Tuesday, April 19, 2011

Notes on the crisis, part 1

I don't like repeating things that have been said by others--often better than I would say them. I have no special insight on the weekend's events that largely shut down the U.S. online poker industry, nor will I be as deeply affected by the blackout as many others. Other writers are better versed in the intricacies of what happened, and have better crystal balls as to what might yet happen. Go read them. You know where to find them.

Still, I have three lines of thought that I have not seen elsewhere. (Of course, it's likely that somebody else has said or written similar things somewhere outside of my circle of reading; I haven't tried scouring blogs and forums to find out.)

1. The ugly power of terminology

Every time I hear the words "bank fraud" and "money laundering" in the context of PokerStars and Full Tilt Poker, something deep inside me says, "That's not what happened."

Now, admittedly, I haven't bothered to read the indictments. Nor have I bothered to read the relevant financial statutes, let alone try to match the allegations laid out in the accusatory papers to the elements of the crimes charged. I do not claim to know whether the factual allegations are true, nor whether, even if true, they genuinely amount to violations of the statutes specified. Heck, I haven't even checked a sampling of dictionaries to see what definitions they offer.

My inner rebellion against the terms is not, therefore, a legal or technical one. It's an emotional, gut-level one.

When I hear the terms "bank fraud" and "money laundering," what they conjure up in my mind is something vastly different from and far more malignant than the alleged conduct of Stars and FTP, as filtered to me through reasonably reliable news sources and commentators.

Let's start with "bank fraud." It seems to me, at least on first blush, that for bank fraud to have occurred, somebody must have been defrauded. E.g., John Doe's next door neighbor dies quietly, and Doe, who has the emergency key, uses his access to find the financial documents, and finagles withdrawals from the decedent's bank account. Clearly the dead neighbor's rightful heirs have thus been cheated out of what should be theirs. Money has been stolen from them. They have been defrauded. Or consider the actions--based on real events in Canada--of Philip Seymour Hoffman's character in the chilling film "Owning Mahowny": As a trusted loan officer at a bank, he wrote checks to nonexistent entities and cashed them himself in order to fuel his gambling addiction. Classic bank fraud any way you look at it. The bank lost huge sums of money.

But who was the victim in the poker cases? Players wanted to move money onto or off of the poker sites. The sites wanted those transactions to occur, too. The banks profited by being the intermediaries, via their usual transaction or account fees. Everybody wins. Everybody is happy. Everybody gets what they want. Nobody has had anything stolen. Nobody has been defrauded out of anything of material worth.

If the term "bank fraud" is to fit--and again, I'm talking about what the words mean to me, and perhaps to the average Joe, too, not any statutory definitions--in my mind there has to be somebody, either a person or a corporate entity, who was defrauded out of money, and I don't see any such victim here.

How about "money laundering"? If you're like me, that term brings to mind flashes of organized crime, of South American drug cartels, of terrorist organizations, all finding illicit ways to either fund their operations or reap the profits of their crimes in ways that appear licit. I think of Tony Soprano's trash collection business. I think of ostensibly charitable front organizations that actually shunt money to buy guns for the Irish Republican Army. I think of vast criminal networks that exist solely to profit their members by preying on the weak by means of dishonesty, force, threats, and violence, disguising their ill-gotten gains to look as innocent as a Girl Scout troop's cookie sales.

What I don't think of is PokerStars putting a "golfing supplies" code instead of a "gambling" code on the credit card transaction of Don Donkey in Peoria, Illinois, when he wants $100 in poker credit to fund a year or so of his weekly microstakes game with his old college buddies. I also don't think of me transferring $10 to my nephew on the old Bugsy's Club site so that I could play him in a series of $1 heads-up matches for fun, when he didn't have a bank account from which he could make the deposit himself. (Yes, that actually happened. Go ahead and send me to jail for it.)

Like me, you have probably heard horror stories of relatively minor crimes getting their perpetrator labeled for life as a "sex offender." It can happen these days, e.g., if an 18-year-old and a 16-year-old engage in fully consensual sex (depending on the laws in the jurisdiction), or if a 15-year-old girl sends a semi-nude cell phone photo of herself to her boyfriend, who then forwards it to a friend. The label of "sex offender" is not just humiliating, it results in requirements to register with the police wherever he goes, to live only in certain designated areas of the city, foreclosure of entire careers that involve working with children, etc. It is patently absurd to lump such offenders together with the truly heinous repeat predators in our society, and use the same term--"sex offender"--to describe them all. Such usage tends to erase important distinctions in degree of odiousness.

So it is here. The terms "bank fraud" and "money laundering," when stretched to include the allegations I've heard about, start to lose their meaning. Or, to put it another way, the terms carry excessive guilt by association--like the guy picked up for littering put in the same holding cell with John Gotti.

