Fact Finding

A couple of posts back, my buddy cadmunkey asked me what I thought the United States government’s “grand master plan” with regard to regulating online gambling might be.

“Send more troops?” I responded. I thought I was joking.

Turns out the U.S. Department of Justice has fired subpoenas to at least 16 of the world’s most prominent banking institutions and accounting firms asking them to hand over information related to particular individuals’ involvement with online gambling. The DOJ is requesting copies of all business records, correspondence, and emails related to internet gambling transactions. Apparently the subpoenas were issued three weeks ago, but only now have these requests for information been made public. Initial articles identified four banks -- the HSBC (headquartered in London), Dresdner Kleinwort Wasserstein (London & Frankfurt), Credit Suisse (Zurich), and the Deutsche Bank Aktiengesellschaft (Frankfurt). I’ve seen references to BDO Stoy Hayward (London) and Investec (London & Johannesburg) also being among the institutions issued subpoenas.

In Jenny Davey’s Times of London article (where the story first broke), her source speaks of how the “Department of Justice has taken a shotgun, not a rifle approach in relation to lots of gaming companies and has just asked everyone to hand over all the information they have.” Another source describes the DOJ’s actions as representing one of the biggest “fishing expeditions” the department has ever undertaken.

What could all of this mean to me, an American online poker player? Have to admit I am mostly in the dark here. I know, for instance, that DKW is connected with PartyGaming -- they “floated” the company when it went onto the LSE in 2005. (Investec had considered doing so as well, but bowed out.) HSBC similarly floated 888.com the same year when it went public. If these banks do comply and hand over the requested documents to American officials, could this spell trouble for those companies and their founders? (Not-too-distant-future headline: “Dikshit Up Creek Without a Paddle” . . . ?)

Obviously I’m not playing on either Party Poker or Pacific, so does the fate of these companies matter to me? What about the sites on which I do play? Might it be that some of the institutions who had been issued subpoenas were banks whose services are utilized by my poker sites? None of my sites -- Poker Stars, Full Tilt Poker, Absolute Poker, and Bodog -- are publicly-traded companies, so none were similarly “floated” by any of the banks being questioned. But they do deal with banks, don’t they?

Prior to “Black Friday” (that October day when the Senate tied the UIGEA tin can to the Safe Port Act bumper) several sites proudly advertised details regarding how they kept player balances in segregated accounts. Most sites even identified their bankers. Poker Stars frequently mentioned how players’ balances were “held in segregated accounts managed by the Royal Bank of Scotland” so as to assure us Poker Stars was not using or investing our money and could “fulfill its obligations towards players at all times.”

Then the hammer fell. A day or two before Bush signed the bill into law, the Royal Bank of Scotland instructed its corporate customers to refrain from accepting online gaming transactions from American customers. (Article here.) Not sure, exactly, how this affected Poker Stars’ relationship with the RBS. (Sounded a lot like a kiss-off, to me.) I do know that around mid-October Poker Stars stopped referring to the RBS in its communications, and instead started stating more generically that “All player funds are kept in a segregated account at a leading European bank.”

Just to satisfy my curiosity, I thought I’d see what my four sites could tell me about which banks they used to hold player balances.

Couldn’t find any information anywhere on the Bodog site about whether or not they held players’ balances in segregated accounts. I emailed them the question, and they quickly responded “Bodog is not directly involved with any bank or bank accounts.” Simple enough. (And a little surprising, frankly.)

I also emailed Absolute Poker my question, but they have yet to get back to me. On their website, Absolute says that “all player account balances are held in segregated accounts, which are managed by a leading European Financial Institution.” Absolute is a bit cheeky about identifying that institution -- instead of naming it on the site, they explain it “is the second largest Financial Services group in Europe by market capitalization and the sixth largest in the world.” That would have to be the Royal Bank of Scotland. (But didn’t the RBS ask its corporate customers not to facilitate Americans’ online gambling transactions? Is this information accurate?)

On its website, Full Tilt Poker ensures customers “there is adequate financing available to pay all current obligations and that working capital is adequate to finance ongoing operations.” It isn’t clear, however, whether they keep the money themselves or use a bank. When I emailed them, my support person couldn’t answer my question. Nor could he get my name right (“Hello Jerry,” he began, though Jerry I ain’t). At least he was honest: “I am not able to find that information as it is not available to me at this time. I am sorry I could not help you further with this inquiry.”

As I said, Poker Stars has stopped referring to RBS specifically. In their answer to my email, they refer obliquely to my question: “In regards to your concern, we do not have any problems with our banks and their cheques being cashed in the U.S. I can assure you that you will not have any problems cashing our cheques if you go to a major bank and not a credit union. We work with several banks and none of them have any restrictions in the U.S.” Not sure, really, how exactly to interpret this response. Now that I reread it, I realize they aren’t answering my question at all. Also sounds like I’ll have problems trying to cash a check from Poker Stars at anything other than a “major bank.” (Not reassuring.)

So what have I learned from my investigations? Not much, I guess. I wanted to find out how to interpret the news I was hearing this week about the Department of Justice and its subpoenas, but instead I learned that none of the poker sites on which I play seem to want me to know with much specificity exactly how they are handling my money. Before the UIGEA passed, sharing such information was often part of sites’ overall strategy to assure me of their integrity. Now, however, I am met with something less than full disclosure.

I am not saying I do not trust the sites with my money. I am saying, however, that (for whatever reason) they seem no longer as able to be completely open with me regarding what they are doing with the money sitting in my accounts on their sites.

Perhaps the DOJ’s subpoenas don’t have much to do with me, specifically. It’s unclear, in fact, whether they have anything to do with the banks and firms receiving the subpoenas -- none have said whether or not they intend to comply with the requests for information.

The subpoenas do indicate one thing, however. Pretty damn clearly. The U.S. government is on the offensive when it comes to policing online gambling. And one gets the sense that, as in other contexts, “failure is not an option.”