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

The guy Marella refers to here is Neteller’s ex-head of IT, Steve Glavine. Lefebvre asked Glavine to fly to New York to be interviewed by the FBI for his case. Glavine, as Marella points out, did so at considerable risk to himself. He was one of the seven original Neteller founders, and there wasn’t much to stop the FBI from arresting him. “They assured me when I was there that they had no interest in me whatsoever,” Glavine told me in 2010 about his precarious New York meeting with the feds. “You know, are they lying to my face?” Glavine asked me. “Is it worth going and seeing if they are?”

No, it wasn’t, and so therefore Marella has scored his point about Lefebvre’s extraordinary reaching out. The irony of taking that chance for Glavine was that he told agents the exact same story everyone else had told them, down to the fine details, and yet they refused to believe Neteller’s operation was that simple. They accused Glavine of holding back information and warned him the real truth about the nefarious operation would come out, so he might as well cough it up right then and there. It was a bewildering experience, Glavine told me, and they weren’t necessarily posturing. They really did have trouble believing Neteller’s business model could produce that much revenue without some secret catch. The real problem was the agents just could not wrap their heads around the concept of the churn — the convenient, secure system had made a bettor feel at ease keeping his money in Neteller and making multiple bets, which produced multiple transaction fees for Neteller from the same bettor, over and over.

Having placated Castel somewhat, Marella moves on to character issues. Under Section 3553 (“Imposition of a Sentence”), judges take into consideration the entire character of the defendant. Again, Marella uses the word “extraordinary,” this time to accentuate the amount of money Lefebvre has given away to worthy causes over the years. “He really does and always has, Your Honor, epitomized giving to people in need,” says Marella. “He has worked with established charities and institutions, well known and well recognized. And he has also done what I kind of refer to, Your Honor, as random acts of kindness and goodwill toward people.”

Then Marella says Lefebvre didn’t just cut checks, he was “personally involved” in the various efforts to which he donated his money. Marella also points out Lefebvre was not a Johnny-come-lately to this kind benefactor work. “In almost every case,” he says, “his work preceded his arrest. It goes back years. And it really does personify, Your Honor, who Mr. Lefebvre is.”

Marella singles out the environment as Lefebvre’s special focus — traveling globally in connection with the David Suzuki Foundation, and to establish medical facilities and clinics in Tibet. “I mean,” Marella says, “the whole spectrum down to helping unwed mothers raise their kids.… And much of this has been done anonymously, Your Honor. So he’s not a person who seeks credit. You won’t find and don’t find buildings named for him, although he could have easily had things like that.”

With this, Marella’s speech on behalf of Lefebvre is over. Castel thanks him and signals to the defendant that he has the floor. “If there’s anything you wish to say, sir, this is the time to say it.”

Unlike Marella, Lefebvre really is brief. He says, in full: “Your Honor, I’ve — my view is that I’ve taken all the time of this court that I — and way more than I ever hoped to. You have my remarks in a letter I wrote to you and I affirm them today. I just want to say one more time, that having been an officer of the court in my country, it’s a matter of personal shame to me to wind up on this side of your courtroom. And with that I’ll leave myself in your hands. Thank you very much.”

That’s that, Castel says thanks, and now it’s Velamoor’s turn, who agrees with Castel that, yeah, okay, Lefebvre didn’t wear a wire in his cooperation but still, the work was valuable and warranted the plea bargain. “I can always attest to the fact this was not a traditional investigation,” he tells Castel. “This was, in many ways, the government … breaking new ground. Certainly information that was provided by the defendant was very helpful in what’s an ongoing investigation and a very important investigation to the office.”

Castel thanks the prosecution and gets on with the sentencing. He talks about the offense again: “The defendant entered a plea of guilty to conspiracy to commit offenses against the United States, including illegal transmission of wagers and gambling information, illegal internet gambling, and money laundering in violation of various statutes.”

He recounts the business success story one more time, tossing in the factoid that at its height Neteller had “over 1,100 employees.” He calls Neteller’s enterprise “large and successful.” Yes, it was. It held more than 685,000 member accounts, eighty-eight percent of them belonging to North Americans. The company processed $3.4 billion in transactions in 2004. The next year, that number grew 215 percent, to $7.3 billion. That’s around when the gusher turned to a rope ladder to the moon made out of U.S. greenbacks. And that’s around when Lefebvre decided he was going to give it all away because it was coming in faster than he could spend it. Castel also points out Neteller’s 2005 profit margin: $91.5 million.

Castel mentions that about seventy-five percent of Neteller’s revenue came from U.S. customers and then says, “Citizens of the United States were free to make the choice to make most gambling transactions unlawful. That’s a choice that citizens in a democracy can make. Neteller was quite aware of U.S. law in this arena, as was Mr. Lefebvre. They elected to conduct their business.”

Castel also acknowledges and accepts Lefebvre’s “sincere remorse” and “efforts to make things right by consenting to the forfeiture, and also by engaging in substantial cooperation.”

Castel trots out a personal history sketch — tragic loss of father, mother a good provider, good family relationships generally, a law degree in 1983—and, usefully, “no known criminal convictions.” Good thing the prior was excluded, because Castel then spent a bit of time talking about illicit drugs. “He has had some history of substance abuse, began smoking marijuana at age fourteen, experimented with LSD, mushrooms, and mescaline. But during his time on pretrial supervision, he has not produced any positive drug tests.” Well, none that he will ever know of.

Castel then mentions Lefebvre’s financial empire — or what’s left of it, which isn’t much compared to January 14, 2007. “The defendant today is a person of substantial means. He has real estate holdings of a combined value of in excess of $8 million. He has—$8 million, that’s Canadian—$3.2 million in artwork. He’s a one hundred percent shareholder of Eagle Medallion Fortress Investment. And the defendant was — and I don’t hold him at fault for this — unable to provide an estimated fair market value of Eagle, although it does have secured mortgages in excess of $5 million.” Those are probably Lefebvre’s personal loans to artists and Marella’s “unwed mothers.” Castel tacks on Lefebvre’s toys — his eleven automobiles, three motorcycles, Cessna Citation II business jet, “as well as a boat.”

Finally, we’re on to the guidelines: “The defendant in this case is in total offense level thirteen, criminal history category one, and, ordinarily, the guideline range would be twelve to eighteen months imprisonment, two to three years supervised release, fine range $3,000 to $200 million.”

Those are steep terms, but more or less in keeping with the numbers Marella had advised Lefebvre to expect back at the Village Recorder in late June 2007. The fine range is worrisome, though. It could wipe Lefebvre’s cupboard clean. But Castel backs away from the guidelines. He points out that he doesn’t have to follow them, especially in light of the government’s acknowledging the defendant’s welcome assistance. Castel won’t dump twelve to eighteen months on Lefebvre, but he isn’t going to let him go free, either. While he realizes the defendant is now on the right path, “It’s also appropriate that there be the message that a crime of this nature also results in some period of incarceration.”