Bill Reynolds - Life Real Loud - John Lefebvre, Neteller and the Revolution in Online Gambling

Lefebvre had known Ramsay for years. In the mid-eighties, they lived together for a while on Tenth Street NW and at 702 5A Street NW, renting a run-down two-story dive from United Properties, owned by the wealthy Singer family. They called it “Wormy House.” It was demolished in the nineties and replaced with an ugly condo box that stood straight and wasn’t drafty. Lefebvre moved out of Wormy House before Ramsay and set up house with Jane Bergman up the block up at 802 Memorial Drive.

Ramsay stayed at Wormy House for another year, sharing the rent with Oliver Friedmann, Choy’s one-time club-owning partner. Then he moved out to Chestermere Lake, about fifteen miles east of Calgary. He and Lefebvre remained close even though they saw less of each other. “Bruce didn’t move in with anybody,” says Jeff Proudfoot, the vice president, finance, from Lefebvre’s student government administration, “but he was dating and getting kind of serious with Debbie Cullen, John’s cousin. They never married, but they lived together for nineteen years.”

The union produced two daughters, Fiona and Isabel. In 2004, Lefebvre would invite his two teenaged “nieces” to shop on Rodeo Drive in Beverly Hills, encouraging them to spend as much as possible. What did he care? At that point, dropping $44,000 in two hours at high-end retail stores had “absolutely no impact” on his bottom line. The money derrick was cranked wide open.

Ramsay and Choy were good guys — trustworthy, smart, and sensible. It was heartening news for Lawrence, a solid endorsement, having these two men support his electronic money wallet baby. McMullen says, “John’s the social guy. Steve couldn’t have raised all the money and put the people together. That’s John’s forte. Everybody knows John and John knew people with money. He’d been involved with Victor and Bruce before, so he could bring money and people with ideas to the table.”

As they worked through late 1998 and 1999, Lefebvre and Lawrence started to think more seriously about how this new venture would work. Lawrence had the business brain and Lefebvre was the marketing guy (who could handle lawyering details, if necessary). Natland was the kid with the IT smarts. They had a couple of silent backers, but a few pieces were still missing. Natland, they all understood, would need to replace himself because he wanted to head to Silicon Valley and get in on the dot-com buzz. There he would cofound his own company, to be named Arizona Bay, and get in the big game.

They divided up the company — Lefebvre says he thinks he was the one who came up with the compound of “internet” and “teller,” and it stuck — roughly seven ways. Lawrence and Lefebvre were cofounders, so they retained the largest slices of the pie. Lawrence’s share was around thirty-six percent and Lefebvre’s around twenty-two percent. Natland was given a couple of points for his original idea even though he didn’t want to stick around Calgary. Please do not weep for the kid’s measly deuce — by his late twenties he lived on the fifty-ninth floor of the Shangri-La, an exclusive luxury condo highrise, the tallest building in Vancouver. He had a 270-degree view. “You can just sit there and stare out the window for two hours,” says Glavine. Natland drove a Bentley and a Ferrari and generally lived how he pleased.

The two investors, Choy and Ramsay, split around twenty percent, with the ratio being two to one in favor of Choy, based on what was invested. “After the crash but before the forfeiture, I was around $125 million. Victor had half of that and Bruce had about half of that,” says Lefebvre.

Choy would have been a successful businessman whether or not he had invested in the new play, but the decision had quite an impact. Lefebvre says, “I guess he made a fortune in nightclubs, but he made a way, way, way, way, way, way bigger fortune in Neteller.” Choy has never spoken of his investment in Neteller. Never has, says Lefebvre, and never will. Lefebvre doubts Choy even told his wife. “She has an idea. You know, I’m hanging around a bit, and suddenly they have way, way, way more money.” And, in August 2000, Lawrence and Lefebvre, having little choice, took up the sweat equity option and increased the number of investors from five to seven.

After securing start-up cash from Choy and Ramsay, and picking their brains occasionally, Lefebvre shopped the concept around town, trying to raise more capital. In one comic incident, Lefebvre says, he talked to some senior lawyers in a fancy corporate boardroom high above Calgary’s Stephen Avenue downtown. One of them — Lefebvre can no longer recall the name but has no trouble labeling him “asshole”—didn’t give them a direct answer. Instead, he chose to tell a parable:

He said, “You know, I used to go the Barbados all the time, and when I did I noticed that the wine was always really expensive. I thought, you know, if we imported some South African wine, it’s nice wine, it’s cheaper and we could undersell all of these guys and make a whole bunch of money and lower the price of wine in the Barbados. Boom, done, good idea. Let’s do it.” He paused. Finally, I said to him, “Well, okay, so what happened?” He said, “I found out something — if you’re going to do that, you’ve got to be careful whose bottles you’re pushing off the other end of the shelf.”

Good joke, especially because it’s true. If this new business model worked the way the Neteller guys thought it might, other entities currently making a tidy profit in gambling revenues might get alarmed enough to flex their first-in-the-market muscle with various state governments. Lawrence and Lefebvre’s idea was so clean and beautiful it might get officials from legal gambling jurisdictions such as Nevada and New Jersey standing up and sputtering, “Why, if we let this stand we’re going to have people staying at home gambling in their housecoats!” Visions of all those so-last-year bricks-and-mortar outlets in Vegas and Jersey crumbling and rotting while the company that created this new methodology collects its toll with each electronic transaction — Ping! … Ping! … Ping! — slowly bleeding all of these hopelessly old-school outlets to death. So clean they wouldn’t know their veins had been razored, so to speak.

Lefebvre also traveled to Philadelphia around this time to meet a bookie named Jack Gallagher and learn more about the actual process of moving funds from customers to bookies and back, and the historical problems involved with this structure. The main problem, he found out, was the insane level of bad debt bookies carried, and the tenacity of fraudsters with phony addresses and stolen credit cards. Then he traveled to the Bahamas to inquire about banking and Western Union and setting up a Visa account. About the only Canadian bank that would listen to him about financing Neteller’s operations was the National Bank of Canada (Banque Nationale du Canada, based in Montreal), the nation’s sixth largest. None of the big five Canadian banks, all based in Toronto except for the Bank of Montreal, would go near the idea. Too much risk. Then he traveled to Costa Rica to glad-hand the bookies he’d be dealing with — a little B2B, a little hi-how-are-ya, a little hey-let’s-work-together-here, and, mainly, a little reassurance that if anything went wrong Neteller would have a guy in place they could go to.

A little later on, just before Steve Glavine arrived to take over Neteller’s IT position, Lefebvre says, he and Lawrence went down to the Caribbean a couple more times, for a couple of days each time, to meet with a Bank of Bermuda guy named Simon to talk financing. The talks didn’t go far. Then they heard something about a “smart card” kind of system from two guys who worked at a small bank located in the Dutch Antilles, who themselves had learned about this new concept from a supplier working with the bank. They thought maybe they should buy this system for Neteller, as it might help ease the money traffic bottleneck. But these guys were a dead end. “They were not nearly as ready as they said they were,” says Lefebvre. “Stringing us along. One guy seemed to think we were being impatient after four or five months: ‘You guys have got to stop bothering me or else I’ll take this online gaming business somewhere else.’ We said, ‘Fuck you.’ They were presumptuous and grabby. They thought they could own Neteller’s concept.”