come to light in the course of this case. It puts all the other hypocrisy into the shade.
More coming at my site on the subject in the very near future.
– Admin, FreeDavidCarruthers.com