Federal E-Mail Wiretaps Result In Convictions Of State Man
www.gamblingmagazine.com March 15, 2003
On the tiny island of Curacao, 40 miles off the coast of Venezuela, a computer hummed along on Bon Bini Ave. Over the course of three years in the late 1990s, the Caribbean server's Internet connections racked up more than $400 million in sports wagers - on college basketball, professional football and everything in between.
The profits lined the pockets of two Americans, one of whom ran the international gambling ring from Nelsonville, Wis., a one-stop-sign town about 15 miles east of Stevens Point. The federal investigation into the Wisconsin-based online betting service was just the third such case ever prosecuted in the United States. It was the first time the IRS used wiretapping hardware - specially designed at the request of investigators in Wisconsin - to monitor e-mail.
So far, six people have been convicted of federal crimes in connection with the three-year investigation. A seventh, accused of helping the bookies hide their profits in offshore banks, is scheduled for trial in May. Christiansen Capital Advisors, a New York market research firm, estimates that about $6.4 billion will be wagered on athletic competitions this year, much of it via about 1,400 Internet sports betting sites.
About 5 million people get a piece of the Internet action. The men's NCAA basketball tournament, which starts next week, is the second most popular gambling draw after the Super Bowl. Except in Nevada, betting on sports is illegal everywhere in the U.S., including at Indian casinos, according to Daniel J. Graber, assistant U.S. attorney for the Western District of Wisconsin.
Under the federal Wire Act of 1961, using an online sports book (even if the server is in a foreign country) is a felony, since it uses interstate telephone lines. The law is difficult to enforce, however, because it's often impossible to tell who is operating a particular Web site, Graber said.
Unfortunately for Duane Pede, 52, of Amherst Junction, Wis., and Jeff D'Ambrosia, 42, of Henderson, Nev., several coincidences and an intense investigation led the feds to their door. Thomas Manske was on trial for federal drug charges in 1998. He told the jury all those secretive meetings in bars were not to sell drugs but to collect bets. Their interest piqued, the authorities began working their way up the criminal food chain toward Pede and D'Ambrosia.
Meanwhile, the U.S. attorney in St. Louis busted up an Internet gambling ring based there. Two defendants told authorities they were just small fish. Pede had started out in the sports information business, printing scorecards for bookies and giving them the point spreads on various games. D'Ambrosia's business began as a "tout" service - a way for gamblers and bookies to get recommendations on how to bet.
Both enterprises constitute legally protected speech under the First Amendment. Pede and D'Ambrosia eventually ran four tout services. Pede and D'Ambrosia courted trouble when they decided to branch out, starting a gambling service they could advertise to the people who used their other services, authorities say.
"They figured, 'We know all the people calling us are gambling, why don't we market them?" said Graber, who, along with assistant U.S. Attorney Timothy O'Shea, prosecuted the case. The direct mail was easy because Pede also ran a small printing company in Nelsonville, Signature Press, where the two could print all their advertising materials for the new business.
One of those brochures, stamped by a postage meter at Signature Press, fell into the hands of the Portage County Sheriff's Department and was forwarded to Graber. Authorities now had a tenuous link, but the fact that the server was in the Caribbean was problematic. To minimize the government's losses, they bet against each other.
To prove the Americans were in charge, the U.S. attorney's office and the IRS needed help from the FBI. The government often wiretaps telephone calls to gather evidence in an investigation. But IRS agents had never before wiretapped e-mail. The U.S. Postal Inspection Service and the Wisconsin Department of Justice also assisted in the investigation.
The intercepted e-mails were a gold mine that clearly showed Pede and D'Ambrosia troubleshooting and giving instructions to employees of both the tout services and the gambling operation. Pede and D'Ambrosia both pleaded guilty in December 2001 to federal gambling and tax charges and assisted authorities in the prosecution of four co-conspirators.
Both are serving five-year federal prison terms. Each man was fined $100,000; together they were ordered to pay nearly $1.5 million in back taxes. Pede and D'Ambrosia's financial adviser, Florida attorney David Hampton Tedder, has pleaded not guilty to seven federal felonies and is scheduled for trial in May. Authorities believe Tedder helped the Internet bookies hide the rest of their millions.
Authorities say that although this case is coming to a close, it has opened a whole new avenue of prosecutions, proving an Internet gambling ring can be shut down.