Chad Elie and John Campos have filed a “motion in limine” requesting permission to present evidence to the jury “concerning the characteristics of online peer-to-peer poker and defendants’ good faith and knowledge”. The government has filed their motion in limine supporting their belief that allowing such evidence would be counterproductive because the law is already clear that online poker constitutes illicit gambling, and that the charges do not rely upon a showing of willfullness on the part of the defendants.
The Defense Position
With the criminal trial fast approaching, attorneys for Elie and Campos have filed a motion with the court asking that the jury be permitted to hear evidence showing that peer-to-peer online poker would not fall under the parameters of the Unlawful Internet Gambling Enforcement Act (UIGEA) or the Illegal Gambling Business Act (IGBA).
The defense wishes to present such evidence to directly challenge the government’s claims that online poker meets the test for 1). “unlawful Internet gambling” and a “game subject to chance” under UIGEA, and 2). the definition of “gambling” as prohibited by IGBA. The defense contends that the government must prove to a jury that online poker is “unlawful Internet gambling” because it is a “game subject to chance.” The government also has the burden to prove that “gambling”, as specifically described in the statute, includes online poker. In addition, Elie and Campos also requested to present evidence about “their knowledge and good faith beliefs” as to whether online poker met those tests, and its lawfulness.
As to the money laundering charges, the defense contends that the government must prove that any monetary transactions that Elie and Campos engaged in were “either in promotion of, or derived from, unlawful activity”.
The document also states that the defendants can provide proof that they both garnered a good faith belief that their conduct was lawful and not in “promotion of, or derived from, unlawful activity”.
The motion in limine points to United States v. Gaudin, 515 U.S. 506, 512-13, 115 S. Ct. 2310, 2314-15 (1995), where the Supreme Court of the U.S. upheld that the jury, not the court, should decide whether the facts in a case meet the legal standard required to apply those facts to an element of the crime charged. Further, the court in Gaudin stated:
“the jury’s constitutional responsibility is not merely to determine the facts, but to apply the law to those facts and draw the ultimate conclusion of guilt or innocence.” 1
Furthermore, in Apprendi v. New Jersey, 530 U.S. 466, 484-85, 120 S. Ct. 2348, 2359 (2000), the Supreme Court noted that an accused’s right to a trial by jury was becoming moot because judges were making determinations as to certain elements of the statutes. To protect this basic constitutional right, the court held that the:
“practice must at least adhere to the basic principles undergirding the requirements of trying to a jury all facts necessary to constitute a statutory offense, and proving those facts beyond a reasonable doubt.”
Keeping in mind Gaudin and Apprendi,and other cited cases, the defense asks permission to introduce evidence to the jury to assist them in deciding whether online poker constitutes “unlawful intemet gambling” or a “gambling business” as would be required under UIGEA and IGBA.
According to the defense, one necessary element needed for a conviction under UIGEA, would require proving the payments handled by the defendants were in connection with “unlawful internet gambling”. Part of UIGEA’s definition of such conduct, relies further on the statute’s definition of “bet or wager”, i.e. “the staking or risking by any person of something of value upon the outcome of a contest of others, a sporting event, or a game subject to chance, upon an agreement or understanding that the person or another person will receive something of value in the event of a certain outcome.” It is the “subject to chance” prerequisite that the defense contends should be a matter for the jury to decide the triers of fact, after reviewing evidence presented at trial.
According to the defense motion, IGBA charges require, first and foremost, that the government prove that Campos and Elie “conducted, financed, managed, supervised, directed, or owned a “gambling business” and then to further separately prove that such a business was illegal because it was in violation of state law. To qualify as a gambling business under federal law, the motion claims that the business must involve conduct meeting IGBA’s definition of “gambling”. 2
Any violation of state law, says the motion, would be a second element to be proven, separately, secondly, and standing free from the question of the federal definition of gambling. To further prove this interpretation, Barry Berke, attorney for Chad Elie, includes an a copy of the plea colloquy of a defendant in the 2007 Neteller case, (U.S. v Lawrence, 07 CR 597), in his declaration, Exhibit 2, pointing out that the U.S. Attorney’s Office, SDNY, expressly said that “knowingly conducting an illegal gambling business under federal law is a separate element from the violation of state law”.
