Thoughts on the Neteller Case

[fnord_too]

I probably missed the thread tallking about this, so sorry if this is a duplication.

Here are some thoughts I kicked out in a thread in El Diablo's forum:

What will happen to the two erstwhile neteller executives that were arrested?

I think this case will be extremely interesting if it goes to court because one of the key issues is where do internet transactions take place. For instance, if the Neteller guys are found guilty for violating US law, then states can start trying to force on line merchants to collect sales tax for them, using this ruling as a precedent if the law gets challenged. I think there is a moratorium on this issue right now on a federal level, but to sucessfully prosecute the neteller guys they will have to show evidence that they broke the law, and since congress left legality up to the states, they will have to show they broke a state law. This really muddies the waters and I don't think 1.) the courts will want to rule on this issue since they would effectively be passing law and 2.) congress really does not want them to rule on this issue because they are still uncertain how to deal with it, except I am sure they want to be the ones to deal with it and not some court.

So, there are a few possibilities here:

No Trial: this breaks down into cases where the Neteller execs plea bargain and cases where either the DoJ or Courts decide they will drop the matter. I think most likely the DoJ will push for a plea bargain, but will have to back off if there is a lot of push back.

Trial: This would likely go on for years if it goes to trial, and would likely end up at the Supreme Court. The ramifications of any decision (other than possibly the law is too unclear to enforce) are just too great. The issue is just incredibly complex. For instance, one angle would be that since the federal government is the only body empowered to make and approve international treaties, and since international commerce is covered by said treaties, state law is immaterial in this case. This would completely cut the legs out from under the current stance if the courts bought into it, since congress has put the question of legality in the states hands.

It would be good to know how the neteller lawyers are planning to proceed and to make sure they have thought about all these issues. Just because they are likely high priced laywers does not mean they are considering all the possible defences. Also, it would be very good if the neteller execs do not roll over and demand for the courts to rule. Them taking something like a fine would be absolutely horrible. Additionally, how is the government planning to penetrate the corporate veil here? It really seems like this is just a scare tactic and any real resistance will send them packing.

I don't buy this funds seizing report yet, but I think the points above are valid regarless. Again I just hope that Neteller fights back and does so intelligently. Forcing the case to court and making it a case that clearly defines where internet transactions take place would be a strong tact to take. The implications of saying that local laws govern transactions are staggering, and I don't think any court would rule on something of that magnitude without clear law existing. (I think there have already been these sort of jurisdiction cases, at least one with a porn site and some BFE counties laws against indecency. IIRC, the porn site won on appeal. Maybe someone with access to Westlaw can research this).

[phish]

Your post is confusing a lot of issues involved in civil cases with criminal cases. Your ramblings really don't make a lot of sense.

[Uglyowl]

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Your post is confusing a lot of issues involved in civil cases with criminal cases. Your ramblings really don't make a lot of sense.

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Please add to the conversation about what you feel is inaccurate and not just saying "don't make a lot of sense".

[fnord_too]

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Your post is confusing a lot of issues involved in civil cases with criminal cases. Your ramblings really don't make a lot of sense.

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Here are a couple of very big open questions:

Where do internet transactions take place (under whose jurisdiction and laws)? This is not established as far as I know. It is at the center of whether the Neteller executives were violating any laws. Am I wrong in thinking they are being charged under the UIGEA? Under that law, it would have to be shown that they processed payments to illegal gambling sites, but for the sites to be illegal they have to have violated a state law. In order for that to be the case, there must be a law on the books in a state where someone made initiated these transactions AND it must be ruled that the transaction took place in that state.

What am I missing here? The reason sales taxes do not apply to mail order and internet sales unless the selling company is licensed to do business in the state of delivery is because the transaction is treated as taking place at the site of the seller. Congress has not legislated this yet, and I believe has put a moritorium on the issue.

If this case goes through and the Neteller former executives are found guilty, there is a precedent that internet transactions take place, at least in part, where they are originated and not just where they are executed.

Maybe I am being dense, but my understanding is that congress has not addressed this issue yet, and that the existing precedents all support the idea that the transaction takes place on the vendors site.

Imagine the implications if the originating physical site is considered to be where the transaction takes place. It practically makes any form of internet commerce untennable. The burden of ensuring you are not breaking any local laws is unberable. Even if you verify that, for instance, something is legal where the person lives and where it is being shipped, what if they order it from a hotel room while on travel where it is illegal. (Say ordering wine from a dry county).

