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Illegal Gambling Business Act

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Citation Edit

Illegal Gambling Business Act of 1970, 18 U.S.C. §1955.

Background Edit

The Act was enacted as part of the Organized Crime Control Act of 1970. The statute (18 U.S.C. §1955) was aimed at syndicated gambling,[1] that is, large-scale, illegal gambling operations that were thought to be financing organized crime.

Application to Internet gambling Edit

On the face of it, an illegal gambling business conducting its activities by way of the Internet would seem to come within the reach of 18 U.S.C. §1955. The limited commentary on the point appears to concur.[2] Dicta in a federal appellate decision likewise strongly suggested the applicability of Section 1995:

[U]nder §1955, it is quite obvious that bettors should not be held criminal liable either under the statute or under §2 and that local merchants who sell the accounting paper or the computers on which bets are registered are not sufficiently connected to the enterprise to be included even if they know that their goods will be used in connection with the work of the business. On the other hand, it seems similarly obvious that the seller of computer hardware or software who is fully knowledgeable about the nature and scope of the gambling business would be liable under §2 if he installs the computer, electronic equipment and cables necessary to operate a “wire shop” or a parimutuel betting parlor, configures the software programs to process betting information and instructs the owners of the gambling business on how to use the equipment to make the illegal business more profitable and efficient. Such actions would probably be sufficient proof that the seller intended to further the criminal enterprise.[3]

Penalties Edit

Violations of section 1955 are punishable by imprisonment for not more than five (5) years and/or fines of the greater of not more than twice the gain or loss associated with the offense or $250,000 ($500,000 for an organization).[4] Moreover, the federal government may confiscate any money or other property used in violation of the section.[5] The offense may also provide the foundation for a prosecution under the Travel Act,[6] the money laundering statutes,[7] and RICO.[8]

Elements of a claim Edit

The elements of section 1955 apply to anyone who:

1. A. conducts,
B. finances,
C. manages,
D. supervises,
E. directs, or
F. owns
2. all or part of an illegal gambling business that
3. A. is a violation of the law of a State or political subdivision in which it is conducted;
B. involves five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business; and
C. has been or remains in substantially continuous operation for a period in excess of thirty days or has a gross revenue of $2,000 in any single day.

“[N]umerous cases have recognized that Section 1955 proscribes any degree of participation in an illegal gambling business except participation as a mere bettor.”[9] Or as more recently described, “`[c]onductors’ extends to those on lower echelons, but with a function at their level necessary to the illegal gambling operation.”[10] The section bars only those activities that involve illegal gambling under applicable state law and that meet the statutory definition of a business. Illegal gambling is at the threshold of any prosecution under the section, and cannot to be pursued if the underlying state law is unenforceable under either the U.S. Constitution,[11] or the operative state constitution.[12]

The business element can be satisfied (for any endeavor involving five or more participants) either by continuity (“has been or remains in substantially continuous operation for period in excess of thirty days”) or by volume (“has a gross revenue of $2,000 in any single day”).[13] The volume prong is fairly self-explanatory and the courts have been fairly generous in their assessment of continuity.[14] They are divided, however, on the question of whether the jurisdictional five and continuity/volume features must coincide.[15]

There is no such diversity of opinion on the question of whether Section 1955 lies within the scope of Congress’ legislative authority under the Commerce Clause. The Supreme Court’s decision in United States v. Lopez,[16] finding the Gun Free School Zone Act (18 U.S.C. §922(q)) beyond the bounds of Congress’ Commerce Clause power, stimulated a host of appellate decisions here and elsewhere. In the case of Section 1955, Lopez challenges have been rejected with the observation that, unlike the statute in Lopez, Section 1955 (a) involves the regulation of a commercial activity (a gambling business), (b) comes with jurisdictional elements selected to reserve prosecution to those endeavors likely to substantially affect interstate commerce (five participants in a substantial gambling undertaking), and (c) was preceded by congressional findings evidencing the impact of substantial gambling operations upon interstate commerce.[17]

Accomplice and conspiracy liability Edit

The accomplice and conspiratorial provisions attend violations of Section 1955 as they do violations of the Wire Act. Although frequently difficult to distinguish in a given case, the difference is essentially a matter of depth of involvement. “[T]o be guilty of aiding and abetting a section 1955 illegal gambling business . . . the defendant must have knowledge of the general scope and nature of the illegal gambling business and awareness of the general facts concerning the venture . . . [and he] must take action which materially assists in ‘conducting, financing, managing, supervising, directing or owning’ the business for the purpose of making the business succeed.”[18] Unlike conspiracy, one may only be prosecuted for aiding and abetting the commission of a completed crime; “before a defendant can be found guilty of aiding and abetting a violation of section 1955 a violation of section 1955 must exist . . . [and] aiders and abettors cannot be counted as one of the statutorily required five persons.”[19]