Under IGBA, says the defense, the charged activity must meet the federal definition of “gambling”, separately from being unlawful according to state law. In addition, the court should not rely on any colloquial definition of “gambling”, but rather that the jury should decide whether there is evidence of meeting a statutory definition if there is one, which the defense contends there is not, as least as far as the inclusion of peer-to-peer online poker.
Finally, attorneys for the defense wish to present evidence of their clients knowledge and good faith with respect to UIGEA. The motion contends that UIGEA specifically requires that Elie and Campos “knew” that any payments they handled were “unlawful”. If a mens rea standard applies to UIGEA, then, as the Supreme Court held in Flores-Figueroa v. United States, 556 U.S. 646, 129 S. Ct. 1886(2009), it must apply to each element of the crime.
Under UIGEA:”No person engaged in the business of betting or wagering may knowingly accept in connection with the participation of another person in unlawful Internet gambling…”
UIGEA then defines “unlawful Internet gambling” to mean “to place, receive, or otherwise knowingly transmit a bet or wager by any means which involves the use, at least in part, of the Internet where such bet or wager is unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise made.”
The defense then asserts that the “government must prove that defendants accepted payment “knowing” it to be in connection with “unlawful intemet gambling,” 31 U.S.C. § 5363, the government must establish that the defendants knew the payments were (1) connected to activities that are “unlawful under any Federal or State law,” 31 U.S.C. 5362(10)(A), and (2) connected to activities that involved a “bet or wager,” which is defined as the staking of something of value upon the outcome of a “game subject to chance.” 31 U.S.C. § 5362(1)(A)”.
The mens rea standard, according to the defense, would apply to the following:
- UIGEA Requires Proof of Knowledge that the Conduct was Illegal Under Federal or State Law
- UIGEA Requires Proof of Knowledge that Online Poker is a Game of Chance
- IGBA Requires Proof of Knowledge That Online Peer-to-Peer Poker is “Gambling” Under Federal Law and Violates State Law
Finally, “evidence of the defendants’ good faith is relevant to the government’s charge of conspiracy to launder money because money laundering requires proof that defendants engaged in monetary transactions that they knew were either in promotion of or derived from unlawful activity”.
The Government Position
The government makes clear in it’s introduction that it finds the argument of skill vs chance in online poker irrelevant, and that as a matter of law, noting it’s belief that the specified state statutes cover poker as a form of gambling, it is not a matter for the jury as the triers of fact. Further, it asserts that no “willfulness” is required for IGBA and UIGEA, and as such, no “good faith” defense should be available. Government further states that, assuming defendants will be including legal opinions previously offered to the poker companies that hired them, that that evidence should not be permitted because it would be “irrelevant, prejudicial, and confusing to the jury”.
The government’s argument against the “good faith” defense revolves around the evidence they plan to introduce at trial regarding the alleged actions of Elie and Campos.
For example, this motion re-iterates, as alleged in the Black Friday criminal indictment, that Elie assisted Intabill with payment processing for the poker companies beginning in 2008, until Intabill collapsed later that year. The motion also traces an encounter that Elie had with sizeable bank seizures, $ 8.6 million, at Fifth Third Bank and Bank of America, while processing transactions for PokerStars, Full Tilt Poker, and Absolute Poker. in 2009 through his company Viable Marketing. The government points out that Elie did not follow up with discussions of those seizures with FBI agents as promised, but instead moved forward with alleged plans to discuss buying, with a partner, Jeremy Johnson, 3 into Sunfirst Bank in Utah in return for the bank agreeing to process poker transactions for Elie and other internet “marketing programs” for Johnson. Elie, however, reportedly asked Johnson to hold Elie’s stock in the bank while he served as a silent partner.
The motion states that although the FDIC, early on, expressed concerns about the volume of transactions, and chargebacks, and the Federal Trade Commission (FTC) contacted Sunfirst to investigate the marketing the Johnson was processing through the bank, Campos, Vice Chairman of the Board of Directors and part owner of Sunfirst at the time, continued to support the processing for the poker companies. Following their investigation, the FDIC ordered Sunfirst to cease processing poker transactions and other third party processing in November 2010. With the renewed need for a U.S. processing channel, Elie allegedly made similar agreements with two more small banks to handle the poker processing. The arrangement did not last long and two of the three banks, inlcuding Sunfirst were eventually seized.
