What’s in a name?
When you think of identity theft, you typically think of someone taking a person’s name plus some other identifiers, like their address and Social Security number or credit card number, to go on a spending spree or drain the victim’s bank account. You may think of fraudulent impersonation. But what if someone falsely stated that another person gave him permission to use their joint property as collateral on a loan? That sounds like a false statement but not a case of stolen identity. Yet a federal district court in Tennessee found that just this scenario constituted identity theft in a current case against real estate broker David Miller.
Perhaps the court’s holding doesn’t sound too troubling. After all, identity theft is a crime and it’s clearly behavior that we want to deter. But expanding the reach of what may fall under the federal identity theft laws doesn’t really deter the behavior that Congress sought to address by statute. It just makes it harder to anticipate the bounds of the law, and that is troubling.
Congress passed the Identity Theft and Assumption Deterrence Act of 1998 in order to address the growing problem of fraudsters taking people’s personal information to either steal from their existing accounts or to run up debt in the victims’ names. The act criminalized fraud in connection with the theft and misuse of personal identifying information. (Before the law was passed, only fraud in connection with identification documents was a federal crime.) But there was some concern that prosecutors were not vigorously going after identity theft cases. So Congress passed the Identity Theft Penalty Enhancement Act of 2004. Again, this measure was aimed squarely at penalizing identity thieves who were attacking consumers’ financial accounts and credit. The bill’s sponsor, Rep. John Carter (R-Tex.), said identity theft is “a crime that we need to address and address seriously … for the protection of the credit of American citizens.”
Years later, the Department of Justice appears to have gotten the message and is actively prosecuting identity theft cases. All is well and good with the DOJ’s ordinary efforts in this area. On its website, the DOJ discusses identity theft issues in a familiar context, relating concerns over the misuse of “your Social Security number, your bank account or credit card number, your telephone calling card number, and other valuable identifying data.”
It also provides exemplary cases, which are again in keeping with the general understanding of what constitutes identity theft: (1) a woman pleaded guilty for using a stolen Social Security number to obtain thousands of dollars in credit and then filing for bankruptcy in the name of her victim; (2) a man pleaded guilty after obtaining private bank account information about an insurance company’s policyholders and using that information to deposit counterfeit checks; (3) a defendant was indicted on bank fraud charges for obtaining names, addresses, and Social Security numbers from a Web site and using those data to apply for a series of car loans over the Internet.
So with a pretty clear understanding of congressional intent and a fairly clear depiction of the scope of federal identity theft laws, it seems a bit like prosecutorial overreach for the DOJ to turn around and use these laws in a case like that against David Miller. Not in keeping with the sample cases above, Miller’s “theft” involved him “using the names of two individuals in a document that stated Miller had the authority to pledge real property as collateral for the loan when he had no such authority.” He was not trying to impersonate them to create new accounts or steal from their existing accounts. There are other laws to prosecute what Miller did – and he was found guilty of making false statements to a bank.
The concern here is that adding the identity theft count to Miller’s sentence is a misuse of the Identity Theft Penalty Enhancement Act and an overexpansion of what behavior falls under the rubric of identity theft. What is next? Will the department uses this law to prosecute those who lie about references on a job application?
The general rule is that criminal laws should be strictly construed in favor of the defendant. The ruling against Miller seems a case in point where the Rule of Lenity was not applied. Miller has appealed to the U.S. Court of Appeals for the Sixth Circuit, which will hopefully bring the law back within its intended scope.
On February 28, 2013, the Virginia Supreme Court issued an opinion in which it declined to address the legality of playing poker in the state but left open the possibility for the issue to be decided in a future case. The full opinion in the case, Daniels v. Mobley, is available here.
Charles Daniels, a former poker hall operator who operated charitable bingo halls in Portsmouth, Virginia, for decades, filed suit in 2010 seeking a declaratory judgment that Texas Hold ‘em poker is legal under Virginia’s gambling statute.
