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Rochester Region at Center of Online Gambling Arrests
Gary Craig – Staff writer, RocNow.com
BetOnline.com, a Panama-based online wagering site, is one of an untold number that will be accepting bets today on a premier gambling event – the Super Bowl.
Meanwhile, Joseph J. Fafone, an Ontario County man who helped build BetOnline.com, is awaiting trial on charges that he was a ringleader in a massive gambling enterprise that made millions of dollars on Internet wagering.
Fafone, 48, of Farmington, was among 30 people arrested in October on bookmaking charges stemming from involvement with offshore, Internet-based gambling sites. Authorities also charged Fafone’s Ontario County-based corporation, JJF Consulting Services, which they said was a shell company that funneled and concealed illegal gambling proceeds.
Also arrested were David Valerio, 61, of Rochester and Louis Lippa Jr., 61, of Perinton. Another of those arrested, Edward P. Kenny of Florida, also previously lived in Rochester.
Police also arrested Fafone’s 70-year-old father, Joseph P. Fafone, at his home in Boca Raton, Fla. He also previously lived in Rochester.
All have pleaded not guilty.
The gambling ring pulled in $587 million over 28 months, authorities allege.
Christopher Grillo, a Florida lawyer representing the younger Fafone, said Fafone operated legally. Fafone continues to maintain his innocence, Grillo said.
Attorneys for the other defendants did not return telephone calls.
In the past decade, Internet gambling has exploded in size – prompting Congress to grapple with new laws and bookmakers to search out ways to skirt any prohibitions. Offshore headquarters – such as the Panamanian home for BetOnline.com – provide an online outlet for wagers.
Despite the technological advances in gambling, the cat-and-mouse game between bookies and police officers continues as in years and eras past – as demonstrated by the sweeping law enforcement operation that led to the arrest of Fafone and others.
The next court dates for the accused – all of whom are free awaiting trial – will be later this month.
The nearly 200-page indictment alleges that traditional policing techniques – gambling-related telephone calls caught by wiretaps, the use of informants, and surveillance in which police witnessed individuals exchanging hundreds of thousands of dollars in gambling proceeds – provided the foundation of the criminal case.
Police say they dismantled a significant criminal enterprise.
“Gambling proceeds is the fuel that drives organized crime,” New York City Police Commissioner Raymond Kelly said about the arrests. “The staggering amount of money in this case demonstrates just that. In this instance, however, the bookies ran out of luck.”
However, months after the arrests, the online gambling sites associated with Fafone and others are still in operation.
“I can’t comment on any of the activities that happened in the States,” said a spokesman for BetOnline.com who asked not to be identified. “We are (legally) licensed as a sports betting site in Panama.”
Airport arrest
On Oct. 20, Joseph J. Fafone planned to fly out of Rochester with his ultimate destination the BetOnline.com headquarters in Panama. Unaware that he was under the watchful eye of State Police investigators, Fafone cleared the security check at the Greater Rochester International Airport. Police waited to approach Fafone; the metal detector had assured them that he was unarmed.
Near the airline gate, police closed in, arresting Fafone on bookmaking charges and seizing nearly $24,000 in cash he was carrying.
Almost simultaneously at homes and apartments across the country, authorities arrested more than two dozen people.
Fafone and Erik Davis Harp, 36, of Las Vegas are accused of being the ringleaders of the online ventures.
A target of previous regional gambling investigations, Fafone had hoped he would no longer be under steady police scrutiny if he moved offshore, Christopher Costigan, president of the online gambling industry publication Gambling911.com, said in an e-mail response to questions from the Democrat and Chronicle.
Fafone set up his first offshore shop in Costa Rica around 2000 so he could operate legally, said Costigan, who interviewed Fafone and visited Fafone’s betting headquarters in Costa Rica and Panama.
According to Costigan, Fafone said: “I got tired of having my door busted in by the police all the time.”
Online wagers aren’t the crux of the criminal allegations against the Fafones, however. Instead, authorities allege that the Fafones and others engaged in numerous exchanges of gambling proceeds, including one instance in which the younger Fafone allegedly delivered more than $550,000 to a bettor at a Long Island hotel.
