X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
WASHINGTON � Federal investigators have been chasing Billy Scott and his online-gambling empire for nearly a decade. But the Toledo-born betting czar has evaded law enforcement every step of the way. A short, balding man with a deep and raspy voice, William Scott, 65, has dodged two sets of criminal charges for online gambling, safely ensconced on the Caribbean island of Antigua. He renounced his U.S. citizenship two years ago, and because the United States has no extradition treaty with the tiny island nation, prosecutors have little chance of nabbing Scott as long as he stays off American soil. The company he founded, Worldwide Tele-sports, is still running smoothly despite the Department of Justice’s claims earlier this year that by indicting Scott, it had “dismantled” the $2.5 billion offshore gambling operation. So the feds have targeted Scott on another front � his money. Using the USA Patriot Act, federal officials seized nearly $7 million from a company called Soulbury Ltd., which they believe Scott used to transfer gambling proceeds through a U.S.-affiliated bank to an account in Guernsey, an island off the northern coast of France. But even the money grab hasn’t been as simple as Justice Department officials might have hoped. For one, the government isn’t even sure who represents Scott. And though Scott has never made a claim on the funds, which were seized in 2003, a team of lawyers from McDermott, Will & Emery claiming to represent Soulbury have. In court papers filed in the U.S. District Court for the District of Columbia in May, they attacked the government’s civil forfeiture case with a provocative and bold claim: that online gambling isn’t against the law. The argument is risky, not just for Soulbury but for the government, as well. Judge Royce Lamberth is expected to rule on the motion in the coming months, and his decision is likely to weigh heavily on the government’s efforts to curtail Internet gambling. Michael Sommer, one of the McDermott partners representing Soulbury, a company registered in the British Virgin Islands, says his team is “cautiously optimistic that the arguments we’ve made are correct.” Scott could not be reached for comment. A Justice Department spokesperson declined to comment. The case, or cases, aimed at Scott illustrates the challenges the government faces in its attempts to curb Internet gambling, which has expanded since the United States began cracking down on online casinos in the late 1990s. The Internet has always been an elusive arena for prosecutors and is particularly so with gambling businesses, which can remain squarely out of reach from U.S. authorities by relocating offshore. “It’s like trying to empty the ocean with a teaspoon,” says Joseph Kelly, a law professor at SUNY Buffalo who has represented the government of Antigua and who has met Scott. “It’s [government prosecutions] going to have no impact [on the gambling industry].” The government has had some success, most notably in 2002 when it won the conviction of Jay Cohen, former president of the offshore World Sports Exchange, for illegally running an online-gambling business. After that victory, the Justice Department took a more aggressive tact and even warned media outlets to stop accepting advertisements from online-gambling companies. But the United States has found little support from other close allies such as England and Australia, which have responded to the industry’s expansion with fresh regulations, rather than an outright ban. More recently, the government of Antigua filed a complaint against the United States with the World Trade Organization, arguing that the prosecution of Cohen violated trade rules. Antigua hasn’t been pleased with the case against Scott, either. As Antigua’s ambassador to the WTO, John Ashe, told the local press: “It is more than just a little ironic that the US DOJ has chosen to single out for prosecution a well-known gaming service provider from Antigua, a jurisdiction that has been leading global efforts to license, regulate, supervise and oversee a robust yet clean and safe gaming industry over the Internet.” FROM TOLEDO TO ANTIGUA Before Las Vegas became a bettor’s paradise, gamblers across the Midwest traipsed to cities like Toledo for weekend jaunts at the casino. Small but bustling, Toledo was a hub of this underground industry until the end of World War II, when prosperous Americans boosted the struggling Vegas industry. The Scott family was one of the more well-known proprietors of Toledo’s infamous trade, and both Scott’s father and uncle had run-ins with the law for their involvement in gambling enterprises. “Billy Paul,” as the younger Scott was known around town, came into the business through his family. He also owned an upscale restaurant where he would dote on favored customers. “He always treated me very well at his restaurant,” recalls Toledo attorney Harland Britz, who represented Scott in some of his criminal cases. “I’m sure he had another side, but I never saw it.” Those who know him say Scott is a gregarious man, someone with street savvy, who seems to relish in his swashbuckling persona more than most. “He’s one of these old-school gambling types,” says Mark Mendel, an attorney representing Antigua in the WTO case. That image, however, won Scott little admiration inside government quarters, and he quickly fell into a cat-and-mouse game with law enforcement. In 1966 the feds charged him with violating the wagering tax law and took his 1967 Pontiac Bonneville. (That conviction was later overturned, and a federal court in Ohio ordered the government to return the vehicle and pay Scott for the cost of depreciation.) Scott didn’t flinch and was soon back in the business, running a betting operation out of his home. In 1970, Toledo officials caught him tallying bets. But unbeknownst to Scott, a bigger sting was on the way. The U.S. attorney’s office began wiretapping Scott, and in 1972 charged him and 17 others with one count of illegal sports gambling. A jury convicted 14 members of the crew, but in 1973 the Sixth Circuit U.S. Court of Appeals overturned the conviction because the wiretaps used to collect evidence for the trial had been improperly obtained. But Scott remained on law enforcement’s radar. State prosecutors also arrested him for gambling violations in 1972. Two years later, he was charged with attempted misuse of a credit card. He faced charges for casino operations again in 1976. Then, in 1978, he was