Online Poker Companies Reach Accord With U.S. on Players’ Access to Money

Two online poker companies whose founders face charges of illegal gambling reached agreements with the U.S. Justice Department that will ease the return of money to players.

PokerStars and Full Tilt Poker entered into domain-name use agreements, U.S. Attorney Preet Bharara in Manhattan said today in a statement. The agreements allow the companies to use their websites “to facilitate the withdrawal of U.S. players’ funds held in account with the companies.”

Bharara announced an indictment against the founders of PokerStars, Full Tilt Poker and Absolute Poker last week, alleging the three companies circumvented a 2006 federal law barring banks from processing payments to offshore gambling websites. All three are based outside the U.S. and are the leading online poker sites doing business with U.S. customers, according to prosecutors.

People lost access to their accounts when U.S. authorities seized five Internet domain names and froze about 76 bank accounts in 14 countries that allegedly belong to the online poker companies, Kelly Langmesser, a spokeswoman for the FBI’s New York office, said April 18.

“No individual player accounts were ever frozen or restrained, and each implicated poker company has at all times been free to reimburse any player’s deposited funds,” Bharara said in the statement. “This office expects the companies to return the money that U.S. players entrusted to them, and we will work with the poker companies to facilitate the return of funds to players.”

‘Returning Money’

Today’s agreement allows PokerStars to “start the process of returning money to its former U.S. customers,” the company said today in a statement. “All PokerStars player deposits are completely safe” and, with its domains released, the company “continues to operate business as usual” outside the U.S.

Bharara’s statement didn’t provide an update on Absolute Poker’s domain names or customer account access.

In the indictment unsealed April 15, 11 people, including the founders of PokerStars, based on the Isle of Man, Ireland’s Full Tilt Poker and Absolute Poker of Costa Rica, were charged with conspiracy to commit bank and wire fraud, money laundering and illegal gambling.

Prosecutors allege that after the U.S. enacted a law in 2006 barring banks from processing payments to offshore gambling websites, PokerStars, Full Tilt and Absolute used fraudulent means to work around the ban to continue operating in the U.S., and “trick” banks into processing payments on their behalf. The government seeks at least $3 billion in forfeitures and penalties.

Five Domains

The indictment names two principals from each company and others who allegedly worked with them to illegally process payments. Five domains were seized: Pokerstars.com, Fulltiltpoker.com, Absolutepoker.com, Ultimatebet.com and UB.com.

Wynn Resorts Ltd. (WYNN), owner of Wynn and Encore casinos in Las Vegas and Macau, announced on March 25 an alliance with PokerStars, the world’s biggest online poker business, to seek the legalization of Internet gambling in the U.S. Wynn said it terminated the accord on April 15.

Wynn Resorts “hesitantly” partnered with PokerStars “because there didn’t seem to be any interest in the government to enforce restrictions on the game of poker,” chief executive officer and founder Steve Wynn said yesterday on an earnings call, where he compared the situation to last century’s prohibition of alcohol. “We’re trying to figure out what the hell the public policy is and then we can have a corporate policy.”

‘Screaming for Regulation’

“Internet poker seems to be screaming for regulation,” Wynn said. “States can get money at a time when they need money and the federal government can get some money at a time when it could use the money. It seems like an intelligent thing to sit down and regulate it.”

Fertitta Interactive, controlled by the owners of Station Casinos Inc., said it had been negotiating an alliance with Full Tilt Poker. The Wall Street Journal reported the talks last month.

“The deal between Full Tilt Poker and Fertitta Interactive was contingent upon pending federal poker legislation, our own internal due diligence, and gaming license approvals,” Fertitta Interactive said in an e-mail April 18. “There is currently not a deal in place as the exclusive negotiating period has expired.”

Industry Lobbying

Caesars Entertainment Corp., the world’s biggest casino company, has led industry lobbying to legalize online poker in the U.S. Gary Thompson, a Caesars spokesman, declined to comment on the indictments on April 18.

Seth Palansky, a spokesman for Caesars’ World Series of Poker and interactive units, said in an April 18 e-mail that the company had “never offered any real online gaming in the United States.”

Units of Caesars, formerly Harrah’s, operate “real” online gambling -- in which players wager actual money -- in the U.K. with partners who aren’t involved in the indictment, and recently reached licensing deals in Italy and France. The company also operates play-for-fun Internet poker elsewhere, including the U.S., according to Palansky.

The case is U.S. v. Scheinberg, 10-cr-00336, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net; To contact the reporter on this story: Beth Jinks in New York at bjinks1@bloomberg.net

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