A Canadian citizen, caught up in the U.S. government's attempt to crack down on online gambling, pleaded guilty to illegally moving gambling funds and will be sentenced by a New York judge in September.
Douglas Rennick of Vancouver was charged last summer with bank fraud, money laundering and illegal gambling, but all the charges except one were dropped by U.S. federal prosecutors when he entered a guilty plea on Tuesday.
Between 2007 and 2009, Mr. Rennick opened a number of bank accounts in the United States under a variety of corporate names. These were used to transfer cash from offshore Internet gambling companies, and the funds were paid out to U.S. residents who had won money. U.S. prosecutors say he funnelled more than $350-million (U.S.) from a bank account in Cyprus into the country.
Mr. Rennick pleaded guilty to illegally helping offshore poker sites move money into the United States to pay players. He has agreed to forfeit about $17-million held in a number of accounts, and could face up to two years in jail.
Mr. Rennick's conviction is part of U.S. attempts to use a variety of legal tools to put a dent in online gambling, but those efforts are unlikely to put an end to an activity that is now firmly entrenched, legal experts say.
"What the Department of Justice is doing is waging a war of intimidation," said Nelson Rose, a professor at California's Whittier Law School who specializes in gambling law. "Every few years they make a big showy arrest to scare people."
The process appears to be working to some degree, at least domestically, he said. Many publicly traded online gambling companies have gone out of business, payment processors are disappearing and some credit card companies won't let members use their cards for gambling. But this hasn't stopped gambling sites from setting up offshore.
Prosecutors have to use complex laws that in some cases don't clearly apply to all forms of gambling, Prof. Rose said. For example, it's not evident whether online poker is strictly illegal under outdated "wire" laws designed to prevent bets from being placed by telegraph across state borders.
Consequently, prosecutions tend to be "extremely haphazard," Prof. Rose said, as officials search through laws for a "hook" to hang a case on.
These kinds of convoluted efforts were evident in Mr. Rennick's case. Some of the original charges against him were based on accusations that he didn't tell financial institutions his bank accounts were being used to transmit gambling winnings. That was fraud, the government said, because the banks would not have processed transactions they knew were related to gambling.
Eventually that charge was dropped, along with another that accused Mr. Rennick of money laundering.
Michael Lipton, a Toronto lawyer who specializes in gaming law, said the United States has a patchwork of laws that can be used to fight online gambling, but officials seldom go after the gamblers themselves. Instead, charges are usually levelled against the entrepreneurs who operate the businesses.
But putting a stop to online gambling based outside the country is nearly impossible, he said, and operators have now set up in numerous international locations, including Gibraltar, the Isle of Man, Antigua and Malta. "The genie is out of the bottle," Mr. Lipton said. "People are able to go online and play poker, play blackjack, and there is not a hell of a lot the government can do about it."
Mr. Lipton said it is a waste of effort to try to stop Internet gambling, and it would be far better to regulate it instead. "This is like the second coming of Prohibition," he said. "That didn't work.