As a general rule, a federal conspiracy exists when two or more individuals agree to commit a federal crime and one of them commits some overt act in furtherance of their common scheme.[20] “A conspiracy may exist even if a conspirator does not agree to commit or facilitate each and every part of the substantive offense. The partners in the criminal plan must agree to pursue the same criminal objective and may divide up the work, yet each is responsible for acts of each other. If the conspirators have a plan which calls for some conspirators to perpetrate the crime and others to provide support, the supporters are as guilty as the perpetrators.”[21]

Conspiracy is a separate crime and thus conspirators may be convicted of both substantive violations of Section 1955 and conspiracy to commit those violations.[22] In fact, under the Pinkerton doctrine, co-conspirators are liable for conspiracy, the crime which is the object of the conspiracy (when it is committed), and any other reasonably foreseeable crimes of their confederates committed in furtherance of the conspiracy.[23]

Application to offshore gambling operations Edit

The application of Section 1955 to offshore gambling operations that take wagers from bettors in the United States involves two questions. First, does state law proscribing the gambling in question apply when some of the elements of the offense are committed outside its jurisdiction? Second, did Congress intend Section 1955 to apply beyond the confines of the United States?

Section 1955 can only apply overseas when based on an allegation that the gambling in question is illegal under a state law whose reach straddles jurisdictional lines. For example, a statute that prohibits recording bets (bookmaking) in Texas cannot be used against a gambling business which records bets only in Jamaica or Dominican Republic, even if the bets are called in from Texas.[24] On the other hand, an overseas gambling business may find itself in violation of Section 1955 if it accepts wagers from bettors in New York, because New York law considers the gambling to have occurred where the bets are made.[25]

Whether a federal law applies overseas is a matter of congressional intent.[26] The intent is most obvious where Congress has expressly stated that a provision shall have extraterritorial application.[27] In the absence of an explicit statement, the courts use various construction aids to divine congressional intent. Unless some clearer indication appears, Congress is presumed to have intended its laws to apply only within the United States.[28] The courts have recognized contrary indications under several circumstances. Congress will be thought to have intended a criminal proscription to apply outside the United States where one of the elements of the offense, like the commission of an overt act in furtherance of a conspiracy, occurs in the United States.[29] Similarly, Congress will be thought to have intended to outlaw overseas crimes calculated to have an impact in the United States, for example, false statements made abroad in order to gain entry into the United States.[30] Finally, Congress will be thought to have intended extraterritorial application for a criminal statute where its purpose in enacting the statute would otherwise be frustrated, for instance, the theft of United States property overseas.[31]

There is a countervailing presumption interwoven among these interpretive devices. Congress is presumed not to have intended any extraterritorial application that would be contrary to international law.[32] International law in the area is a matter of reasonableness, of minimal contacts,[33] traditionally described as permitting geographical application of a nation’s laws under five principles: a country’s laws may be applied within its own territory (territorial principal); a country’s laws may be applied against its own nationals wherever they are located (nationality principle); a country’s laws may be applied to protect it from threats to its national security (protective principle); a country’s laws may be applied to protect its citizens overseas (passive personality principle); and a country’s laws may be applied against crimes repugnant to the law of nations such as piracy (universal principle).[34]

Section 1955 does not say whether it applies overseas. Yet an offshore illegal gambling business whose customers where located in the United States seems within the section’s domain because of the effect of the misconduct within the United States.