Under Virginia law, “illegal gambling” is defined as:
“the making, placing or receipt of any bet or wager in the Commonwealth of money or other thing of value, made in exchange for a chance to win a prize, stake or other consideration or thing of value, dependent upon the result of any game, contest or any other event the outcome of which is uncertain or a matter of chance, whether such game, contest or event occurs or is to occur inside or outside the limits of the Commonwealth.”
The law also states that:
“Nothing in this article shall be construed to prevent any contest of speed or skill . . . where participants may receive prizes or different percentages of a purse, stake or premium dependent upon whether they win or lose or dependent upon their position or score at the end of such contest.”
Daniels argued that the outcome of Texas Hold ‘em poker is determined by skill and not luck and therefore the game does not violate the Virginia statute. In the circuit court Daniels presented testimony of two math experts and a world champion poker player to support the skill argument.
The lower court ruled that poker was a game of chance, stating that “all the evidence indicates that the outcome of any one hand is uncertain.” Daniels then appealed the case to the Virginia Supreme Court.
The state Supreme Court declined to address the legality of poker, holding that the court could not rule on the case because the request for a declaratory judgment on the status of Texas Hold ‘em poker “failed to present a justiciable controversy over which the circuit court could exercise jurisdiction.” Since there was no justiciable controversy, the Supreme Court held that the circuit court did not have jurisdiction to rule on the claim.
The court did not directly address the argument that poker is a game of skill and not chance, an argument that has been accepted by other courts. It thus left the door open for the argument to be made in the future.
Daniels also argued that the state’s anti-gambling statute is unconstitutionally vague. The Supreme Court affirmed the ruling of the circuit court that the statute is not unconstitutionally vague because it gives fair notice and an individual of ordinary intelligence can discern its meaning.
In our view, poker is a game of skill and not chance and thus should not be considered gambling under the Virginia statute. The Virginia Supreme Court’s decision to rule on other grounds left poker supporters with a lost opportunity, but there will be other opportunities to make the argument in this and other courts.
A year ago, we wrote about the indictment in the Eastern District of Virginia of the executives and founders of Megaupload, one of the leading file-hosting sites on the Web. The charges were copyright infringement through the facilitation of piracy of copyrighted materials, money-laundering, and conspiracy. The site was shuttered after the indictment.
The case quickly got tied up in the U.S. Justice Department’s effort to extradite Kim Dotcom, Megaupload’s chief founder, from New Zealand, where he lives. After a series of setbacks, the DOJ just won a victory before a New Zealand appeals court. The extradition hearing is set for August 2013.
The issue before the appeals court was how much information the DOJ was required to turn over to Dotcom before the hearing. One of Megaupload’s defenses is that its activities were protected by the “safe harbor” provisions of the Digital Millennium Copyright Act, which protects Internet service providers from copyright liability for the activities of people who merely use their Web sites.
Dotcom wanted the DOJ to turn over, in advance of the hearing, information that it had about possible copyright infringement on the site – in other words, a good deal of the government’s evidence. Reversing a lower court, the New Zealand appeals court held that the DOJ need not turn over much of this material at this point.
“If a suspect was entitled to demand disclosure of all relevant documents on the basis that he or she wished to challenge not the reliability of the summarised evidence but rather the inferences that the requesting state seeks to draw from it,” the court wrote, then the extradition hearing process would not work properly. Rather, the suspect is entitled to a summary of the evidence but not to the government’s entire case at this juncture.
It thus appears that Dotcom will be able to get access to the DOJ’s entire case and to mount a full defense only if he is extradited to the United States and faces a criminal trial. But in order to hold such a trial, the DOJ will need to make a prima facie case at the extradition hearing, which Dotcom will be allowed to rebut, that Dotcom is guilty of the charged offenses. The appeals court said that this hearing will only involve a “limited weighing of evidence” and that the DOJ is entitled to some deference as to its reliability.
We have said before that this is a highly dubious prosecution. We are confident that despite this setback, Dotcom will get a full chance to present his case before an impartial tribunal.
Today, New Jersey became the third state in the country to legalize online gaming within its borders, as New Jersey Governor Chris Christie (R) signed into law a bill legalizing online gaming in the state.
