Web Giants Settle Gambling Claims

December 21, 2007 0

Washington — Internet giants Google, Microsoft and Yahoo agreed to pay a total of 31.5 million dollars to settle a government probe into their role in promoting online gambling dating back to 1997, with the United States Attorney’s office in St. Louis officials said Wednesday.

“Honest taxpayers and gambling industry personnel who do follow the law suffer from those who promote illegal online behavior,” Catherine Hanaway US Attorney, said in a statement.

“This is a very profitable business that had a lot of money to spend on marketing,” stated Hanaway. “I do think it will have a major impact. Obviously these are three of the largest online organizations in the world.”

The United States Attorney’s Office said a deal was reached with Google, Microsoft and Yahoo over Department of Justice (DOJ) claims the companies had “aided and abetted” the promotion of illegal gambling on their Web sites.

The three companies all agreed to varying degrees of punitive damages pending the extent of their involvement in accepting gambling ads.

The US authorities claimed the trio illegally accepted payments from online gaming firms between 1997 and 2007. “None of the three firms have accepted any wrongdoing as part of the civil settlement, which concludes an investigation dating back to 2000.”

The settlements marked the latest development in a US crackdown on Internet gambling, which has attracted a large number of Americans using offshore gaming websites.

“The companies said they stopped taking such adverts several years ago.”

As part of the agreement, Google, Microsoft and Yahoo agreed to stop accepting ads for sports wagering and other online gambling. The three internet giants already stopped taking such ads approximately 4 years ago. The settlement reached today was finalized after a year and a half of negotiations between the tech companies and federal prosecutors.

“It is a shame that the United States continues to taking such draconian measures against the internet gambling industry while they were found to be violating international law by the WTO earlier in the year,” stated an executive of a US facing online sportsbook that spoke to Point-Spreads.com after the news broke of the fines. “We miss doing the PPC advertising on Google, Yahoo and Microsoft, but have already transitioned away from that sort of marketing years ago.”

“Under US federal law, online gambling on sports and casino games is illegal but the practice is still widespread with wagers worth about $6bn being struck every year.”

As part of the settlement, Microsoft will pay a total of $21 million, of which $4.5 million will go to the United States and, $7.5 million to the International Center for Missing and Exploited Children (ICMEC), the Justice Department said in a statement.

On top of a $4.5m forfeit, Redmond also agreed to provide $9 million to an online, public service advertising campaign for three-years to alert people and educate young Ineternet users that online gambling enterprises are illegal under U.S. law.

Microsoft did not admit wrongdoing in settling the allegations that the software and Internet giant received payments from online gambling businesses for advertising.

The Google settlement of $3 million resolves claims, which they also neither contest nor admit receiving payments from on-line gambling businesses for advertising on-line gambling between 1997 and June 2007.

And Yahoo! has agreed to forfeit $3 million to the US authorities and will also fund a $4.5 million advertising campaign warning its users that anyone participating in online sports gambling is liable to arrest and prosecution.

“These sums add to the over $40 million in forfeitures and back taxes this office has already recovered in recent years from operators of these remote-control illegal gambling enterprises,” said Hanaway.

Microsoft spokesman David Bowermaster said in a statement to ABC News that the company stopped accepting ads from online gambling sites nearly four years ago, and called the agreement with the U.S. Attorney’s office a “mutually beneficial outcome” that will “provide substantial resources to protect consumers from harmful Internet content.”

“We are hopeful that our educational campaign will stop young people from gambling before they start,” he said.

According to Bowermaster, the company “suggested a contribution to the ICMEC as a way to advance an important cause that is a government priority.”

Similarly, Yahoo said it had not accepted such ads for years, noting that it had co-operated with the authorities once it had been made clear of their concerns.

“While we did not admit any wrongdoing, the Department of Justice has advised that online gambling is illegal in the United States and ads to promote it are improper,” stated Google spokesperson Jon Murchinson.

“Google voluntarily discontinued running such ads, which were a very small part of our AdWords business, in April 2004.”

The settlement resolves government claims that the firms made profits from promoting online gambling on their Web sites between 1997 and 2007.

The U.S. Attorney’s office for the Eastern District of Missouri has investigated the online gambling sites, with federal grand juries returning numerous indictments for the operations.

In June 2006, a federal grand jury indicted the founder of BetOnSports.com, Gary Stephen Kaplan. Kaplan was charged with violating anti-racketeering laws, the Wire Act and tax violations.

The original indictment against Kaplan indicated that he had a long history of involvement in sports betting operations, starting in New York and Florida in the early 1990s, then moving to Antigua and Costa Rica.

British firm BetOnSports pleaded guilty to racketeering charges earlier this year and cases are still pending against a number of its former executives.

The entire internet gambling industry is waiting for a ruling from the World Trade Organization over what sort of sanctions and relief will be handed down to Antigua & Barbuda. The tiny island nation has asked the WTO to grant $3.4 billion in annual relief since finding that the United States ban on internet gambling is illegal under international trade laws.

Under terms of the deal, the companies do not have to make any admission of guilt on the charges by the companies, nor do they represent a contesting of the charges, a common arrangement in settlement situations.

“Illegal Internet gaming operations continue to be areas of IRS compliance concern,” stated James D. Vickery, Special Agent in Charge, IRS-Criminal Investigation. “CI will continue to play an enforcement role in the illegal gaming industry and to support regulatory and legislative initiatives aimed at eliminating an environment conducive to illegal gambling.”

Hathaway is the same U.S. Attorney leading the prosecution of BetOnSports PLC, David Carruthers and Gary Kaplan. BetOnSports PLC pleaded guilty to federal racketeering charges while the cases against former CEO Carruthers and company Founder Gary Kaplan are still pending.