Neteller founder pleads guilty

Neteller PLC was once one of the primary channels American gamblers used to place bets with offshore bookies. Based in the Isle of Man, the company served as a financial middleman between bettors and Web-based operations in countries with few restrictions on gambling. Some experts initially believed Neteller’s offshore status put it beyond the reach of U.S. law. But prosecutors read the law differently, and a co-founder of the company acknowledged in a federal courtroom in Manhattan Friday that the operation was illegal. “I came to understand that providing payment services to online gambling Web sites serving customers in the United States was wrong,” Stephen Lawrence said as he pleaded guilty to a charge of criminal conspiracy. His lawyers said he was cooperating with U.S. investigators and had agreed to be at least partly responsible for the $100 million the government is seeking in restitution. Lawrence and another Neteller director, John David Lefebvre, were arrested in January as part of a U.S. crackdown on the online gambling industry. Both men are Canadian citizens. Neteller, which was traded on the London Stock Exchange, processed billions of dollars in Internet gambling transactions for Americans. Prosecutors charged Lawrence with violating decades-old acts prohibiting the use of electronic wires to send or receive information that facilitates illegal gambling. Lawrence, who remains free on $5 million bail, declined to speak to reporters as he left the courtroom Friday. “Mr. Lawrence is very glad to have this episode over and is looking forward to moving on to the next stage in his life,” said his attorney, Peter Neiman. He said Lawrence intended to return to his home in the Bahamas until his sentencing, which has been scheduled for October. It wasn’t immediately clear whether Lawrence would face prison time. He faced a statutory maximum of five years, but any punishment is likely to be reduced by his cooperation in the case. Neteller stopped processing gambling transactions for U.S. customers within days of Lawrence’s arrest in January, ending a brief period in which it had soared to the top of the cottage industry that helps Americans wager billions of dollars a year online. Founded in 1999, the company grew fast as spooked credit card companies, worried about legal liability, stopped doing business with offshore gambling operations. Prosecutors said Neteller processed $5.1 billion worth of transactions in the first half of 2006. Nearly all involved online gambling. A majority of the company’s revenue came from customers in the U.S., and the FBI began looking at its operations in June 2006. Lawrence, at one point, was the company’s largest shareholder. Both he and Lefebvre have since left the company’s board of directors. The case against Lefebvre, who pleaded not guilty, is still pending. The two are among a group of businessmen linked to online gambling who have faced U.S. charges. Stephen Kaplan, the founder of the London-based bookmaker BetOnSports PLC, was indicted on racketeering charges in St. Louis. He and the company’s chief executive, David Carruthers, are awaiting trial. The chairman of Sportingbet PLC was detained briefly last year in New York after he was indicted on online gambling charges in Louisiana. Congress enacted new regulations last year further barring banks and credit card companies from processing online gambling payments. The crackdown hasn’t sat well abroad. The World Trade Organization ruled in December that the law is unfair to offshore casinos. The Caribbean nation of Antigua and Barbuda, a home to online gambling businesses, demanded this month that the U.S. pay $3.4 billion in sanctions each year for failing to comply with the ruling. Protests also have been made by the European Union, Japan and India.