And wouldn't you know it, he's making ignorant statements again. I know you're as surprised by that as I am.
Finally, I noticed Ed Brayton is back complaining about anti-gambling laws again. Now he's up in arms about the arrest of a Carruthers (there's an English name), a UK citizen who runs a vast online-gambling empire... the gentleman in question was arrested while switching flights at a US airport. To quote Ed, "they're already engaging in vast overreach by arresting foreign citizens for doing something perfectly legal in their countries." Now, there may be perfect valid reasons to allow (or not) online gambling - personally I'm against it. Still, it's a long established principle of the law that doing business in a state or country renders one subject to the jurisdiction of the courts of that state or country... and it seems that, at the absolute minimum, everyone involved failed to pay taxes. Whoops.
The whoops here is on your part, dlamming. BetonSports isn't "doing business in this country"; they do business in England and Costa Rica, where their business is perfectly legal and regulated by the government. The fact that they take orders from customers in America doesn't mean they're doing business here any more than a foreign company that takes mail orders from Americans is doing business here.
And the tax evasion charge in the indictment is clearly a sham. If a French company takes an order from an American and ships it to them, they don't pay taxes to the US for the profit or the sale, they pay taxes to the nation in which the business is located. It's the location of the business, not the customer, that determines where a company pays taxes. Why do you think so many companies are registered in tax havens like the Cayman Islands? If they had an actual subsidiary here, then that subsidiary could be taxed because it is located on American soil. But that's not the case here.
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The problem is that there is an excise tax on wagers (USC26, Chapter 35, Subchapter A) which Betonsports and other offshore gambling sites have not been collecting.
The question, therefore, is does the firm's online activity create a constructive presence within the US to the extent that the US can exert extraterritorial jurisdiction sufficient to compel Betonsports to comply with US tax collection regulations?
I confess to not knowing the answer to this question, never having been involved in questions of international law. This is, however, similar to the question of when mail order firms are required to collect state sales taxes. In that case, the firm must collect the taxes if it has a "significant presence" within the state. A significant presence can be met by either having an office in the state, sales agents whose regular territories include the state, or (most significantly for our examination) if the firm does more than a certain amount of business within the state, even if the firm never has any kind of physical presence. When I was taking Conflicts of Law, the jurisdictional threshhold (in $$s) was rather low.
But in this case, there's no presence at all. The company is located in the UK. They have no offices here. The closest they could come to some connection to business in the US was that they had a US marketing company promoting them in the US. That certainly isn't enough to prompt extraterritorial jurisdiction. There's just no way this is going to hold up in court.
It's no more ridiculous than the British/Australian position that non-UK/Oz citizens companies can sue for libel for things published on the internet by non-UK/Oz citizens, so long as someone, somewhere in Britain read it. In other words, if it's on the internet, it was published in Britain/Australia.
Which is, of course, ridiculous.
What constitutes "publication" is a different issue (and I agree with you, Ginger, if any publication is going on, it is by the downloader).
The issue is was Betongames doing sufficient US business to have been required to collect the US wagering excise tax. As I said, I don't know.
The story also alleges that Federal agents ordered gambling supplies which were shipped to Florida. I see this as problematic for the defense.
1) US Customs law imposes a variety of taxes and excise duties, which it is the duty of the importer to collect. That is why most foreign firms exporting to the US either have a US arm to handle the imports or sell wholesale to a US firm which then handles the import requirements. By shipping directly to the customers, Betonsports is exposing itself to potential liability here.
2) Worse, if the imports are of such volume as to rise to the level of significant presence, then the failure to collect the wagering excise -- although completely unrelated -- may also fall under extraterritorial jurisdiction based upon the other relationship.
I really need to read a copy of the indictment, so I hope the Smoking Gun or someone posts that soon. Still, I have to assume that the bases of the charges are something like what I've put forward. BTW, it can be extremely painful to "think like a prosecuter," as my CrimPro prof used to regularly remind us.
I stand corrected on one point. Two Florida companies were handling the import business for betonline. That significantly helps the defense. However....
The fact that the charges involve RICO could make that a moot point. Presumably the allegation against betonline is that it conspired with those companies to subvert US tax law. Criminal intent within the US would automatically waive jurisdictional objections.
kehrsam-
You can see the indictment here.
Thanks for the link, Ed. By the way, feel free to call me Kurt.
The indictment runs to 28 pages in Acrobat format, and is highly repetitive and tedious. The allegations can be divided up into:
1. Illegally taking bets placed from within the US. Except for RICO, this would be a non-starter, as Ed correctly identified it. For the logic of RICO, however, see below.
2. False and misleading advertizing within the US. If (1) doesn't hold up, then the advertizing was not, in fact, false.
3. Failure to collect wagering excise taxes as required by US law. This remains the strongest legitimate charge, but is going to be overshadowed by
4. RICO. The Racketeering Influenced Corrupt Organizations Act was passed in the 1970s as a tool to help prosecuters deal with organized crime. Despite a few well-publicized cases, it really hasn't been terribly successful at its intended purpose.
Instead, RICO has been used as a weapon to threaten other targets of Federal prosecutors, especially when the evidence will not support a conviction on the "real" charges. This is because RICO allows exactly the same penalties for CONSPIRACY as for any actual offense.
RICO comes into play if an organization (loosely defined) commits a certain number of listed offenses within a given time frame, or if there is a conspiracy among its members to commit those offenses.
Betonsports problem is that Kaplan started his bookmaking enterprise in New York, later moved to Florida, and eventually went offshore. So even if the prosecution can't nail him on (1), they are going to argue that moving offshore was merely part of a conspiracy to continue Kaplan's prior gambling venture -- which definitely was illegal, he was convicted in NY.
My wager is he's in a lot of trouble.
By the way, my opinion is that RICO is one of the most pernicious statutes ever enacted by Congress (and now since copied by many states). That's leaving aside the issue of civil uses of RICO to bully prolife groups etc.
The courts rightly struck down the use of RICO against pro-life groups, as they've done in several other instances where the statute has been used.
Can someone explain to me how this is different than a company like Apple Computer, which sells things over the internet into states where they have zero physical presence, but nonetheless collects taxes for the state and local governments.
Lettuce, that depends upon whether international law for that sort of thing is the same as domestic US law. The defense will attempt to have the cases dismissed for lack of jurisdiction. The prosecutor will claim,
a) that failure to collect the wagering excise as required by US law gives the Court subject matter jurisdiction, and may even argue that there is personal jurisdiction over the gentleman arrested in Dallas;
b) In any case, they will argue for personal jurisdiction based upon the RICO charge, saying that defendants were taking part in an ongoing enterprise which started within the US.
I suspect I will go to my grave shouting RICO SUCKS!