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Neteller Founder Pleads Guilty To Promoting Illegal Gambling

by Leroy Baker, for LawAndTax-News.com, New York

18 July 2007


John Lefebvre, the founder and former president of payment services company Neteller, has pleaded guilty to charges that he conspired with others to promote illegal gambling by providing payment services in the United States to offshore internet gambling businesses.

According to Michael J. Garcia, the United States Attorney for the Southern District of New York, the NETeller Group provided payment services to internet gambling businesses located outside the United States, so those businesses could take bets from gamblers in the United States, where such betting is now illegal.

Lefebvre and fellow co-founder Stephen Lawrence, both Canadian citizens, were arrested in connection with the charges in January.

Neteller PLC, formerly known as Neteller, Inc., is an internet payment services company that was founded by Lawrence and Lefebvre in 1999. Neteller is based in the Isle of Man and its shares are listed on the London Stock Exchange, although trading in the company's stock has been suspended.

Neteller began processing internet gambling transactions in approximately July 2000. Internet payment services companies like Neteller allow gambling companies to transfer money collected from United States customers to bank accounts outside the United States. According to Neteller’s 2005 annual report, Lawrence and Lefebvre, through Neteller, provided payment services to more than 80% of worldwide gaming merchants.

Both defendants held senior positions within Neteller; Lawrence served as the company's chief executive officer until December 2002, its executive director from 2001 until mid-2003 and as chairman until May 2006. Lefebvre was president of the company from 2000 until 2002 and a board member until approximately December 2005.

Neteller has said that as of 18 January 2007, US customers were no longer able to transfer funds using its services to or from any online gambling site. The company's board made the decision in the light of the passing of the Unlawful Internet Gaming Enforcement Act of 2006 (UIGEA) by Congress last year, and the attendant.

In 2005, it is said that Neteller processed over $7.3 billion in financial transactions, and prosecutors alleged that 95% of the firm's revenue was derived from money transfers involving internet gambling companies.

Lefebvre pleaded guilty to a number of charges, including: one count of conspiracy to use the wires to transmit in interstate and foreign commerce bets; conducting illegal gambling businesses; engaging in international financial transactions for the purpose of promoting illegal gambling; and operating an unlicensed money transmitting business.

Lefebvre, 55, faces a maximum sentence of 5 years’ imprisonment and a fine of $250,000, or twice the gross gain or loss from the offense, when he is sentenced before United States District Judge P. Kevin Castel on October 29, 2007. Lawrence also admitted to forfeiture allegations, requiring him to forfeit $100 million.

In a related case, Lawrence pleaded guilty on June 29, 2007 to participating in the same conspiracy and also admitted to a forfeiture allegation of $100 million, for which he is jointly responsible with Lefebvre.

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

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