According to Reuters "The Sunday Times and Sunday Telegraph newspapers earlier reported that the U.S. had sought the information from 16 banks, including HSBC, Dresdner Kleinwort, Credit Suisse and Deutsche Bank, as well as accountants and law firms.
The sources said the Department of Justice had issued requests for information through the Southern District Court of New York and had ordered the banks to hand over all e-mails, telephone records and documents connected with Internet gaming firms such as 888 Holdings and PartyGaming ."
HSBC advised 888, owner of Pacific Poker , on its IPO. Credit Suisse advised the original shareholders of 888 on their strategic options before the flotation. Deutsche is co-broker to PartyGaming, while Dresdner advised on its public listing. Two of the United States' largest banks, Citigroup and Goldman Sachs, avoided involvement with internet gambling offerings due to questions of their legality.
This may be part of broadening of scope for the ongoing witch hunt against internet gambling, giving the Justice Department information on investors who may have profited from the public offerings of internet gambling companies. While it may not ultimately be within the jurisdiction of the US Department of Justice to investigate companies that are licensed and regulated in other countries, shares of PartyGaming fell almost 10 percent on news of the investigation. Sportingbet and 888 Holdings stocks also tumbled at the start of trading on Monday.
One opinion is that these subpoenas are intended to prosecute senior management and founders of internet gambling firms, similar to the arrests of Canadian Neteller founders Stephen Lawrence and John Lefebvre last week on money laundering charges. Other sources called it a "fishing expedition" by the Justice Department, while the wildest of theories range far enough for the US government to proceed against individual investors and stockholders in these companies.
The prosecutors may be emboldened by a law signed by President Bush last October that explicitly defined the illegality of running an Internet casino. Even before that law, the Unlawful Internet Gambling Enforcement Act, was adopted, the government said that Internet gambling was illegal under a 1961 provision. European gambling companies, including PartyGaming, have been taking business from the United States for many years arguing that until last October U.S. federal law was ambiguous and made no reference to the Internet.
That ambiguity was stripped away in October, leading to the exit from the US market of Party Poker, Pacific Poker, Paradise Poker, Pinnacle Sports, FirePay and Neteller. These high-profile exits are no guarantees against prosecution, as the Neteller arrests last week demonstrated. Lawrence and Lefebvre were arrested on suspicion of money laundering activities in connection with the founding of the company, events that took place long before the passage of the UIGEA.
No one knows what the future holds for internet poker in the US, but these attacks by the Department of Justice are certainly creating turbulence in the market and causing investors to worry, which plays right into the hands of the US government. The frantic sell off of stocks, the rush to withdraw money from gaming sites by those outside the US all help to undermine the market's stability, which pushes the industry one step closer to the brink that the Justice Department is trying to drive it over.