Here is a video in which Jeff Ifrah, founding partner of Ifrah Law, discusses this exciting development.
Both houses of the state legislature had previously passed the bill by large margins and Gov. Christie had sent the bill back to the legislature requesting minor changes to the bill. The legislature made the changes requested by Gov. Christie, and on Tuesday the state General Assembly voted 68-5-1 to pass the bill with the Governor’s requested changes. The State Senate then voted to pass the bill by a margin of 35-1. Governor Christie signed the bill into law shortly thereafter.
The changes requested by the Governor included an enhanced level of funding for compulsive gambling treatment programs, a requirement that state employees and legislators disclose any representation past or present of entities seeking Internet gaming licenses, and an extension of a prohibition on any casino-related employment for state employees and legislators to include companies involved in Internet gaming.
New Jersey’s online gaming law would allow the state to participate in interstate gaming compacts with other states that have legalized online gaming within their borders, as long as this is consistent with federal law. Online gaming compacts would allow for the possibility of generating much larger player pools for the games as well as significant extra revenue for the state.
Under the law, casinos or their affiliates would be allowed to offer the same games that are currently offered on Atlantic City casino gaming floors. All players must be physically located in New Jersey, but do not need to be residents of New Jersey. There is no definitive word yet on when games will become operational, but it is quite possible that it could happen this year.
The law will help to stimulate the New Jersey economy and created needed jobs and revenue for the state.
“Internet gaming will provide a lifeline to New Jersey casinos by producing more jobs and additional revenue,” said bill sponsor New Jersey State Senator Raymond Lesniak (D). “At the same time, it will contribute to the state’s economic recovery and generate more revenue for state programs for seniors and the disabled.”
Under the law, all equipment used in Internet gaming is required to be located in Atlantic City. This will create a significant number of jobs in the region.
We are very happy to see New Jersey enact an online gaming law. This will be an enormous boost for the state as well as great news for gamers, who will soon be able to play online again.
A Nevada man now has a criminal record – simply because he placed a bet in a casino in Las Vegas and a casino employee didn’t ask him enough questions.
Robert Walker recently pleaded guilty in federal court to one misdemeanor count involving a record-keeping violation and was sentenced to one year of unsupervised probation. He was also ordered to pay a $250 fine and agreed to forfeit a $32,400 bet he made in March 2011.
Walker was a member of Acme Trading Group, a company whose members placed bets for several years at a number of casinos on Acme’s behalf. Acme is structured in a way that allows individuals to invest in the company, and bets are made on behalf of the company.
Messenger betting is a crime under Nevada law that occurs when wagers are placed at sports books by individuals on behalf of others. Thus far, Acme Trading Group has not been prosecuted for messenger betting, although Walker and others have clearly been subject to law enforcement scrutiny.
In November 2011, Walker was indicted on four felony counts under 31 U.S.C. 5313(a) for causing a domestic financial institution to fail to file an accurate currency transaction report. Walker faced a maximum of 20 years in prison and a $1 million fine if convicted of all charges.
The indictment alleged that on four occasions, Walker went to the Golden Nugget Casino Race & Sports Book and placed a bet of more than $10,000, and that when he was asked by the employee taking the bet if he was gambling on behalf of anyone else, he said that he was not.
Under federal law, all financial institutions, which include casinos, must file reports of any currency transactions over $10,000. The casino must also verify the name and the address of the individual placing the bet and the taxpayer identification information of the person on whose behalf the bet is being placed.
Walker’s attorneys contended in court filings that the burden is on the casinos, and not the individual bettor, to determine whether the individual is placing the bet on behalf of himself or a third party. Walker’s attorneys stated that Golden Nugget personnel never asked him if he was placing bets on behalf of someone else, and if they had asked him, he would have informed them that he was wagering on behalf of Acme. He had been instructed by his employer, he said, that if asked, he should reply to casino personnel that he was placing the bet on behalf of Acme.
Attorneys for Walker also stated in court papers that they hired an investigator who went to the Golden Nugget and engaged in at least seven transactions that required reporting under federal law. In none of those transactions did casino personnel ever ask the investigator if he was placing the wager for himself or on behalf of someone else.
