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

Plus — oh, yes — the forfeiture allegation. If Lefebvre admitted to it, he would forfeit his interest in “money used in the gambling offenses and all property, real and personal, that constitutes or is derived from the proceeds of the violations of law, including but not limited to at least the $100 million in U.S. currency.” The government had calculated a sum of $100 million dollars, but don’t worry, it was going to be split between Lefebvre and Lawrence. Yes, he understood he was about to get dinged for $40 million, and, maybe, if you think he needed to think about what he had done, Your Honor, do time.

Castel then turned to the sentencing part of his program. Again, it was a boilerplate: He told Lefebvre he would consider a range of factors—“the nature and circumstance of the offense, your personal background and any criminal record you may have” and would read the prepackaged presentence report written by a member of the probation office. The report would relay information on Lefebvre’s life history and background and would recommend to the judge a range for the sentence, under sentencing guidelines. He told Lefebvre he would hear from government lawyers about how the defendant had conducted himself, whether or not he had cooperated with the feds in their ongoing investigation of online gambling, and, if so, how much. He would also hear from Lefebvre’s lawyer about how his client had been turning his life around and, yes, how much he had been assisting the government in catching other alleged bad guys. Then he cautioned Lefebvre that, look, even after doing all that reading and listening, he was the judge and therefore under no obligation to follow anyone’s advice: “I need not follow it and can sentence you all the way up to the statutory maximum. The guidelines are advisory and are not binding on me. Do you understand all of that?”

With that vice clamp, Lefebvre could only say, “Yes, I do, Your Honor.”

Even though Castel had accepted the plea bargain, he still had to hear what Treanor’s case would have been against Lefebvre had the proceedings gone to trial. So he asked for the government’s evidence. Treanor said he had to show beyond reasonable doubt that Lefebvre and others were part of a conspiracy in violation of U.S. law and the agreement to do so “had some nexus to the Southern District of New York.” Treanor had to prove that Lefebvre violated the Wire Act by knowingly using some kind of wire communication to transmit bets.

Then Treanor had to prove that Lefebvre violated the Illegal Gambling Business Act, 18 U.S. Code, Section 1955. He said, “An offense under that statute requires the government to prove that someone knowingly conducted an illegal gambling business. That’s a business that operated in violation of the law of a particular state. Here the violation is of the law of New York State.” In other words, the charges had come out of New York so he had to show that Lefebvre had broken New York laws. Glavine had talked about how Neteller turned off certain states where the laws made it too hot to operate. New York wasn’t one of them.

Then there was the money part. Treanor had to prove that Lefebvre’s business involved at least five people, had operated for at least a month, and had gross receipts of at least $2,000 a day. Easy peasy, since Neteller had hundreds of employees, operated for almost a decade, and was, by the time of the bust, watching billions pump annually through its monetary ventricles.

And then there was the money laundering. According to 18 U.S. Code, Section 1956(a)(1)(A), it’s illegal to move money “from either inside the United States to out or from outside of the United States to in,” for the purposes of gambling. That was Treanor’s way of saying in and out of the U.S. Okay, maybe yes, maybe no. Again, Neteller wasn’t one of the bookies, it simply handled the movement of clients’ funds, but Treanor was going to want to say, lump it, Neteller exec, it’s money laundering according to U.S. law.

Last, Treanor had to show Lefebvre knowingly set up and ran an unlicensed money transmitting business (18 U.S. Code, Section 1960) that promoted illegal gambling between states as well as foreign commerce. Again, maybe yes, maybe no. The gambling sites themselves were invariably located in legal jurisdictions, but whatever, Treanor won’t have trouble convincing a U.S. magistrate judge that Neteller, and Lefebvre, had observed a rather loose interpretation of the law.

Then, at trial, Treanor said, the government would have to parade to the stand both its cooperating and its law enforcement witnesses. Castel would be treated to “voluminous evidence” of online transactions involving Neteller with people living in the Southern District of New York, Manhattan, and Westchester County.

Castel then turned to the defendant and asked him to describe, in his own words, what he did that led him to believe he was guilty. Lefebvre asked to read from his notes. Permission was granted. He read the same facts Lawrence had trotted out: Neteller was a money transfer business; six hundred thousand accounts by 2004; more than one thousand merchants connected to the system; almost all business coming from U.S. customers, “including Manhattan.”

Lefebvre told Castel he was president of Neteller until the end of 2002 and that Neteller had some 170 employees by March 1, 2004. He added he was also a director and member of the U.K. version of the company until December 2005. After that, his only role was that of shareholder. “Among other things,” he said of this period, he “managed internal operations of the Neteller group.” Then he recited the “admitting guilt” mantra Lawrence had been advised to say: “During my involvement in the Neteller group, I learned that the United States had legislation barring certain transactions intending to fund online gambling services. With this knowledge I eventually came to see that providing payment services to online gambling businesses serving customers in the United States was wrong.”

Castel thanked Lefebvre for the admission. He asked both Treanor and Marella whether or not there was a “sufficient factual predicate” for Lefebvre to enter a plea of guilty. They both agreed there was. Castel hammered away at Marella one more time about mounting a plausible defense. Marella told him it was not possible. Castel turned to the defendant and said, “Mr. Lefebvre, how do you plead to Count 1 of the information, guilty or not guilty?”

“I plead guilty, Your Honor.”

Castel said, “All right.” One down. On to the forfeiture. Same deal. Lefebvre admitted to the allegations. Castel reiterated his opinion that Lefebvre was fully cognizant of what was happening around him, and so therefore he accepted the guilty plea and the admission of forfeiture. He stated he wanted a presentence investigation and advised, “Mr. Lefebvre, it’s important that you be candid, honest, truthful, accurate with the people who prepare the presentence report. Tell them the good things and even the not-so-good things, because that report will be important in the decision I make on sentencing.”

Marella and Lefebvre would get their chance to review the report prior to sentencing. If there were any errors, Castel wanted to know about them. He set the sentencing date for November 1, 2007, at 9:30 a.m.

Lefebvre’s lawyer then haggled to get his client a bit of breathing room. The current supervision was intense — daily reporting. Castel decided in favor of the defendant. Pretrial supervision would be allowed to remain L.A.-based and required Lefebvre to make in-person appearances at least once a month. His travel would no longer be confined to the Central District of California and to the Southern and Eastern Districts of New York. He would be allowed to travel throughout the U.S. and Canada. The problem was, no one knew where his passport was. It had been surrendered either at pretrial services or the clerk’s office in L.A. and hadn’t been seen since. Castel said he couldn’t sign an order to return the passport until it was found and directed Treanor to find it in the next two days.