Beginning in 2009, the motion states that Elie, and later Campos, came into possession of several legal opinions as to the legality of peer-to-peer online poker with respect to UIGEA. One such legal opinion draft, authored by Full Tilt Poker’s general counsel, Ian Imrich, asserted that UIGEA required chance to be the predominate factor in online poker and that poker would not be considered “unlawful gambling” under “most state laws”, therefore making online poker not covered by federal law, including UIGEA. Other legal opinions included in the motion package, hail from Sonneschein Nath and Rosenthal, outside counsel to PokerStars, Akin Gump,Strauss, Hauer & Feld and Ashcroft Hanaway. 4
The government asserts the argument of skill vs chance in poker is irrelevant because under UIGEA and IGBA, and the underlying state laws at issue here, “poker constitutes illegal gambling as a matter of law”.
The motion notes that , under IGBA, an “illegal gambling business” is “a gambling business which (i) is a violation of the law of a State . . . in which it is conducted.” 18 U.S.C. § 1955(b)(1). Further the government points back to the court’s denial ruling on the motion to dismiss earlier this month, from which they quote: “[t]he focus of IGBA is upon the conduct of gambling businesses in the United States in violation of the laws of the states and political subdivisions in which they are conducted.”. Therefore, the government asserts that the question of skill is irrelevant as to IGBA, but only must meet the test with respect to the underlying state law.
The argument quotes from UIGEA, “No person engaged in the business of betting or wagering may knowingly accept, in connection with the participation of another person in unlawful Internet gambling,” certain payments,the motion says the skill vs chance argument is equally irrelevant under UIGEA. Further, the motion states that the definition of gambling for UIGEA, defers to state law, as long as such “gambling” is “unlawful” when “such bet or wager is unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise made.” 31 U.S.C. § 5362(10)(A).
When considering the definition of “gambling” under UIGEA, “the staking or risking by any person of something of value upon the outcome of a contest of others, a sporting event, or a game subject to chance . . . .” 31 U.S.C. § 5362(1)(A), the government contends that, based on concerns from the Department of Justice in 2005/2006, the wording in that final statute was changed from “a game predominantly subject to chance”, in order to be sufficient to include card games such as poker. 5 In conjunction with a “rule of construction” included in UIGEA: “[n]o provision of this subchapter shall be construed as altering, limiting, or extending any Federal or State law or Tribal-State compact prohibiting, permitting, or regulating gambling within the United States.” 31 U.S.C. § 5361(b), the motion claims that UIGEA incorporates state laws and therefore the definition of “gambling” in state law would prevail. 6ost Internet gambling sites offer casino-style gambling, such as blackjack, poker, slot machines, and roulette.” Commission Report at p. 5-3.]
In further reference to state gambling laws applicable to this case, they “make clear that poker is gambling simply as a matter of state law” says the motion, therefore confirming violations of UIGEA and IGBA by poker businesses in those states.
At trial, the government plans to provide evidence that the poker companies violated state laws for gambling in a sample of nine or fewer states. In the cases where state gambling statutes “explicity cover poker or all card games”, the goverment asserts there is no factual determination for the jury to decide, other than whether any “poker or game of cards” took place. In two states, specifically New York and Utah, the government asserts that the statutes again clearly cover poker, although not drafted in as specific terms. Pointing to New York’s gambling law, which covers any game in which “the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein”, the motion states that NY courts have consistently held poker to apply, and that in fact, for over 100 years, every NY reported judicial opinion has described poker as gambling, even when applying an earlier statute where chance was required to “predominate” rather than simply be “material.” 7
In addition, the motion refers to Utah’s broad definition of gambling which includes:
“risking anything of value upon the outcome of a contest, game, gaming scheme or gaming device when the return or outcome: (i) is based upon an element of chance; and (ii) is in accord with an agreement or understanding that someone will receive something of value in the event of a certain outcome.”