Allegations of connections to organized crime have followed both Fafones, though their attorneys have contended there are no ties.
Queens District Attorney Richard Brown said that the alleged betting ring busted in October “had links to both the Gambino and Genovese crime families.”
In 2002, the elder Fafone, nicknamed “Boca Joe,” was arrested with his son and a reputed Gambino family associate – Frank “The Bear” Basto – by a Florida police investigation dubbed “Operation Goodfellas.”
Basto and the elder Fafone were accused of conspiracy to distribute cocaine while Fafone and his son were charged with illegal bookmaking.
In allegations similar to the current case, authorities said the two ran a Costa Rica-based online betting operation and made cash payoffs in Florida.
Basto’s criminal record dated back to 1956, and included convictions of conspiracy to commit murder and arson. He and the Fafones pleaded guilty to criminal charges in Florida.
The elder Fafone served almost two years in prison, while the younger received probation. Basto served about five years.
Were it not for an appellate ruling, the elder Fafone would have been in prison for the past two decades.
In 1989, a Massachusetts jury convicted him after hearing evidence that he was an accessory to the shipment of major amounts of cocaine from Florida into western Massachusetts.
Prosecutors portrayed him as an upper-tier dealer who lived lavishly without evidence of legal employment.
In 1990, a judge sentenced Fafone to 30 to 45 years in prison. Three years later, however, an appellate court reversed the conviction.
While living in Florida, Fafone may have sold cocaine to a major drug dealer, the judges ruled, but he did not know the drugs were destined for Massachusetts. Under state law, the appellate court determined, he could not be an accessory to the drug transactions in the state.
Before that case, the only conviction for the elder Fafone occurred in 1971 in Rochester. Fafone and two other men sold almost $200,000 worth of counterfeit $20 bills, authorities alleged at the time.
Old habits?
Costigan said the younger Fafone may have suffered from a common problem among bookmakers trying to transition into an online world: He couldn’t break with his old habits of dealing with bettors in the United States.
“Joe has been well regarded in the industry, but online sports betting was started by bookies who ran stateside businesses and, for many, it is very tough to get away from that part of the business,” Costigan said in the e-mail.
Online betting sites such as BetOnline.com navigate within a legally murky area. They can legally accept bets if allowed in their countries of operation. The BetOnline.com spokesman said bettors are the ones responsible for knowing whether there are legal prohibitions on making wagers.
Department of Justice officials contend that longstanding federal Wire Act laws, prohibiting the transfer of gambling proceeds by wire communications, extend to Internet gambling. However, in 2006 Congress passed the Unlawful Internet Gaming Enforcement Act (UIGEA), trying to specifically outlaw online wagering by forcing banks and payment conduits to monitor and report Internet-based gambling transactions.
“What the UIGEA does is it goes after the payment providers who do have exposure in the U.S.,” said David Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas. “It definitely makes (online gambling) less legitimate. Basically what it does is it forces anyone with any kind of illegal exposure in the United States out of the picture.”
The offshore gambling site operators “don’t have any kind of legal exposure in the U.S.,” he said.
The UIGEA has been placed on hold, however, after gambling industry and banking lobbyists argued that the statute is too difficult to enforce. Meanwhile, U.S. Rep. Barney Frank, D-Mass., has been pushing a bill to legalize and regulate online wagering.
Longtime gambling critic John Kindt, a business and legal policies professor at the University of Illinois, says that legalized online wagering would provide an easy front for money laundering and spur more gambling addiction.
Online gambling will be “the crack cocaine of creating new addicted gamblers,” he said. “It would place gambling at every school desk, at every work desk, and in every living room.”
Department of Justice officials concur, opposing the legalization of online wagering. The battle over online gambling is likely to be rejoined in the current congressional session.
As for today, however, the Internet will be alive with what some experts predict will be millions of online wagers.
“It’s not just Super Bowl Sunday,” Kindt said. “It’s Super Gambling Sunday.”
Said Schwartz, from UNLV: “It’s kind of like Christmas for little kids, that’s what this Sunday is for the sports books.”
