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

The defendant told Castel his story:

In 1999, I agreed with others to found a group of companies that were eventually called the Neteller Group. The Neteller Group provided an online money transfer service, using, among other things, bank wires that enabled users to transfer funds worldwide to and from merchants that registered to use the Neteller online payment system.

In 2004, there were more than six hundred thousand members with Neteller accounts, a significant number of whom were residents of the United States, and there were more than one thousand merchants registered to use the Neteller system. The Neteller Group focused its growth on the online gaming segment and achieved widespread adoption in that market.

In 2004, approximately ninety-five percent of the Neteller Group’s revenue derived from processing money transfers pertaining to the online gambling market and a significant portion of the Neteller Group’s revenues derived from persons in the United States, including Manhattan.

By March 1, 2004, the Neteller Group had 163 full- and part-time employees. I held a position of chief executive officer of the Neteller Group until approximately the end of 2002, and held a position on the board of Neteller PLC and predecessor entities until October of 2006. I remained a shareholder of Neteller PLC through the time of my arrest in January 2007. During the time that I was directly involved in the operation of the Neteller Group, I, among other things, entered into contracts with merchants and payment processing companies and managed the internal operations of the Neteller Group.

During my involvement in the Neteller Group, I learned that the United States had legislation barring certain actions intending to fund online gambling services. With this knowledge I came to understand that providing payments to online gambling businesses serving customers in the United States was wrong.

And so it was that Lawrence was advised to plead guilty, not to money laundering and racketeering, but rather that he came to see that what he was doing so successfully was, in fact, against the law. That’s what the FBI wanted — admit it, Lawrence, you broke the rules. Now he was going pay a lot of dough — up to $100 million — and do some time, up to five years.

Neiman then made a play for the judge to alter his client’s travel restrictions on the bail package. My client pleaded guilty, Your Honor, so could he please travel anywhere in the world with prior notice to the government? There was the fully secured $5-million bond, Your Honor, plus he left the country twice and returned, which means he established precedent twice. Judge Castel said, hey, not so fast, what if I allow just the U.S. and Canada? Then Neiman said, look, Your Honor, that’s great, but my client’s primary residence is actually the Bahamas. “I’m going to grant your application in part,” the judge decided. “I’m going to limit travel to the United States, Canada, and the Bahamas, without prejudice to your right to make an application showing extraordinary circumstances that require further modification.”

Castel then set Lawrence’s next meeting, his bail hearing, in exactly four months’ time. Lawrence got to go home to his wife and kid, and Lefebvre had a good idea what was going to happen in courtroom 12C in eleven days’ time.

“I Plead Guilty, Your Honor”

Ahern initiated mix-down sessions soon after the recording sessions finished. Lefebvre had put a lot of material into digital memory, so he knew the process might drag on. Whatever, that could wait. Like Lawrence before him, Lefebvre had a reluctant date with Judge Castel, and it was set for July 10 at 1 p.m. When the United States of America v. John David Lefebvre resumed, he had to listen to a judge tell him how his life would work for the foreseeable future. Across the aisle, his new best friends from the FBI, Garcia and Treanor, were there, along with Special Agent Goldman. Marella and Gluck from L.A. were right there with him, along with local counsel Michael Tremonte from Cohen & Gresser.

That was the part Lefebvre had been dreading. He thought it was sort-of, kind-of bullshit, what they were doing to him, but he was powerless, which was the worst part. Other than getting a few good lines off in his songs, he had to sit here in Castel’s fiefdom, 12C, and take it. Castel wasted no time: “I’ve been told that you wish to enter a guilty plea to a charge contained in a criminal information. Is that correct, sir?”

Lefebvre said, “Yes.” He took the oath and answered umpteen questions about his state of health and mind. Castel was only following a set routine designed to establish without doubt that the defendant understood what was happening to him. The first question was about doing drugs and drinking in the past twenty-four hours. Lefebvre admitted to drinking wine with supper the night before. Was that all right? Sure, so long as his mind was now clear. “Yes,” he replied.

Castel then talked about Court Exhibit 1, the waiver of indictment. He advised Lefebvre that he was giving up his opportunity to be tried before a grand jury of twenty-three citizens who would decide by majority vote whether or not he ought to be charged. Marella informed the court that his client waived the public reading of the criminal information. The court told Lefebvre he was giving up his right to presumption of innocence, that the government would no longer have to prove beyond reasonable doubt that he was guilty, and that a jury of twelve would not have to unanimously agree with the government’s argument. Yes, Lefebvre waived it all.

The right to cross-examine the government’s witnesses, the right to take the stand and defend himself, the right to not take the stand and not have it influence the outcome, the right to ask the court to compel witnesses to testify, the right to appeal if found guilty. Yes, yes, Lefebvre waived it all.

They discussed the “information,” S1 07 Crim. 597. Castel wanted to make sure Lefebvre understood that he was being charged in “Count 1 in connection with your participation in the operations of Neteller PLC, a company that provided internet payment services, and its related companies,” and charged with a violation of 18 U.S. Code, Section 371. He understood.

And then we got to the sticky part. Castel said the violation meant that Lefebvre was admitting to participating in a conspiracy from June 1999 to January 2007. One of the objects of the conspiracy was that Lefebvre and others “engaged in the business of betting and wagering unlawfully, willfully, and knowingly.” This part of the conspiracy was weird, since Neteller employees were not actually gambling but moving clients’ money around. The next part was a little more comprehensible — Lefebvre and others knowingly used a “wire communication facility for the transmission in interstate and foreign commerce of bets, wagers and information assisting in the placing of bets and wagers on sporting events and contests and for the transmission of wire communications which did entitle the recipient to receive money and credit as a result of bets and wagers and for information assisting in the placing of bets and wagers.”

At least that clause made sense, because it was what Neteller was all about, and if it was a conspiracy, all Lefebvre could respond to this charge was “I understand that completely.”

Judge Castel mentioned the sentence contained in the charge: maximum five years’ prison; maximum three years’ supervised release; maximum fine of the greatest of $250,000, twice the gross pecuniary gain derived from the offense or twice the gross pecuniary loss to a person other than yourself as a result of the offense; and please, don’t forget the $100 special assessment.