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The 2nd U.S. Circuit Court of Appeals on Tuesday affirmed what is believed to be the first conviction after trial of a bookmaker under federal law for running an off-shore sports betting operation on the Internet. In unanimously affirming the conviction of bookmaker Jay Cohen under the federal Wire Wager Act, the 2nd Circuit for the first time explicitly refused to apply a 126-year-old legal doctrine that requires a “corrupt motive” to obtain a conspiracy conviction. Cohen was convicted after a 10-day trial last August and sentenced to 21 months in prison by federal Chief Judge Thomas P. Griesa of the U.S. District Court for the Southern District of New York for running a sports gambling operation in Antigua. Cohen started accepting bets on sporting events in 1996 through the Internet and a toll-free telephone number. By November 1998, his company, called World Sports Exchange, had received 60,000 phone calls, including more than 6,100 from New York. In one 15-month period, World Sports collected approximately $5.3 million in funds wired from customers in the United States, according to the panel’s opinion. Judge John F. Keenan, the author of the 2nd Circuit’s opinion in United States v. Cohen, 00-1574, found that doctrine requiring a “corrupt motive,” first articulated by the New York Court of Appeals in People v. Powell, 63 NY 88 (1875), could not be invoked by the defense. Over the years, Keenan wrote, the Powell doctrine has been seriously eroded, with the 1st, 9th and 10th Circuits having “moved away” from its application, and the 2nd Circuit having previously expressed its “discontent” with it in dicta. As early as 1940, Judge Learned Hand had called the doctrine “anomalous” in United States v. Mack, 112 F. 2d 290, and asked why it was necessary to show more than that the defendant had intended to commit all the elements of the underlying substantive criminal offense, Judge Keenan noted. Cohen’s lawyer, Mark Baker of Brafman & Ross, said Tuesday that his client had no criminal intent because he had modeled his business on the way the Off-Track Betting Corp. accepts bets in New York. Since OTB has operated for many years without being prosecuted for violating the federal statute, 18 U.S.C. Section 1084, Baker asserted, Cohen had a reasonable belief that his betting operation was legal. Like the OTB, Baker explained, World Sports Exchange required bettors from other jurisdictions to establish an account by depositing a minimum of $300. Then, when the bettor sent an instruction to place a bet, either over the Internet or the telephone, money would be deducted from the account already established in Antigua. Without directly addressing that argument, Judge Keenan noted that the federal law requires that betting be legal in both the jurisdiction where the bet is placed and where its received. In New York, he pointed out that General Obligation Law Section 5-401 expressly makes the placing of a bet “unlawful.” He also wrote that the federal statute expressly bars the transmission of “information assisting in the placing of bets or wagers.” Second Circuit Judges Pierre N. Leval and Fred I. Parker joined in the decision. Keenan sat on the panel by designation from the Southern District of New York. The prosecution was represented by Assistant U.S. Attorneys Joseph V. Demarco and George S. Canellos.

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