convicted of using his residence to conduct meetings for his gambling operation and was put on probation. Three years later, state prosecutors caught him working in the trade once again, but this time they also charged him with possession of cocaine. He pleaded guilty in 1982 and began serving time behind bars. The next year, federal investigators charged Scott with six counts of collecting credit through extortionist means and other violations. He was transferred to federal custody, at which time he pleaded guilty to three counts and was sentenced to eight years in prison. For all his aversion to the law, Scott was a help to federal prosecutors in at least one case. During an interview by a DOJ Strike Force Team, Scott told investigators about a $40,000 loan he gave to a local attorney, Arthur James, who needed the money to cover what he had stolen from a trust account for his clients. While behind bars, Scott planned his future, inquiring about the extradition treaties of foreign governments, including Ecuador and Peru, the Canadian television news program “The Fifth Estate” reported in October 2001. Scott chose Antigua, a tiny Caribbean island with fewer than 70,000 residents. Best known for its beaches, the former British colony began to embrace gambling in the 1990s as a source of economic development. Scott opened one of the island’s first online gambling companies, Worldwide Tele-sports, in 1996. In just eight years it became a more than $1 billion operation with 145 employees, according to an e-mail one of Scott’s associates supplied to a bank in 2002. “We brought gambling to the island,” Scott told the Canadian broadcasting show. Back in the United States, however, law enforcement was beginning to catch up with Scott once again. In 1998 the U.S. Attorney’s Office for the Southern District of New York charged him and business partner Jessica Davis with illegal gambling as part of an investigation that ensnared almost two dozen individuals. But Scott remained virtually untouchable in Antigua. And in January 2003 he cashed in on his gambling operation, selling it for $56 million to the publicly traded Australian company Betcorp. FOLLOWING THE MONEY The DOJ was still watching Scott. And in December 2003 it moved to seize $6.9 million being held in the name of Soulbury with the Royal Bank of Scotland.. In its 2003 filing the Justice Department alleged that Scott had made eight transfers to the Soulbury account from various shell companies using proceeds from Worldwide Tele-sports. During approximately the same period, the government said, Worldwide accepted at least $1.6 billion in sports bets, largely from the United States. Under more expansive seizure rules put in place through the USA Patriot Act, the Justice Department argues that because of the bank’s relationship with the U.S.-based Harris Bank International in New York, the funds fall under U.S. jurisdiction. In March 2004 three McDermott, Will partners � Sommer, Charles Work and Michael Nadel � filed a claim for the funds on behalf of Soulbury and requested the government return the money. The DOJ responded by having the civil forfeiture case stayed, claiming it was part of an ongoing criminal probe. Scott renounced his U.S. citizenship in 2004 in favor of a passport from Antigua. A federal grand jury in Washington indicted Scott and his partner Davis on 12 counts of money laundering and illegal gambling in April 2005, but the criminal case remained sealed for nearly a year so that federal officials could check into a tip that Davis planned to visit her North Dakota home. Then, in May 2006, the government unsealed the indictment and asked the court to rule in its favor on the civil forfeiture case. The McDermott lawyers claim in court filings that the government cannot prove that Scott runs Soulbury, but bank records the government submitted show that Scott opened the bank account in 2002. The defense also argues that because Scott had transferred $10,000 from the Soulbury account to an investment company affiliated with the bank in March 2002, the funds were beyond U.S. reach. But the McDermott attorneys’ most prominent argument relies on a November 2002 opinion from the Fifth Circuit U.S. Court of Appeals, which states that all Internet gambling is not against the law. The decision upheld a lower court ruling that credit card companies could not be held responsible for online gamblers’ debts. The case distinguished between two kinds of Internet gambling. There is the illegal kind, such as sports betting, which the statute explicitly bans. And then there is the legal kind, which includes all other forms of casino games. Although Worldwide Tele-sports offers sports betting, the defense claims the funds came largely from casino gambling. “Soulbury has denied that the operation of Internet casinos is illegal,” McDermott attorneys wrote in a court filing. “The Government, however, continues to turn a deaf ear to the courts, insisting that such conduct is unlawful.” The appeals court decision is also the key reason government officials have pushed recent legislation in Congress that would ban all online gambling. The House passed a bill earlier this year, but the Senate is unlikely to move forward on its half of the legislation anytime soon. Scott is not likely to return to the United States, and he continues to frustrate U.S. officials. In order to prevail in the civil forfeiture case, the government must show that Scott is aware of the criminal charges against him. A month before the Justice Department unsealed its indictment, a DOJ lawyer sent Sommer, Soulbury’s attorney, an e-mail asking whom the government should go to if there is a “need to contact Mr. Scott.” Sommer replied the next day, saying that “at this point it would make the most sense for any contacts you wish to have to go through us.” After all, Sommer had received the Soulbury work through Scott’s longtime Toledo-based attorney, John Czarnecki, with whom he tried a case in Ohio in the late 1990s, Czarnecki says. But when the government unsealed the indictment on May 17, DOJ lawyers again attempted to confirm Scott’s attorney. At that time, Sommer told the government he did not represent Scott and added that he wouldn’t tell the government who Scott’s lawyer was “unless he was under a legal obligation” to do so, according to a DOJ brief. So far, Sommer has kept to his word. Emma Schwartz is a reporter with Legal Times, a Recorder affiliate based in Washington, D.C.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.