References Edit

  1. See United States v. Sacco, 491 F.2d 995, 998 (9th Cir. 1974).
  2. Jonathan Gottfried, The Federal Framework for Internet Gambling, 10 Richmond J. of L. & Tech. 26, 53 (2004) (“While section 1955 has yet to be successfully used to prosecute an Internet gaming operation, its minimal requirements may make it a likely candidate for future use”); General Accounting Office, Internet Gambling: An Overview of the Issues 11 (Dec. 2002); Seth Gorman & Anthony Loo, Blackjack or Bust: Can U.S. Law Stop Internet Gambling?, 16 Loyola of L.A. Entertain. L.J. 667, 675-77 (1996).
  3. United States v. Hill, 55 F.3d 1197, 1200 (6th Cir. 1995).
  4. 18 U.S.C. §§1955(a), 3571(d).
  5. Id. §1955(d).
  6. Id. §1952.
  7. Id. §§1956 and 1957.
  8. Id. §§1961-63.
  9. Sanabria v. United States, 437 U.S. 54, 70-1 n.26 (1978).
  10. United States v. O’Brien, 131 F.3d 1428, 1431 (10th Cir. 1997). Perceptions of necessity are not always particularly demanding. See e.g., United States v. Heacock, 31 F.3d 249, 252-53 (5th Cir. 1994) (may include “everyone from layoff bettors and line services to waitresses who serve drinks”); United States v. Grey, 56 F.3d 1219, 1221 (10th Cir. 1995) (bartenders and managers of establishments where the defendant placed his video poker machines and who recording winnings, made payoffs, and reset the machines were properly counted as conductors of the defendant’s gambling business); United States v. Mick, 263 F.3d 553, 568-69 (6th Cir. 2001) (“layoff bettors may be considered part of the requisite five members, so long as their dealings with the gambling business are regular and not just based on one contact”); United States v. Febus, 218 F.3d 784, 797 (7th Cir. 2000) (conduct for purposes of section 1955 extends to the performance of “any act, function or duty which is necessary to or helpful in the ordinary operation of the business” including the owner of a bar who knowingly allowed gamblers to use the bar as a collection site); United States v. Chance, 306 F.3d 356, 379-80 (6th Cir. 2002) (“regularly helpful or necessary to the operation of the gambling enterprise”); Requirement of 18 U.S.C. §1955, Prohibiting Illegal Gambling Business, That Such Business Involve Five or More Persons, 55 ALR Fed. 778 (1981 & 2004 Supp.).
  11. Cf. United States v. Hill, 167 F.3d 1055, 1063-64 (6th Cir. 1999).
  12. Cf. United States v. Ford, 184 F.3d 566, 582-83 (6th Cir. 1999).
  13. Sikes v. Teleline, Inc., 281 F.3d 1350, 1366-367 (11th Cir. 2002).
  14. See, e.g., United States v. Trupiano, 11 F.3d 769, 773-74 (8th Cir. 1993) (“Congress did not purport to require absolute or total continuity in gambling operations. Consistent with this, substantially continuous has been read not to mean every day. The operation, rather, must be one that was conducted upon a schedule of regularity sufficient to take it out of the casual, non-business category”).
  15. Compare United States v. Nicolaou, 180 F.3d 565, 568 (4th Cir. 1999) (“the five-person requirement must be satisfied in conjunction with the third element. That is . . . section 1955 covers only those gambling operations that involve at all times during some thirty day period at least five persons . . . or that involve at least five persons on any single day on which it had gross revenues of $2,000") with United States v. Boyd, 149 F.3d 1062, 1064-65 (10th Cir. 1998) (“the government is not required to demonstrate the involvement of five or more persons for a continuous period of more than thirty days to support a conviction under §1955, but rather need only demonstrate that the operation operated for a continuous period of thirty days and involved five or more persons at some relevant time”).
  16. 514 U.S. 549 (1996).
  17. See, e.g., United States v. Riddle, 249 F.3d 529, 538-39 (6th Cir. 2001); United States v. Lee, 173 F.3d 809, 810-11 (11th Cir. 1999); United States v. Threadgill, 172 F.3d 357, 371-72 & n.12 (5th Cir. 1999); United States v. Ables, 167 F.3d 1021, 1026-28 (6th Cir. 1999) (also rejecting the suggestion that section 1955 exceeded the reach of Congress under the Commerce Clause because it intruded into an area traditionally reserved to the states); United States v. Boyd, 149 F.3d 1062, 1066 (10th Cir. 1998); United States v. Zizzo, 120 F.3d 1338, 1350 (7th Cir. 1998); United States v. Wall, 912 F.3d 1444, 1445-52 (6th Cir. 1996).
  18. United States v. Hill, 55 F.3d 1197, 1201-02 (6th Cir. 1995).
  19. Id. at 1204.