The final decision, says the motion, whether online poker should be considered illegal gambling under specific state laws, and then their incorporation into IGBA and UIGEA, should be determined by the Court and not a jury, because, such a decision requires “looking at the language of the statutes, case law interpreting and applying the statutes, and their legislative history”.8
To further enforce their position, the government points to United States v Hill. In Hill, the defendants asked to introduce evidence of two circuit court decisions and their discussions with a lobbyist organization that led them to believe their conduct was not “gambling” per se. The Sixth Court of Appeals affirmed the exclusion of that evidence saying :
“Hill‟s proffered evidence concerning the scope of Tennessee‟s gambling laws involves a question of law, not fact, and thus would have improperly invaded a matter solely within the court‟s province. . . . It is the court‟s task to instruct the jury on the law, and it is the jury‟s task to then consider evidence regarding Hill‟s conduct”
The government asserts that Elie and Campos should be precluded from offering any evidence that poker is not included under UIGEA, IGBA or the state statutes based on the skill involved in poker, the same as Hill was excluded from presenting similar style evidence for video poker and slot machines in Tennessee. Although the government believes there is no question that poker is included, even if there existed such a question, the motion contends that the question is a matter of law for the court to decide and then instruct the jury.
The government anticipates a “good faith” or “advice of counsel” defense with respect to meeting any “intent” requirements under IGBA, UIGEA and the money laundering charges. While a good faith defense instruction can be given to the jury in some circumstances, the government contends that such a defense is not available unless the statutes have a “willfulness or specific intent” requirement. For “general intent” statutes, which the motion claims the Black Friday charges are, a good faith ignorance of the law is not a valid defense and the government need only prove that the defendants had knowledge of the facts that comprised the offense.
Regarding the “advice of counsel” potential defense, the allowable parameters are much more specific, says the motion. According to United States v Evangelista 122 F.3rd 112, 117 (2nd Circuit 1997),the government says the defendants would have to
- honestly and in good faith seek advice of counsel prior to taking action as to what they may lawfully do
- fully and honestly lay out all the facts before counsel
- act strictly in accordance with the advice of counsel
Even if “willful and unlawful intent” were an element of the statute, the defense would also be required to establish a factual basis to present such a defense to the jury.
The government contends that under IGBA, which states “Whoever conducts, finances, manages, supervises, directs, or owns all or part of an illegal gambling business shall be [guilty of a crime]”, that the defendant must only have knowledge that he was conducting the business, regardless of whether or not he had intent to violate the law.
Under UIGEA, which states, “No person engaged in the business of betting or wagering may knowingly accept, in connection with the participation of another person in unlawful Internet gambling” certain types of payments, there also is no willfulness or specific intent requirement, but rather the word “knowingly” infers only a general intent, which is not sufficient to meet a statutory mens rea provision. United States v. Cohen, 260 F.3d 68, 75-76 (2d Cir.2001).
The government points to three reasons why the legal opinions that the defendants may seek to introduce, to show that they believed their conduct was not unlawful, should be excluded:
- There is no “good faith” or “advice of counsel” defense under IGBA or UIGEA, and introducing the poker company legal opinions would only serve to support such a defense.
- The defendants cannot meet the requirements necessary to present such defense. The motion says evidence of this is shown by: Elie processing for the poker companies more than a year before he had possession of the opinions; neither Elie or Campos personally sought out counsel or the opinions, they were given to them by third parties; Elie and Campos did not lay out for counsel any of the facts relied on in the opinions; and Elie and Campos neglected to follow legal advice they were given.
- The introduction of evidence in the legal opinions, not only are wrong on the law and self serving, but would “serve only to confuse or mislead the jury and thus should be excluded under Rule 403“.
Based on all of the above information, the government requests that the court deny any request by the defense for permission to offer evidence regarding the level of skill involved in poker and regarding various legal opinions supporting a “good faith” and “advice of counsel” defense.
