NatWest 3 Plea Could Have Affect on European Online Gambling Operators

We posted earlier about Tony Blair's shameful conduct of allowing his citizens to be snatched and held in the US for gambling crimes. The recent plea bargain of another group of UK citizens in a US court may have implications for upcoming gaming trials. The US has come down hard to force pleas on foreigners; just yesterday Gary Kaplan from BetonSports was denied bail. Gambling911 examines the issue:

"The greater UK business community is up in arms," points out Joe Brennan, Jr. of iMEGA.org. "How the US can unfairly reach into their country (Great Britain) to prosecute their people. This is a pretty big precedent being set."

And many now speculate that the NatWest 3 (plea bargained) and David Carruthers (still awaiting trial in the States) are just the beginning to a long string of arrests that could be coming down the pike.

Immediately following the Carruthers arrests, the online gambling community and those in the entire European business sector, were stunned to learn that a former Chairman of Sportingbet was taken into custody at New York's JFK Airport. Peter Dicks was wanted on an arrest warrant from the state of Louisiana. The warrant charges Mr. Dicks was running a gambling enterprise by computer, a crime under Louisiana law. Yet Dicks was hardly active on the Sportingbet board and was in the US on "unrelated" business.

The Plan To Take the Online Gaming Market - US Gaming Firms Tale of Shame

1. Pass legislation to get rid of foreign competition - The US Casinos had fallen so far behind the competition at this point that they didn’t have a chance of winning on merit. No matter - Senators are cheap. Although the majority of Americans disagreed with its contents, the bill was snuck through by Bill Frist with the laughably stupid claim it would protect children and stop terrorism.

2. Establish an Online Presence – Of the majors, only LV Sands has had the gall to announce it was starting to establish an online presence. For now it will stick to Europe through a partnership with Cantor Gaming. Make no mistake, this is a trial run for the US market. Other casinos are sure to follow.

3. Repeal the Gaming Act – The majority of Americans support it. The senators have already been paid off. And Chanos is long (kidding!). The trial balloon was floated today by Barney Frank who called it: one of the “stupidest laws” ever passed and said he wanted to “repeal” the law.

The entire affair, the arrests and the tough talk were exactly what they seemed - protectionist measures by "useful idiot" politicians.

DOJ To Criminalize More Americans

The DOJ is dropping any pretense that the Gaming Ban was to hunt terrorists and help kids and is now on a massive fishing expedition. For what purpose? One can only guess at this point. Gambling911 reports:

THE US Department of Justice has ordered the world’s biggest investment banks, accountants and law firms to hand over all e-mails, telephone records and papers connected with internet gaming firms as part of an investigation into illegal online gambling in America.
...
The source went on: “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.”

The request could force banks and other advisers or former advisers to the gambling companies to hand over hundreds of thousands of e-mails and files to American investigators.
...
“UK plc should be really worried about yet another encroachment of American investigators on to British territory. The City is clearly under threat,” said one British businessman who asked not to be named.

We know from experience that Bush lapdog Tony Blair won't do anything about it

Insight or Connection - How Kynikos Associates Profited from the Gaming Bill

The FT has an excellent article about short seller James Chanos predicting and profiting from the gaming bill.

His hedge fund, Kynikos Associates, had put a large slice of its $3bn in assets on a bold punt that shares in the internet gambling sector were about to go into free-fall.

And on October 2, shares in the companies did precisely that as about $5bn was wiped off their value in just a few hours of trading in response to a US Senate decision to introduce tough new laws cracking down on gambling on the web.

It took the industry and the markets, in fact almost everyone except Mr Chanos and his team of traders, by surprise. The consensus view had been that the sector was about to ride higher on a wave of consolidation.

No doubt he has done his research – but so did every other bettor on the gambling bill contract which didn’t go above 20% until after the bill passed. How did he make such an astute bet? Mr. Chanos didn’t comment in the article but FT said, “most analysts think his acute political antenna had come into play. He is widely regarded to be more tuned in to the Washington political scene than most of his peers.”

They say “more tuned in” but I have another idea – it was pure connections, it’s likely he knew information about the bill before it passed. All the research in the world didn’t reveal it to other speculators - so who else knew about Bill Frist’s sneak attack?

One Senator that would have been involved is John Ensign of Nevada. As a Las Vegas based Senator, who has supported protectionism against gambling expansion outside Nevada, he would have a strong incentive to see this bill pass.

His campaign contribution list says it all.

Ensign and Frist had a common interest in the gaming bill and a close relationship besides.

Since it was very likely Ensign had advanced notice that the bill would be pushed throught he would have discussed it with close Las Vegas GOP colleagues – including George Chanos.

Who is George Chanos?

Besides a cousin to hedge fund manager James Chanos who, “considers him a brother,” he is the Las Vegas Attorney General and long time GOP insider – he worked for the Nevada Republican Party for nearly a decade.

George Chanos attended UNLV and worked in student government with Senator Ensign who later endorsed him for his Attorney General position. Chanos and his wife are also campaign contributors to Senator Ensign.

While there is no direct proof - the chain of information and connections are clear. Frist and Ensign knew that the bill would pass. George Chanos found out and passed the information to his cousin James Chanos. James used it to make a massive bet on the sector.

We are not believers in information socialism or “illegal insider trading” but of Occam's Razor. This wasn’t a bold trade based on a research edge – it was a simple information advantage from Chanos connections.

FT called the trade a "million-to-one-chance"; it would be - if your cousin wasn't close with the Senator.

Leach Clubbed by Poker Aces

Leach’s defeat is one of the few Republican losses tied directly to the Unlawful Internet Gambling Enforcement Act. In today’s NY Post, The Poker Players Alliance takes credit:

The Poker Players Alliance last month set its sights on Rep. Jim Leach (R-Iowa), who steered the ban through the House. Leach, a longtime incumbent, ended up being one of the most unexpected casualties of the midterm elections, losing by 3 percentage points.