Michael J. Garcia, the US Attorney for the Southern District of New York, and Mark J. Mershon, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation, announced the unsealing of an indictment charging the twelve on Monday, following the arrest of eight of the accused in New York, Maryland and Massachusetts earlier that day.

The indictment, filed in Manhattan federal court, alleges that from December 2005, Carmen Cicalese operated an internet website and telephone call center, known as a wireroom, in Costa Rica which charged United States-based sports bookies weekly fees of approximately $15 to $30 for each gambler that the bookie registered with the 'Cicalese Wireroom'. In return, registered gamblers were able to place bets on sporting events at odds set by the Cicalese Wireroom via a toll-free phone number, and through various websites maintained by the Cicalese Wireroom, including datawager.com and betwestsports.com.

The indictment stated that the Cicalese Wireroom did not itself take an interest in the outcome of these wagers; paying winners and collecting from losers was the responsibility of the bookies.

US bookies are said by the authorities to have paid the fees owed to the Cicalese Wireroom to representatives of the Cicalese Wireroom in the United States. It is then thought that the collectors, or 'runners,' in turn transferred the money back to the Cicalese Wireroom in various ways, including by using couriers, debit cards, and electronic funds transfers. According to prosecutors, on one occasion, the Cicalese Wireroom used a Pakistan-based "hawala" money transfer organization to move money collected from United States bookies.

The Cicalese Wireroom is believed to have serviced several hundred bookies, each of whom had registered numerous gambling customers, and received millions of dollars in revenue.

All twelve defendants were charged with gambling and with conspiracy to engage in gambling.

Fearing that online gambling operations based offshore could act as a conduit for money launderers and financiers of terrorism, the Bush administration has led a crackdown on foreign operators in the US. The Unlawful Internet Gambling Enforcement Act, passed by Congress in 2006, effectively shut down the US industry for these companies by prohibiting the use of payment instruments by financial institutions to handle the processing of any form of internet gambling that is illegal under US federal or state law.

The government has also not shied away from pursuing some of the biggest names in the industry, such as BetonSports, the UK-and Costa Rica- based company formerly listed on the London Stock Exchange, which pleaded guilty to racketeering charges in May 2007.

A comprehensive report in our Intelligence Report series examining offshore e-commerce and online gaming is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report6.asp