Further, consider that all formal international relations fall under the auspices of the federal government. How is there a law basically on international trade (the UIEGA) that cites local laws. This is not importing/exporting, but services entirely rendered on foreign soil. (Unless again the ruling is that they are rendered at the customers address, which is just insane if you are talking about requirements to meet local laws and codes.)

[BluffTHIS!]

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Where do internet transactions take place (under whose jurisdiction and laws)? This is not established as far as I know. It is at the center of whether the Neteller executives were violating any laws. Am I wrong in thinking they are being charged under the UIGEA?

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fnord,

As to jurisdiction, using a sportsbetting example with a customer in NYC betting with a CR book, US law maintains the bet was effectively taken in NY, thus giving them jurisdiction. And as to the neteller case, they are primarily being charged with facilitating money laundering, and not faciliating gambling per se. The investigation of neteller was well underway before the IUGEA passed.

[fnord_too]

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Where do internet transactions take place (under whose jurisdiction and laws)? This is not established as far as I know. It is at the center of whether the Neteller executives were violating any laws. Am I wrong in thinking they are being charged under the UIGEA?

[/ QUOTE ]


fnord,

As to jurisdiction, using a sportsbetting example with a customer in NYC betting with a CR book, US law maintains the bet was effectively taken in NY, thus giving them jurisdiction. And as to the neteller case, they are primarily being charged with facilitating money laundering, and not faciliating gambling per se. The investigation of neteller was well underway before the IUGEA passed.

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This makes sense (the money laundering bit). There are probably lots of attacks on that, too, but they would be entirely different and I have no clue as to what they would be.

In the first bit, I think there are contradictory laws on the books, at least with regards to betting with off shore sites. I don't believe the laws have been adjusted enough for the emergence of new technology and advance of globalization. What I find amazaing (well, I'm not really amazed) is that congress has not addressed the core issues of internet commerce and international commerce. (I am including services in commerce, though by strict definition I am not sure they are, but that is a diction nit).

You bring up a great point though that gambling within the US is an exception. Is that by federal law or just convention. Does the wire act specifically call out gambling or say, specifically exclude avoiding local sales taxes?

[schwza]

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Am I wrong in thinking they are being charged under the UIGEA? Under that law, it would have to be shown that they processed payments to illegal gambling sites, but for the sites to be illegal they have to have violated a state law.

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they could be considered illegal under the wire act, at least clearly for the sports betting and it'd be a legal slugfest other gambling. i kind of doubt that the doj would want to try to apply the wire act to non-sports betting though just because they might lose (more obviously than they've lost in the past).

my .02

[BluffTHIS!]

Regarding how the US views transactions conducted over the net with an offshore entity, it mostly has to do with how the DoJ construes the Wire Act and other legislation, and judicial decisions affirming same, rather than by express will of congress. And as long as congress is happy with those interpretations, it probably won't feel it necessary to pass a law saying so explicitly.

As far as gambling within the US, if it takes place within the confines of a state, it is mostly that state's jurisdiction. Federal jurisdiction only enters in when gambling takes place across state lines, including to overseas, and regarding the types of gambling (sports betting) specified in the Wire Act taking place over communication lines that are part of the national infrastructure (phone lines).

Regardless of what some of us feel *should be* the correct legal interpretations, the practical fact is that what has been upheld in court cases is what *is* the interpretation to be concerned about, although of course some of those interpretations might be appealed higher up the chain. Jay Cohen if he cares to, could speak more on this issue.

[gringo]

This may have already been mentioned... sorry if duplicating. I do not think these guys were Netteller "execs"...just founders and now stockholders.

This is why Netteller's drastic new stance has caught me offgaurd. (yes, with money in their safe trust fund or now DOJ?)

[Petomane]

What does the Neteller case do to tourism in the USA? And internet commerce?

The feds have locked up millions of dollars of citizens' money in cyberspace.

They're making Neteller seem like a shady, fraudulent, "money laundering" operation, instead of a highly respected company operating in over a 100 countries.

At the very least, this is international piracy. If America has arcane interstate laws, than it's America's problem, not the world's. It means America is not ready for the 21st century, not the other way around.