This is a case that simply did not need to be prosecuted. Factually, there were very serious questions raised regarding the role that the casino played in trying to obtain the information necessary to file the reports and regarding the issue of who is responsible for making sure that information is reported.
Walker accepted a plea that would grant him a year of unsupervised probation; the indictment he was originally facing had a maximum sentence of 20 years in prison. Walker now has a criminal record as the result of very aggressive and unnecessary prosecution. Is this the type of case that the government’s limited prosecutorial resources should be focused on?
On February 5, 2013, the Bipartisan Legal Advisory Group of the U.S. House of Representatives filed a brief urging the U.S. Court of Appeals for the D.C. Circuit to hold that U.S. legislators and their aides cannot be forced to testify about their legislative activities, even when their expected testimony might help exonerate a criminal defendant.
The case raises interesting questions about the balancing of constitutional imperatives – here, the separation of powers and a criminal defendant’s right to present a defense. Fraser Verrusio, a former House staffer, is hoping for a balance struck in favor of defendants’ rights.
In 2011, Verrusio was convicted of accepting an illegal gratuity in connection with his duties as then policy director of the House Transportation Committee. According to the prosecution, Verrusio accepted and failed to report an all-expenses-paid trip to New York City that included a ticket to the World Series and an outing to a strip club. The trip was funded by United Rentals, a construction-equipment company that had stepped up its lobbying efforts to get favorable amendments into the federal highway bill. United Rentals wooed senior staff member Verrusio, who reportedly advised the chair of the House Transportation Committee (as well as the committee) on legislative strategies and policy. Prosecutors alleged that when Verrusio accepted the $1,200 trip, he knew that United Rentals was compensating him for future assistance on the highway bill.
One key piece of evidence against Verrusio was an e-mail that United Rentals lobbyist James Hirni sent to Vivian Curry, legislative director for then-House Committee member John Boozman. In his e-mail, Hirni said, “I have spoken to [Verrusio] and he is good to go. I am resending him the language in the Senate bill, with changes which would represent the 100 percent victory for [United Rentals. Verrusio] asked us to give him the language plus what we would want in the perfect world.”
To address the possible inferences from that e-mail, Verrusio’s attorneys issued a trial subpoena to Curry. The defense expected her to testify that Verrusio had not inserted himself into the legislative process and had not pressured her. But Curry moved to quash the subpoena on grounds that her testimony was privileged under the Speech or Debate Clause of the Constitution. She argued that the testimony sought was protected because it concerned “information gathering for legislative purposes.”
Verrusio countered that the inability to call Curry would violate his rights to due process and to present a complete defense. During the hearing on Curry’s motion, the defense made a potentially critical error when it acknowledged the “high hurdle” imposed by the Speech or Debate Clause and then conceded that the clause “in fact did “appear to cover [the e-mail] communications.” The court held that Curry had properly invoked the privilege and could not be forced to testify.
After the jury returned a guilty verdict on all counts, Verrusio appealed. Among other things, he claims that the trial court erred when it prevented him from calling Curry as a witness. In his view, one of two results must follow. First, Verrusio contends that protections under the Speech or Debate Clause are not absolute but, in some cases, must give way to a defendant’s right to compulsory process. He argues that trial judges should balance a defendant’s need for otherwise-protected testimony against the potential burden on Congress. When the case involves an aide’s testimony regarding informal, passive information gathering from a third party, the potential burden is minimal to non-existent. In such cases, the next question to ask is whether the testimony sought is material. In cases like his — where the jury verdict is already of questionable validity — the “materiality” bar is lower. Thus, he argues, any evidence calling into question the government’s theory could have created reasonable doubt.
Verrusio contends in the alternative that, if the Speech or Debate Clause privilege is absolute, the indictment must be dismissed.
The prosecution replies that Verrusio waived his right to appeal the trial judge’s order to quash. Not only did the defense concede that Curry’s testimony was protected; it first introduced the “balancing test” argument on appeal. Therefore the appellate court may not consider it.