MasterCard Blocking Online Poker Deposits From US Customers
The Unlawful Internet Gambling Enforcement Act is not set to take effect in the US until June, but already the trickle down effect of the law are being felt. MasterCard has become the first of the major credit card companies to block transactions for online poker.
Up until recently, MasterCard and other credit card companies have been slow to adapt to the laws set forth in the UIGEA. MasterCard has attempted this type of block before, but were unsuccessful after the gaming companies changed their codes to get their transactions to process.
Lately, the US government has been seizing bank accounts related to online gambling sites. These seizures have millions of dollars held up, and the US is currently trying to get their hands on the funds in forfeiture rulings.
Instead of changing the codes again, it appears that online poker sites will continue their operations without MasterCard as a deposit option. The logo has been removed from some big online sites, still leaving other options for US players looking to enjoy online poker.
Representative Barney Frank, meanwhile, is still collecting supporters in Congress to attempt to overturn the UIGEA. Frank has introduced legislation that not only would overturn the law, but would also set up a regulated Internet gambling system in the country.
Online Casinos Ban Just Part of NFL Bullying, “Who Dat ” Seized
New Orleans Saints fans are learning what online casino patrons and operators have known about the NFL and its arrogant bulldozing of the law.
Online casino operators have long seen the manipulative, bullying approach utilized by the National Football League to feed its greed for cash, as the NFL led lobbyists fighting to deny Internet gambling rights. That hidden face was dragged a little further into the light this week as the league attempted to seize and profit from the populist “Who Dat” chant used by New Orleans Saints fans.
“Who Dat” as in “Who dat gonna best dem Saints? Nobody!” became one of the rallying cries by New Orleans fans in the 80s, along with the register sound of “Cha-ching!” The history of the cry goes back to St. Augustine High School, a private Catholic school known for both its powerful football teams and colorful marching band.
Saints fans adopted the cheer, and used it as theirs for 25 years, while the team toiled in mediocrity. But, now that the team is in the national spotlight and playing in its first Super Bowl, the NFL wants local merchandisers to cease and desist from using the slogan on t-shirts and such.
“The Saints actually win something and go to the Super Bowl, and the NFL sees a way they can make a penny,” general manager Dan Frazier, of sports-talk radio 690 WIST told the Wall Street Journal.
The NFL says it is concerned people buying “Who Dat” merchandise will think they are purchasing NFL-sanctioned material. But even the Saints see the issue here. Locals are waiting to find the NFL claiming rights to “The Saints Come Marching In.”
“No one should own ‘Who Dat,’ ” says team spokesman Greg Bensel.
Still, as with gambling, the NFL cares more about wielding its money as a weapon than any consideration of right and wrong. Shop owners are pulling the materials in question, saying they can’t put their mom-and-pop operations up against the NFL attorneys and hundreds of millions in legal warchests.
There are signs US lawmakers are growing tired of NFL arrogance. Delaware is taking the case of legal sports betting to the Supreme Court. New Jersey legislators have filed suit against the NFL-sponsored sports betting ban. Barney Frank is advancing his bill to regulate online casinos.
And Senator David Vitter advised the NFL in a letter to “Please either drop your present ridiculous position or sue me,” signing as “Junior Senator of Who Dat Nation.”
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Party Poker May Become Huge In The U.S.
America’s Biggest Sporting Voice Examines UIGEA and Online Gambling and How PartyPoker Might Fit into U.S. Picture.
If the online poker ban in the U.S. (that’s the UIGEA, for those keeping score at home) should happen to be reversed in the near future, what online gambling companies are going to be best positioned to enter the largest Internet poker market in the world?
More and more media observers are speculating that PartyPoker is working hard on preparations to not only enter the U.S. market, but also dominate it when the time comes. Admitting that Full Tilt Poker and PokerStars have in recent years risen far ahead of any online poker competition, ESPN’s Gary Wise is still of the opinion that PartyPoker is poised to come back strong in the U.S. when the UIGEA is repealed — and that day may be soon.
“Party has been operating in the years since UIGEA, but only in recent months has its name again started hitting the headlines in North American media outlets,” Wise writes. “In May, the site finally re-signed its most recognizable face, Mike Sexton. In August, it purchased the World Poker Tour, a longtime business partner that’s synonymous with the Sexton brand. More recently, Party announced the signings of Kara Scott and Tony Guoga, better known as Tony G.
