December 8, 2023

Foreign Money Fuels Faltering Bid to Push Online Poker

Former Senator Alfonse M. D’Amato, Republican of New York, has been the public face of the effort, which has included charity poker tournaments featuring members of Congress, as well as hundreds of thousands of dollars in campaign contributions to a disparate assortment of lawmakers, including Representative Barney Frank, Democrat of Massachusetts, and Senator Harry Reid, Democrat of Nevada, the majority leader.

But late last week, the United States Justice Department delivered an unexpected thunderbolt to this huge lobbying campaign when it indicted top executives at PokerStars, Full Tilt Poker and Absolute Poker, accusing them of fraud and money laundering. In doing so the government has taken on a politically powerful industry that for a while seemed like it might transform gambling around the world.

As evidence of the industry’s shifting fortunes, major gambling operators like Wynn Resorts are already distancing themselves from the three Internet gambling companies, canceling planned business alliances. ESPN has removed poker-related content from its own Internet site.

This is exactly what the industry was trying to prevent when it set out to block enforcement of a law intended to ban Internet games or to get the law repealed. Interviews show that the companies named in the indictment, while foreign-based, have indirectly been paying more than half of the lobbying and operating bills for a nonprofit organization that is championing Internet gambling in the United States.

Mr. Frank, in an interview on Monday, said he had no plan to back down. “It is a bad law,” he said. “How is it possible that a United States attorney in New York does not have anything more to do than indict people for a full house? He should be indicting people for the empty houses we have around,” referring to the troubles in the mortgage industry.

Mr. Frank and Representative John Campbell, Republican of California, in March introduced yet another bill, backed by the Poker Players Alliance, a Washington-based nonprofit group. Its budget is subsidized by a Canadian trade association whose members include the companies that run Poker Stars and Full Tilt Poker.

As a senator, Mr. D’Amato played a regular poker game that featured lobbyists. On Friday, he said in a statement, “Online poker is not a crime and should not be treated as such.”

An estimated 10 million online poker players in the United States have turned to these Internet sites, helping generate perhaps as much as $5 billion in annual revenues for the companies.

On Friday the Justice Department said the companies had illegally moved their earnings to corporate headquarters in spots like the Isle of Man in Great Britain and Costa Rica by conspiring with middlemen who disguised them as sales of items like flowers, pet supplies and golf clubs.

John Pappas, the executive director of the Poker Players Alliance, pointed out on Monday that the organization is made up of an estimated 1.2 million members in the United States, including both amateur and professional players, who want to be able to bet online. One of the executives indicted, Raymond Bitar, 39, of California and Ireland, is a contributor to the Players Alliance Political Action Committee, donating about $15,000 of the $200,000 the committee has given to members of Congress in the last four years, with Mr. Frank collecting the biggest amounts.

But most of the money the committee gives to politicians here comes from individuals not cited in the indictment. And Mr. Pappas said the power of his group came not from industry giants but from its members.

“It is the 1.2 million members who live and vote in Congressional districts across the country,” he said. He did confirm that more than half of his organization’s budget is supported by industry companies, including those indicted Friday.

But the push in Washington, and much of the fund-raising, is coordinated by Poker Players Alliance, which relies in large part on contributions from the Internet-based operators. The organization spent $1.6 million on lobbying last year, using nine lobbying firms, and lobbyists like former Representative Jon Porter, Republican of Nevada, and Mr. D’Amato.

The Poker Players Alliance is enlisting players around the nation to call or write lawmakers to protest the restrictions. It hosts an annual “fly-in” day, when players fan out across Capitol Hill. And it sent representatives to — and set up a poker tournament at — the Conservative Political Action Conference this year, convinced it could find some recruits to its cause at the popular annual event.

In October 2009, 19 members of Congress signed a letter sent to Treasury Secretary Timothy F. Geithner and Ben S. Bernanke, chairman of the Federal Reserve, urging them to impose a one-year delay on enforcing regulations intended to cut off payments to the Internet poker companies.

One of the lead signers of the letter was Representative Peter T. King, Republican of New York; he calls Mr. D’Amato a friend and mentor, and Mr. D’Amato has served as one of his top fund-raisers. In total, 15 of the 19 signers of the letter received contributions from the Poker Player Alliance political action committee in the last election cycle.

Mr. Frank has been celebrated as one of the industry’s most important champions in Washington. He worked last year to push legislation through the Financial Services Committee, where he served as chairman until this year, that would legalize Internet poker, although the bill never got taken up by the Senate or the full House.

Mr. Frank, no poker player himself, has said he opposes the ban based on his distaste for government intervention into the private lives of citizens. His advocacy, he said, goes back to 2002, even before the Poker Players Alliance was set up.

Mr. Pappas, the executive director of the Poker Players Alliance, delivered $51,200 worth of bundled campaign contributions to Mr. Frank’s re-election campaign in late 2009, according to campaign finance reports. These contributions follow up on at least $30,000 more that Mr. Frank took in from the industry in the prior two years, including contributions from some of the industry’s most famous players, like Annie Duke (“The Duchess Of Poker”), Howard Lederer (“The Professor”) and Andy Bloch (“The Rock”).

For now, the companies that have been indicted — and their Internet site addresses seized by the Justice Department — have stopped taking bets from players in the United States, generating a wave of resentment from the millions of players who turned to the games, many several times a day.

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