Inclusionary,exclusionary and preclusionary motions in limine are presented for determination by the court in order that both sides can adequately prepare for trial. Responses to the above are due this week. Any additional motions in limine adressing other evidentiary disputes are due March 12. Trial is scheduled to begin on April 9, 2012.9
- The Ninth District Court of Appeals overturned the conviction in Gaudin finding that the court taking the question of materiality of fact from the jury violated the Fifth and Sixth Amendments to the U.S. Constitution. The Supreme Court upheld the reversal. ↩
- From IGBA: “gambling” includes but is not limited to pool-selling,bookmaking, maintaining slot machines, roulette wheels or dice tables, and conducting lotteries, policy, bolita or numbers games, or selling chances therein. ↩
- Jeremy Johnson is not a charged co-conspirator in the Black Friday case, but faces separate criminal charges in Utah and Nevada relating to non-poker marketing scams that also used processing accounts at Sunfirst Bank. ↩
- The background allegations provided in the government’s motion are not statutory in nature and would likely be presented at trial as a matter for the jury. ↩
- See testimony of Bruce G. Ohr, before the House Judiciary Committee‟s Subcommittee on Crime, Terrorism and Homeland Security (available at http://www.gambling-law-us.com/Articles-Notes/DOJtestimony- 4477.htm). ↩
- Moreover, as set forth in the Government‟s Opposition to Defendants‟ Motion to Dismiss, additional Congressional findings indicate that UIGEA was intended to cover games such as poker. In the Congressional findings accompanying UIGEA‟s enactment, Congress explicitly referenced the Congressionally-commissioned “National Gambling Impact Study Commission” of 1999. See 31 U.S.C. § 5361(a)(1). The Commission‟s report includes numerous references to “poker” and “video poker.” See, e.g., Nat‟l Gambling Impact Study Comm. Report at pp. 1-2, 2-3, 2-4, 2-5, 3-11, 3-12, 5-3, 7-4, 7-20, 7-23 and 7-24 (available at http://govinfo.library.unt.edu/ngisc/reports/finrpt.html). And in its chapter on Internet Gambling, the Commission stated “[m ↩
- See, e.g., People v.Turner, 165 Misc. 2d 222, 224 (N.Y. City Crim. Ct. 1995) (observing that N.Y. Penal Law §255.00 covers games “such as poker or blackjack which require considerable skill in calculating the probability of drawing particular cards” because the ultimate outcomes “depends to a material degree upon the random distribution of cards.”); Katz Delicatessen, Inc. v. O’Connell, 97 N.E.2d 906, 907 (N.Y. 1951) (affirming liquor license suspension because deli allowed social poker games in basement, a form of gambling); People v. Dubinsky, 31 N.Y.S. 2d 234, 236 (N.Y. Ct., Spec. Sess. 1941) (affirming conviction of man who charged fee to allow individuals to play poker in an apartment, noting that there was “no question” that stud poker was a form of gambling). See also, Luetchford v. Lord, 11 N.Y.S. 597, 597 (N.Y. Gen. Term. 1890), rev‟d on other grounds, 30 N.E. 859 (N.Y. 1892) (involving foreclosure of a mortgage to pay a gambling debt involving poker); People v. Bright, 96 N.E. 362, 363 (N.Y. 1911) (conviction of defendant as a “common gambler” based on poker playing); People v. Cohen, 289 N.Y.S. 397, 399 (N.Y. Magis. Ct. 1936) (describing any game involving delivery of cards “face down” as a game of chance); In re Fisher, 247 N.Y.S. 168, 178-79 (N.Y. App. Div. 1930) (“any game of cards for stakes is technically gambling”); People v. Pack, 39 N.Y.S.2d 302, 305 (N.Y. Ct. Spec. Sess. 1947) (same); People ex rel Felming v. Welti, 179 Misc. 76, 37 N.Y.S.2d 552 (N.Y. Sp. Sess. 1942) (“every card game is a game of chance and if played for money constitutes gambling under our statute.”). ↩
- See Cal. Pen. Code § 337j(e)(1) (including “any poker or Pai Gow game, and any other game played with cards or tiles, or both” under the definition of a “controlled game” which is unlawful to offer in California without licensing); Conn. Gen. Stat. § 52-278a(2) (gambling includes “the playing of a casino gambling game such as blackjack, poker, craps, roulette or a slot machine”); Florida Sta. § 849-08 and 085 (gambling includes “any game of cards,” though exempting “poker,” “bridge” and other specific card games when played for “penny-ante” of less than $10 per hand); Mich. Comp. Laws 750.313 (gambling offenses include “playing at cards” and “betting on cards”); Nevada Rev. Stat. 463.0152 (defining “gambling game” to include “poker”); Ohio Rev. Code § 2915.01(D) (explicitly identifying “poker” as proscribed “game of chance,” and affirmed as applying to poker by Ohio Supreme Court in Garono v. State, 524 N.E.2d 496, 500 (Ohio 1988)); Oregon Rev. Stat. § 167.117(4) (including both “poker” and specifically “Texas hold-„em” – one of the poker variations offered in this case – in the statute). ↩
- The author fully acknowledges only linking a minimal number of more than 150 citings, case law and statutes, from the motions. A full list is available in the Table of Authorities of the respective motions. ↩