Speaking as friends of the court, the House’s Bipartisan Legal Advisory Group framed the issue as one upon which “the whole American fabric” rests – separation of powers. The decision is simply whether an individual’s right to evidence trumps American liberty in general – an impossible bar to meet. After summarizing the history of the Speech or Debate Clause, the House brief argues that the clause is absolute, regardless of whether the proceedings are civil or criminal. Moreover, the testimony Verrusio sought from Curry was unquestionably protected because it concerned “activities that were ‘an integral part of the deliberative and communicative processes by which Members participate in committee and House proceedings.’” According to the House brief, no court has held that the Speech or Debate Clause privilege is subject to a balancing test. And Verrusio’s reliance on cases recognizing some flexibility with respect to executive privilege is unavailing since executive privilege is not expressly mandated in the Constitution.
But the House brief glosses over the fact that executive privilege is rooted in separation of powers just like the speech or debate privilege. That leaves the question of why the separation of powers in executive-privilege cases need not be guarded so jealously.
Courts decline to address thorny constitutional questions if they can resolve a case on other grounds. It seems likely that the D.C. Circuit will home in on Verrusio’s alleged failure to preserve his argument and save the speech or debate issue for another day. Verrusio’s reply brief is due to be filed by March 13, 2013; the D.C. Circuit will likely issue its decision sometime mid-year.
President Obama’s February 12 State of the Union address included the announcement of an executive order intended to permit greater sharing of information about possible threats to the nation’s cyber security among private companies and between private companies and the government.
“We know hackers steal people’s identities and infiltrate private e-mail. We know foreign countries and companies swipe our corporate secrets,” Obama said in the speech. “Now our enemies are also seeking the ability to sabotage our power grid, our financial institutions, and our air traffic control systems.”
The executive order permits businesses to enter voluntary information-sharing agreements in which they provide the government with information about possible cyber threats to the grid. In return, the government is permitted to provide private companies with classified technical information.
This is an admirable goal, and we support the president’s efforts to keep the nation safe in this way. However, it’s not the end of the story.
Last year, legislation was introduced in Congress to provide protection from liability to companies that share information about possible cyber attacks with each other and with the government. That legislation, however, did not pass, and some form of it will be introduced again this year. Sen. Tom Carper (D-Del.), the new chairman of the Senate Homeland Security and Governmental Affairs Committee, has pledged to make a cyber security bill a high priority.
One important aspect of possible legislation of this type is whether it contains adequate safeguards to protect privacy. Last year, privacy advocates pointed out that in the name of protecting the nation against cyber threats, many versions of the bill contained provisions that allowed for “nearly unlimited monitoring of user data.”
If a final bill contains adequate privacy safeguards, we would support it, along with the executive order, as a means of keeping the nation safe.
We have previously reported in this space about the use of domain name seizures by American law enforcement – for example, here and here. Recent media reports show that domain name seizure has become the go-to tactic for law enforcement for other countries as well.
Canadian police made a series of arrests during an invitation-only Super Bowl party attended by 2300 people as part of Project Amethyst. A Royal Canadian Mounted Police spokesperson says this was connected with the arrest of 21 individuals related to a separate online credit betting operation in November. The more recent arrests were connected with an online sports betting operation that used the website located at www.platinumsb.com. In addition to arresting six individuals, officers also seized $2.5 million in cash as a result of the execution of nine search warrants in and around Toronto.
Police also seized the domain name associated with a Costa Rica-based website, which is registered with Washington State-based Enom, Inc. Police obtained a Canadian court order for that purpose, and then submitted a request under the Mutual Legal Assistance Treaty (MLAT) between Canada and the United States. The domain name was then transferred to the control of Canadian law enforcement authorities who, in turn, redirected it to a new landing page. Visitors to the platinumsb.com website are now greeted by a notice stating that the web site has been “restrained by court order granted to the Attorney General of Ontario.”