  20. United States v. Falcone, 311 U.S. 205, 210 (1941); United States v. Edwards, 188 F.3d 230, 234 (4th Cir. 1999); United States v. Lage, 183 F.3d 374, 382 (5th Cir. 1999); United States v. Svoboda, 347 F.3d 471, 476 (2d Cir. 2003).
  21. Salinas v. United States, 522 U.S. 52, 63-64 (1997).
  22. Iannelli v. United States, 420 U.S. 770 (1975); United States v. Jimenez Recio, 537 U.S. 270, 274 (2003).
  23. Pinkerton v. United States, 328 U.S. 640, 645-48 (1946); United States v. Escobar-DeJesus, 187 F.3d 148, 174-75 (1st Cir. 1999); United States v. Castillo, 179 F.3d 321, 324-25 (5th Cir. 1999).
  24. United States v. Truesdale, 152 F.3d 443, 446-49 (5th Cir. 1998) (rejecting the argument that the gambling was illegal under a provision of Texas law not mentioned in indictment or the jury charge).
  25. People v. World Interactive Gaming Corp., 1999 WL 591995, at *5 (N.Y. Sup. Ct. July 22, 1999) (“Respondents argue that the Court lacks subject matter jurisdiction, and that Internet gambling falls outside the scope of New York state gambling prohibitions, because the gambling occurs outside of New York state. However, under New York Penal Law, if the person engaged in gambling is located in New York, then New York is the location where the gambling occurred (See Penal Law §225.02(2)). Here, some or all of those funds in an Antiguan bank account are staked every time the New York user enters betting information into the computer. It is irrelevant that Internet gambling is legal in Antigua. The act of entering the bet and transmitting the information from New York via the Internet is adequate to constitute gambling activity within New York state”).
  26. EEOC v. Arabian American Oil Co., 499 U.S. 244, 248 (1991) (“Congress has the authority to enforce its laws beyond the territorial boundaries of the United States. Whether Congress has in fact exercised that authority . . . is a matter of statutory construction”); Foley Brothers v. Filardo, 336 U.S. 281, 284-85 (1949) (“The question . . is not the power of Congress to extend the . . . law to . . . foreign countries. Petitioners concede that such power exists. The question is rather whether Congress intended to make the law applicable”); In re Simon, 153 F.3d 991, 995 (9th Cir. 1998); United States v. Delgado-Garcia, 374 F.3d 1337, 1345 (D.C. Cir. 2004).
  27. See, e.g., 18 U.S.C. §2381 (relating to treason committed in the United States “or elsewhere”).
  28. Sale v. Haitian Centers Council, Inc., 509 U.S. 155, 174 (1993); Steele v. Bulova Watch Co., 344 U.S. 280, 285 (1952).
  29. United States v. MacAllister, 160 F.3d 1304, 1308 (11th Cir. 1998).
  30. Ford v. United States, 273 U.S. 593, 620-21 (1927) (“Acts done outside a jurisdiction, but intended to produce and producing detrimental effects within it, justify a State in punishing the cause of the harm as if he had been present at the effect”); United States v. Larsen, 952 F.2d 1099, 1100-01 (9th Cir. 1991); United States v. Hill, 279 F.3d 731, 739-40 (9th Cir. 2002).
  31. United States v. Bowman, 260 U.S. 94, 98 (1922) (“Other [crimes] are such that to limit their locus to the strictly territorial jurisdiction would be greatly to curtail the scope and usefulness of the statute and leave open a large immunity for frauds as easily committed by citizens . . . in foreign countries as at home. In such cases, Congress has not thought it necessary to make specific provision in the law that the locus shall include . . . foreign countries, but allows it to be inferred from the nature of the offense”); Blackmer v. United States, 284 U.S. 421, 438 (1932) (“The jurisdiction of the United States over its absent citizen, so far as the binding effect of its legislation is concerned, is a jurisdictional in personam, as he is personally bound to take notice of the laws that are applicable to him and to obey them”); United States v. Vasquez-Velasco, 15 F.3d 833, 839 (9th Cir. 1994); United States v. Delgado-Garcia, 374 F.3d 1337, 1345-347 (D.C. Cir. 2004).
  32. Weinberger v. Rossi, 456 U.S. 25, 32 (1982) (“It has been a maxim of statutory construction since the decision in Murray v. the Charming Betsy, that an act of Congress ought never to be construed to violate the law of nations, if any other possible construction remains”); United States v. Dawn, 129 U.S. 878, 882 (7th Cir. 1997); United States v. Yousef, 327 F.3d 56, 96 (2d Cir. 2003).
  33. Restatement (Third) of the Foreign Relations Law of the United States §§401-423 (1986 & 2004 Supp.).
  34. Jurisdiction with Respect to Crime, 29 American J. of Int’l Law (Supp.) 439, 445 (1935).

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