Government Files Fugitive Motion, Seeks Discovery

Late this afternoon the U.S. Attorney’s Office, Southern District of New York, filed a motion requesting expedited discovery of PokerStars, specifically related to determining whether the Fugitive Disentitlement Doctrine can be applied in this case. Pending such a determination, SDNY also filed a motion to stay any ruling with respect to PokerStars motion to dismiss the charges in their civil case, filed just more than a week ago.

The Fugitive Disentitlement Doctrine basically provides that a fugitive from justice may not seek relief from the courts whose authority they are evading. In other words, a fugitive would not be able to take advantage of a court’s ruling that may be in his favor ( a positive ruling via the motion to dismiss or claims for assets facing forfeiture) while avoiding the authority of the court by keeping fugitive status. The code provides that:

(a)A judicial officer may disallow a person from using the resources of the courts of the United States in furtherance of a claim in any related civil forfeiture action or a claim in third party proceedings in any related criminal forfeiture action upon a finding that such person—

(1)after notice or knowledge of the fact that a warrant or process has been issued for his apprehension, in order to avoid criminal prosecution—

(A)purposely leaves the jurisdiction of the United States;

(B)declines to enter or reenter the United States to submit to its jurisdiction; or

(C)otherwise evades the jurisdiction of the court in which a criminal case is pending against the person; and

(2)is not confined or held in custody in any other jurisdiction for commission of criminal conduct in that jurisdiction.

(b)Subsection (a) may be applied to a claim filed by a corporation if any majority shareholder, or individual filing the claim on behalf of the corporation is a person to whom subsection (a) applies.    

The limited scope of the expedited discovery would be to ascertain whether Isai Scheinberg is a majority shareholder of PokerStars (or who else may be), and even if he is not, as the person making the claim on behalf of the company, does he control the corporate claimant (PokerStars) or does the corporation operate as his alter ego.

Furthermore, a court would have to decide whether Scheinberg meets the court’s criteria to be determined a “fugitive”. The fact that he indeed faces criminal charges in the Black Friday indictments, and has not appeared in New York to date to answer those charges, would not automatically make this true.  In this very case, earlier this month, the CEO of Full Tilt Poker, Ray Bitar, voluntarily surrendered to the USAO in New York.  During his arraignment the same day, prosecutors labeled him a “fugitive” to the court while making their argument that bail should be denied and that Bitar should be remanded pending trial. Magistrate Judge Debra Freeman, went on the record to say that even though the government was labeling Bitar as a “fugitive”, and granted that it could have different meanings, that to her, it means  “someone who is aware that he is wanted and is taking steps not to be found…essentially running away or hiding“.  While it was shown that those characterizations did not fit Bitar, and he was ultimately granted bail, a similar argument could be made for Scheinberg.  Not only is he not a U.S. citizen, he was living out of the country at the time of the indictment and there has been no indication that he is hiding or otherwise evading being found. All reports are that he works every day at PokerStars, which is still legally operating outside the U.S.  If Judge Sand, who is hearing the civil case where the motions were made, were to rule in line with Judge Freeman, the Fugitive Disentitlement Doctrine would not apply.

It’s been no secret that PokerStars have been in settlement negotiations of their Black Friday civil case with the USAO for many months, and since at least April 2012, it’s believed those discussions include PokerStars acquisition of the assets of Full Tilt Poker. Included in that potential settlement is reportedly a promise by PokerStars to facilitate repayment of Full Tilt’s customer’s account balances, which Full Tilt was not able to repay and total in excess of $ 330 million worldwide.

Speculation of late has been that PokerStars and SDNY have been very close in coming to final terms in such a settlement, but reportedly there was some disagreement of changes to terms in the eleventh hour a week ago that prevented the final execution of a settlement moving before the court. By all reports, talks have been continuing since then in order that the deal could be concluded.  Today’s filings by the USAO could just be leverage to move such a settlement along quickly, or to help insure that the motion to dismiss is not granted. Even if the elements of the doctrine are met, the decision of whether to order disentitlement is at the discretion of the court. SDNY is free to withdraw their request at any time.

No comments were available from the US Attorneys Office, SDNY at time of publication.

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3 Responses to Government Files Fugitive Motion, Seeks Discovery

  1. Kevin MacKenzie says:

    Dear DF
    I read all of your insightful and intelligent articles, with great pleasure.
    Kevin

  2. flight2q says:

    …, or this even could just be for discovery purposes

    • Diamond Flush says:

      or not…because this expedited discovery is limited to information just for purposes of the Fugitive Disentitlement Doctrine.