Media reports indicate that the website was back online as www.platinumsb.tk within hours of the shutdown. The .tk top level domain belongs to Tokelau, a non-self-governing territory off the coast of New Zealand. The .tk version of the domain name was reportedly registered in 2004, suggesting that the group operating the sports book had set up contingency plans for a seizure of its .com website.
Whatever the merits of the Canadian prosecution against individuals affiliated with PlatinumSB, the seizure of the platinumsb.com domain name certainly shows that domain name seizure is by no means a tactic used only by U.S. law enforcement. As more and more businesses move largely or exclusively to the Internet, the global use of this law enforcement tactic is sure to grow.
Facebook is quickly expanding its real money gaming platform. Net Entertainments has signed a license agreement with Bonza Gaming, which is a joint venture between gaming publisher Plumbee and online gaming operator Sportingbet. Under the agreement Net Entertainment will offer a range of casino games to Bonza Gaming, which will create an app, Bonza Slots, that will be available on Facebook to users that want to participate in real money gaming.
Facebook is now the world’s largest social media outlet, with over a billion active users. Last summer, Facebook announced that it would expand its social gaming to real money gaming, beginning initially with users in the United Kingdom. Bonza Slots becomes the third real money gaming app on Facebook, joining Gamesys and 888 Holdings; all three companies have recently reached deals with Facebook to launch their real money gaming apps. With Facebook’s massive user base, it can accomplish what other online gaming sites could likely only achieve on a much smaller scale — the ability to reach a large and constantly growing base of players.
Facebook is no stranger to online gaming. For some time now, it has offered its users the option of playing online games for Facebook credits as an alternative to real money. In 2011, Facebook changed its advertising policies, allowing online gambling companies to advertise in jurisdictions where such services are permitted. In the past, Facebook has been extremely strict when it comes to advertising online gambling business on its website. Now, Facebook’s Advertising Guidelines web page has a specific online gambling clause under the Gambling and Lotteries subsection of the Ad Content section, which reads: “Ads that promote or facilitate online gambling, games of skill or lotteries, including online casino, sports books, bingo, or poker, are only allowed in specific countries with prior authorization from Facebook.”
It is not clear how much Facebook will charge real money gaming companies to operate on its platform. In general, Facebook charges other apps 30 percent of their revenue, and there is no indication that gaming will work any differently. After reviewing Facebook’s public filings, we still have some questions about this and we will report back as we find answers.
In any case, Facebook’s new online real gaming platform will immediately give it a strong position in the real money market in the United Kingdom and a great opportunity to monetize its very large user base. With legislative efforts for real money online gaming gaining momentum across the United States, Facebook could be well positioned to be a power in the U.S. market in the future if it chooses to do so.
New Jersey is poised to become the third state in the country to legalize online gaming. Today, Gov. Chris Christie (R) sent the state iGaming bill back to the legislature requesting some minor changes and indicated that he is prepared to move forward with the bill once those changes are made.
Gov. Christie’s statement said, “I have concluded that now is the time for our State to move forward, again leading the way for the nation, by becoming one of the first States to permit Internet gaming.” The statement goes on to say, “I authorize this step towards modernizing Atlantic City’s entertainment attractions cautiously, with carefully constructed limitations that will ensure the highest integrity and the most robust oversight.”
New Jersey’s online gaming bill allows for all casino games to be played online, not just poker.
On December 20, 2012, the New Jersey State Senate voted 33-3 to legalize online gaming in the state after the state General Assembly previously approved the bill by a vote of 48-25-3.
State legislators have indicated that they are prepared to make the changes suggested by the governor and could get a new bill back on his desk in a matter of weeks.
The sponsor of the bill, State Sen. Raymond Lesniak (D), called the governor’s decision “a huge win” and something that “can help keep Atlantic City from drowning in red ink.”
The changes requested by Gov. Christie today included an increase in the tax rate on revenues generated from online gaming, additional funding for problem gamblers, and tighter regulations on relationships between state employees and companies that hold an Internet gaming license. The bill also expires in 10 years, although there is nothing preventing the state from renewing the legislation in the future.
We are very happy to see New Jersey take a huge step toward bringing Internet gaming to the state and toward adding more jobs and revenue.