The embattled online gambling hub PokerStars and the Department of Justice showed their hands Tuesday, reaching a $731 million settlement nearly 16 months after the company was charged with fraud and other offenses.
Under the terms of the deal, the website — one of three Internet poker outlets hit by an Obama administration crackdown in April 2011 — admits no wrongdoing or guilt. It acquires all the assets of its former competitor Full Tilt Poker.
“Today’s settlements demonstrate that if you engage in conduct that violates the laws of the United States, as we alleged in this case, then even if you are doing so from across the ocean, you will have to answer for that conduct and turn over your ill-gotten gains,” U.S. Attorney Preet Bharara said in a statement announcing the deal.
PokerStars has agreed to pay the federal government $547 million over three years, with the money going to reimburse former Full Tilt customers in the U.S. who lost funds from or were denied access to their online accounts. The company will also set up a fund to repay foreign customers owed a total of about $184 million, PokerStars officials said.
PokerStars players who lost money already have been made whole, the company said.
The U.S. attorney’s office also filed a motion in court Tuesday that would force Absolute Poker, the third company involved, to forfeit all of its assets. It hasn’t yet been approved by a federal judge.
The government’s deal with PokerStars, an offshore company that served U.S. customers in real-money games until last year, comes less than a week after a U.S. district judge sentenced 54-year-old Ira Rubin, who pleaded guilty to to money laundering, wire fraud and other offenses related to online gambling, to three years in prison.
Rubin is one of 11 people charged with criminal offenses in the incident. Seven have been arrested, with six pleading guilty.
Four defendants remain at large, the Justice Department said.
Tuesday’s deal allows PokerStars to set up shop again in the U.S. if and when lawmakers implement a system to regulate Internet poker.
“We are delighted we have been able to put this matter behind us, and also secured our ability to operate in the United States of America whenever the regulations allow,” said Mark Scheinberg, PokerStars’ board chairman.”This outcome demonstrates our continuing global leadership of the online poker industry and our commitment to working with governments and regulators to ensure the highest standards of protection for our players.”
The Justice Department in December changed its interpretation of the Kennedy-era Wire Act, previously viewed as prohibiting online gambling. The department now says the law applies only to sports betting, such as wagers on NFL or NBA games, meaning companies technically can operate online poker sites based on U.S. shores.
But Congress in 2006 passed a gambling enforcement bill that has made it illegal for banks and other institutions to process financial transactions associated with Internet poker games.
Industry leaders, including the head of the American Gaming Association casino trade group, along with several members of Congress, have called for a strict new regulatory framework allowing businesses to run safe, secure online poker sites available to U.S. players.
“Let’s remember that Americans still remain unable to play poker with safe and secure online sites based in the U.S. — a freedom and consumer protection they should not be denied,” said John Pappas, executive director of the Poker Players Alliance, a pro-poker organization with more than 1 million members.
“The PPA and its members continue to urge Congress to quickly enact thoughtful legislation to create a licensed and regulated U.S. online poker market that restores Americans’ freedom to enjoy a game of poker from their home computer,” he said.
• Ben Wolfgang can be reached at firstname.lastname@example.org.
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