“With the money being thrown around, it appears that Party is in the early stages of trying to reclaim a share of an American market it once controlled.”
And of course, when online poker becomes business as usual again in the United States, the company best prepared for that market may easily end up becoming the biggest online poker brand in the world.
Internet Gambling: iMEGA Chief Testifies Before New Jersey
IMEGA will participate in today’s hearing of the New Jersey Senate’s Gaming & Tourism committee, with Chairman Joe Brennan Jr. testifying on the behalf of the Internet gambling and sports wagering bills.
The hearing is scheduled for 1:00 pm ET, and can be heard live online at:
www.njleg.state.nj.us.
Gambling911.com first reported that the state of New Jersey had put forth a bill drafted by Senator Raymond Lesniak that would legalize online sports betting and other forms of Internet Gambling.
The Interactive Media Entertainment & Gaming Association is working with Lesniak in his efforts to legalize online sports betting, poker and casino games.
An Act permitting wagering at casinos in-person and through an account wagering system using telephone, Internet and other means on the results of professional and collegiate sport or athletic events, subject to voter approval, and amending and supplementing P.L.1977, c.110 (C.5:12-1 et seq.).
Iowa Wants Legalized Sports Betting
DES MOINES – Iowa gamblers would be able to legally wager on sporting events if Congress and the Iowa Legislature play ball.
Two Democratic senators introduced separate measures Thursday seeking to give the state Racing and Gaming Commission authority to allow state-licensed racetracks and riverboat casinos to offer sports betting to patrons if a federal prohibition is lifted.
“I think we ought to have sports betting in Iowa,” said Senate President Jack Kibbie, D-Emmetsburg. “They’re probably betting on them anyway, but we’re not getting any tax. I think it would raise a lot of money.”
The federal professional and amateur sports protection act of 1992 made sports betting illegal in all but a handful of U.S. states. However, Kibbie and Sen. Steve Sodders, D-State Center, say current restrictions are being challenged in court and there are efforts to convince Congress to change the law.
They have offered slightly different versions – Sodders’ bill mentions professional sports only, while Kibbie authored a measure that would give Iowa gambling regulators the go-ahead if federal law does not prohibit professional and amateur sports betting in Iowa.
“This bill hinges on federal legislation to open it up,” Kibbie said.
“There are people that would like to bet on sports who don’t bet on other things,” added Kibbie, who speculated an expansion into legalized sports wagering eventually could generate as much as $100 million in new state gaming revenue it if were taxed at the same rate as other betting activities.
Sodders said he hoped the proposals would begin a conversation about legalizing sports gambling. He planned to contact members of Iowa’s congressional delegation to enlist help in getting the federal prohibition lifted.
“We think that we ought to be able to regulate that here and have sports betting if Iowa desires to do that in our casinos,” he said. “Why not let them do that betting here than in other states that are getting the revenue for that?”
Sodders said the fact that huge sums of money will be wagered on the upcoming Super Bowl is evidence there is consumer interest in betting on sporting events. He said channeling the activity through state-regulated outlets would help prevent problems associated with clandestine betting options.
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Kentucky Still Awaits Final Online Poker Verdict
It’s the case that just won’t seem to end: The Kentucky government’s attempt to seize 141 online gambling-related domain names in late 2008 is still playing out in the courts.
Many in the online gambling industry (and the state itself) believed that this week would see a decision being made by the Kentucky’s Supreme Court. But, as of yet, no final decision has been made, and reports now indicate that the decision won’t come until March — if then.
It’s a good sign for the online gambling industry, since the most recent verdict by a Kentucky appeals court was that the domain name seizure was unlawful. The fact that the higher court is taking so long to decide which way to go on this issue, however, is a bit less encouraging.
All this is happening in the wake of this week’s decision by Kentucky lawmakers to not allow an expansion of land-based gambling in casinos and state racetracks. So, as much as the Kentucky governor is vilified in this issue because of his seemingly hypocritical take on gambling, it’s important to note that some legislators in the state are consistent in their opposition to online gambling. (The real question, however, would be: What do the voters think?)
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