The Rake's Helper
California man to cooperate with federal online gambling probe as part of plea deal
Published: January 12, 2011
“Yes, your honor,” James Davitt said, over and over again, as he answered U.S. District Judge Catherine Blake’s questions during his Jan. 4 hearing in the federal courthouse in Baltimore. He was in Blake’s court to plead guilty to a single count of conducting an illegal gambling business. The hearing revealed that the 38-year-old California man—one of five people charged publicly in connection with an ongoing federal probe of online gambling staged by Maryland’s U.S. Attorney’s Office (“The Ghost Hand,” Feature, March 24, 2010)—signed an agreement in November to cooperate with federal authorities in Maryland and New York, where a high-profile online gambling investigation is also underway.
Davitt’s plea agreement, as summarized by Blake during the hearing, may require him to testify in court and turn over documents. “If truthful in your cooperation,” Blake explained to Davitt, then the documents and information that he may provide “cannot be used against you” by prosecutors, though if he breaks the agreement or fails to be truthful, she continued, he could face new charges based on that same information. Davitt’s “sentencing might be delayed until your cooperation is complete,” Blake said. The prosecutor, Richard Kay, told Blake that Davitt’s cooperation will “take up at least the next several months.”
Davitt—a square-faced, broad-shouldered fellow with a close-cropped beard, wearing a brown suit—was released on his own recognizance while the charges are pending against him. His release form indicates he resides in La Habra, Calif. A portion of the hearing was spent addressing the fact that he keeps a gun in a safe at his home, which he is required to relinquish under the terms of his supervised release.
The other four people charged so far in Maryland are Edward Courdy, Michael Garone, Kenneth Wienski, and Martin Loftus. The cases against them, and related forfeiture cases in which the government seeks to keep seized cash, are part of a federal push to interrupt the flow of international online gambling money when it is in the United States, where the proceeds are considered illicit gains. The companies that provide online gambling services tend to be foreign entities that allegedly rely on facilitators, called “payment processors,” to conduct gambling transactions in the massive U.S. market, which is estimated to account for about 70 percent of the $4 billion-a-year industry.
Courdy, of California, and Garone, a Georgian, were charged with money laundering in 2008 (“Bodog Internet Gambling Investigation Leads to Money-Laundering Charges,” Mobtown Beat, Oct. 30, 2008). The cases against both men were initially filed publicly, but disappeared from the court docket in late 2009, presumably after having been placed under seal by a judge. Courdy’s case appears to still be under seal, but Garone’s re-emerged on the public docket in December, when he was sentenced to a year of probation. He signed his plea agreement in September 2008, when the charges were first filed against him, and the agreement’s statement of facts describes a scheme in which he helped launder money used as payouts in 2007 to online gamblers who wagered on sites operated by Bodog, a company based in Canada and Costa Rica. The transactions amounted to at least $7.9 million.
Gambling and money-laundering charges were leveled against Wienski, a Missourian, in May 2010 (“Billing Complaint,” Mobtown Beat, May 24, 2010). The 12-page criminal complaint against Wienski accuses him of using a medical-billing company, SNR Inc., and a check-processing company where he worked, Diversified Check Solutions, to move online gambling funds in 2009. The complaint also summarizes how federal law enforcers in Maryland have gone after the industry since 2006, when then President George W. Bush signed the Unlawful Internet Gambling Enforcement Act (UIGEA) prohibiting internet gambling-related transactions in the United States. To date, Wienski has not had any court appearances related to the Maryland charges.
Davitt’s name was mentioned numerous times in the complaint against Wienski, though Davitt himself was not formally charged until Dec. 7 (“Superfecta,” Mobtown Beat, Dec. 10, 2010). In the Wienski complaint, Davitt is described as using two California companies, HMD Inc. and Forshay Enterprises—both of which have had funds seized by investigators (The News Hole, Sept. 24, 2009)—to facilitate online gambling transactions. In particular, Davitt and Wienski are alleged to have moved funds for two of the world’s largest online poker sites—Ireland’s Full Tilt Poker, and Poker Stars, based in the Isle of Man—in 2009 via HMD and SNR. Davitt’s plea agreement says $3.9 million in Full Tilt Poker money was involved in the transactions for which he pleaded guilty.
In preparing for Davitt to plead guilty, the Maryland U.S. Attorney’s Office filed a memorandum to persuade Blake that online poker is primarily a game of chance rather than skill, and thus is illegal under Maryland law (The News Hole, Dec. 16, 2010). The memorandum, which includes as an attachment an academic paper prepared for prosecutors by University of Maryland mathematics professor Benjamin Kedem, addresses a subject that has been hotly debated. Last year in Pennsylvania, a state judge ruled that “skill predominates over chance” in poker, though the ruling was later overturned by a higher state court.
On Dec. 8, 2010, the day after Davitt was charged, a criminal information was filed against Loftus, accusing him of a single count of money laundering in connection with the 2009 transfer of $1.5 million from Switzerland to an HMD bank account in California. Details of the accusation against Loftus are spare, though in Davitt’s guilty plea, Loftus and another man—Daward Lee Falls, the CEO of Electracash, a California company previously associated with Courdy (The News Hole, Sept. 24, 2009) —are named as having “made arrangements with representatives of Full Tilt Poker to make payments by checks to gamblers through HMD, Inc.” Loftus is scheduled to be arraigned in court on Jan. 19.
Loftus and Wienski, neither of whom have defense attorneys listed on their case dockets, could not be reached for comment, and neither could Garone. Courdy’s attorney, Stanley Greenberg, has consistently declined comment. Falls has not responded to City Paper’s numerous messages since investigators seized money from Electracash bank accounts in 2009. Davitt’s attorney, Christopher Mead, had no comment.
In addition to the five men charged in Maryland’s online gambling investigation, U.S. Attorney’s Office spokesperson Marcia Murphy writes in an e-mail that “our office has seized $65 million, some of which is still being litigated.” The amount, while large, pales in comparison to the federal investigation being conducted by the U.S. Attorney’s Office for the Southern District of New York, which Davitt will be helping under his plea agreement. There, for instance, more than half a billion dollars has been seized in connection with charges against Douglas Rennick, a Canadian, who ran payment-processing companies that served the online gambling industry, and another $300 million was forfeited by Anurag Dikshit, a founder of partypoker.com. Both men pleaded guilty in 2010. In addition, the Financial Times in London reported last year that Full Tilt Poker is under criminal investigation by New York’s Southern District prosecutors.
The fact that Davitt’s plea agreement commits him to cooperating with authorities both in Maryland and in the Southern District of New York suggests investigators in the two jurisdictions are coordinating their efforts. And, since efforts to repeal the UIGEA failed during the lame-duck session of Congress that ended in December, it appears that facilitators of online gambling in the United States will remain targeted by federal investigators for the foreseeable future. At the very least, the ongoing probe is proving lucrative to federal coffers.
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