Company is Cooperating in Federal Investigation

[Wahoo73]

Read this: http://www.finextra.com/fullstory.asp?id=16724
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Federal Web gambling probe scuppers Echo/Intuit merger
US merchant payment processor Electronic Clearing House (Echo) has called off its planned $142 million merger with financial software vendor Intuit following a federal investigation into online gambling by the firm's Internet wallet customers.

In two separate statements the companies, which had entered a merger agreement on 14 December 2006, say they each agreed to release each other from all claims. The deal had been valued at $142 million, or $18.75 a share, including shares issuable upon exercise of options.


But the merger seems to have been scuppered in large part by the federal government's ongoing crackdown on Internet gambling.


California-based Echo says it has entered into a non-prosecution agreement with the US Attorney for the Southern District of New York and has agreed to give up an estimated $2.3 million in profit from services provided to its Internet wallet customers from 2001 until February this year when it ceased all processing and collection services for these customers.

Echo says it will continue to act as a witness in the investigation and also expects to incur additional legal expenses related to the federal probe.


Although Echo hasn't stated that it was the federal investigation that torpedoed its merger with Intuit, company chairman and chief executive Joel Barry told reporters that the investigation and $2.3 million settlement was a "primary contributing factor" to the decision to terminate merger transaction.


In a statement Barry says the costs associated with the proposed merger, along with the settlement and on-going legal expenses, will negatively impact the firm's near-term financial results.


US Congress passed the Unlawful Internet Gambling Enforcement Act last September which bans payments processors from handling online payments for Internet gambling sites.
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Connecting the dots (based on what I placed in bold text): ECHO was one of the primary ACH/EFT processors for Neteller and probably has/had control of all or a substantial part of the $55M that was "seized."

[MiltonFriedman]

They certainly looked to get that business in years past. I do not know whether they suceeded, but they may have residual exposure .... the same sort of thing that got Steve Lawrence arrested.

[MiltonFriedman]

Good theory about Neteller ACH processing, but snyone here know for who else ECHO provided services, if anyone ?

[yahboohoo]

Testimonials from some of their customers, and a whole slew of press releases will give you more insight into which and how many companies ECHO Inc. served.

[MiltonFriedman]

Thanks, I looked at all their posted press releases already, back to 2001, but did not see gaming companies there. Nor were there any in the testimonials.

Clearly there is some gaming tie-in, anyone know what ?

[yahboohoo]

Here is some confirmation in this article from Thoroughbred Times.

[ QUOTE ]
Internet gambling crackdown prompts large fine for payment facilitator

By Frank Angst

The federal government took another step in its crackdown on illegal Internet gaming on Wednesday when a company that processes online payments agreed to pay a fine and cooperate with the Justice Department as a witness.

In signing a non-prosecution agreement, Electronic Clearing House Inc. (ECHO) agreed to pay $2.3-million and fully cooperate with the government’s continuing investigation into illegal Internet gambling. ECHO chairman Joel Barry said the $2.3-million represents company profits since 2001 from processing and collection services provided to companies, known as e-wallets, that in turn provided financial transactions for illegal Internet gaming.

On Wednesday, United States Attorney for the Southern District of New York Michael Garcia said ECHO would not face prosecution because it started to wind down its e-wallet processing in October and has frozen $21-million belonging to e-wallet companies. The biggest such company handled by ECHO was Neteller, which in January ceased operations with United States customers.

Barry said the Camarillo, California, company would not face further prosecution.

“It’s important to know that the government has assured us it will not pursue further prosecution,” Barry said. “We want to get on with our business.”

Last year, the United States passed the Unlawful Internet Gambling Enforcement Act, which makes it unlawful for financial entities to process financial transactions to illegal gambling Internet sites. Horse racing received an exemption in that bill.

The Justice Department believes the federal Wire Act prohibited transactions to such gambling sites before that September law was passed. In January, the Federal Bureau of Investigation arrested two Neteller founders on charges of facilitating the transfer of billions of dollars in illegal gambling proceeds since July 2000.

Barry said ECHO did not wish to contest the legality of the transactions completed before the Unlawful Internet Gambling Enforcement Act became law.

“Frankly, we did not feel like we had the time or money to challenge this [in court],” Barry said. “It would have been much more harmful for the shareholders to fight it.”

ECHO has cooperated with the government by providing requested documents and making employees available for interviews.

In announcing today’s agreement, ECHO also reported that a merger agreement entered in December with business software developer Intuit Inc. would be terminated.

[/ QUOTE ]

[MiltonFriedman]

thanks, any others ... like epassporte or firepay or PrepaidATM ?

[LinusKS]

[ QUOTE ]
That ePassporte is moving to pick up a lot of the US gaming market is clear, Milton, but I doubt they are going to be a target any time soon unless they are foolish enough to fund sportsbetting sites. Anyone know for certain whether epass can be used at sportsbetting sites? If it can, then they better be careful about having any physical contacts with the US or Milton's prediction may well come true.

[/ QUOTE ]

1. They don't need sports betting to go after them.

2. These corporations fold up if the DOJ looks cross-eyed at them.

[fleece_me]

Firepay

[Uglyowl]

[ QUOTE ]
1. They don't need sports betting to go after them.


[/ QUOTE ]

I guess they could go after anyone, but sports betting has been the common thread with all DOJ action to date.

Outside of sports betting, you head into very murky waters. Some U.S. companies (including publicly traded companies) are handling poker transactions very openly right now.