No doubt that is precisely the effect the prosecutors wish to have, in addition to whatever technical legal merit the terms may possess. As prosecutors always do when they go public with their charges, they want to skew the public perception against the defendants, for a variety of reasons.

Maybe I'm naive, but I am loath to believe that the actions of Stars and Tilt and their banking associates were much more than technical violations, even if all of the allegations against them are factually provable.* The difference between what I understand they are accused of doing and what in my mind constitutes real "bank fraud" and real "money laundering" is not just a matter of degree, but of kind. It is the difference between malum prohibitum and malum in se.

It is undoubtedly true that my feelings on this are due, at root, to my deep-seated conviction that no truly moral society makes it a crime for mentally competent adults to engage in commercial transactions that are fully to all parties' satisfaction and benefit. It should not be a crime to play poker (or, for that matter, blackjack or roulette) online or in person anywhere in a free society--nor to hire a prostitute, buy heroin, or subscribe to a pay-per-view pornographic web site. Governments should interfere in such private matters only to prevent and punish the use of deception and coercion.

I'm sure that, e.g., Senator Jon Kyl, a scum-sucking dirtbag who beats his wife, drowns kittens for pleasure, and sells child pornography to fund his reelection campaigns,** sees the underlying conduct--gambling--as intrinsically evil and deserving of no societal protection. He and I would therefore naturally come to very different perspectives on the morality of peripheral associated actions. What I see as minor technical violations of no real social import he would see as part of a dark stain on the nation, sucking in hapless victims and ruining their lives for the nefarious profit of greedy, soulless corporations. But that's because he wants to control what other people do with their time and money, and I don't.

Well, this has already gotten a lot longer than I had planned. I have two more points that I have not seen made by others, but I think it will be better if I cut this off here, add a "part 1" to the post title, and save the others for tomorrow and/or the next day.

*I have been fooled before. Likely most of you won't remember the shocking news from 1985 when one Mark Hofmann was found not only to have forged a bunch of sensational documents from early Mormon history, but to have planted bombs that killed two innocent people in an attempt to cover his tracks. I was heavily into LDS history at the time, and had been following his remarkable document "finds." I had come to like and admire him from my safe distance in the Midwest. For quite a while after he had been charged with the forgeries, fraud, and the murders, I refused to believe he was guilty, due to the good will he had built up with me and any number of other history buffs. I was dead wrong; he was guilty as sin, and there is absolutely no question about it now. I admit that it's entirely possible that I'm similarly blinded here by my fondness for two of the three sites that stand accused. (The third, Absolute Poker, of course, can go to hell as far as I'm concerned.)


Anonymous said...

The point about distinguishing malum prohibitum vs malum in se is quite fascinating. Good stuff.

Unfortunately, in your very next sentence, you descend into libertarian propaganda. Look, no society in human history had ever existed based on noncoercion and no-one ever will. Not only that, only a tiny percentage of people agree with such notions and no one did before a few generations ago.

For a quick critique of libertarian ideology, see here:

Look, if poker is ever legalized, you need to convince the mass of humanity that doesn't agree that 7-Eleven should sell black tar heroin.

Grange95 said...

The problem with your analysis is that what you view as a technical, victimless crime actually has far wider implications. The proper coding of money transfers is an integral part of modern electronic banking. Intentionally miscoded money transfers could just as easily be:

* organized crime groups hiding illicit cash proceeds

* terrorist groups hiding illicit funding

* rich folks evading taxes

* politicians hiding bribes

Banks have to play by the rules, meaning those who do business with them must play by the rules. Sure, it's "just poker" in this particular case, but gambling funds must be marked as such. Marking them as golf or jewelry sales subverts the system.

Plus, if there were nothing illegal about moving gambling funds, these poker sites would never have lied, Eh? The questionof whether it should be illegal is irrelevant; the only point that matters is that it is illegal to move gambling funds. Don't play by the rules, pay the price.

Anonymous said...

I find it quite ironic that in the land of the free, internet poker is not allowed, yet poeple from China are permitted to use their hard earned money as they see fit. This should not even be an issue. Its truly a headshaker. What is wrong with your government?

Anonymous said...

I wholeheartedly agree with Grange95.

astrobel said...

Well, I, for once, completely disagree with Grange. I think I understand where he's coming from but many ordinary actions could become illegal overnight and we'd have to find a way round that fact and fight stupid rulings. Stupidity is stupidity, backed from the Courts or not.

Julius_Goat said...

I see what you did there with Jon Kyle, each of whose teeth are hollowed out fake espionage suicide caplets filled not with poison, but with a mixture of Mountain Dew and baby's tears.*

The main reason I currently do not think that the indicted members of the Big Three are guilty of money laundering and bank fraud is pretty simple: They haven't been convicted yet. They are innocent until proven guilty.

However, I think we should look at how sure the DOJ is that they are guilty, and how serious they are (extradition treaties?) about pursuing it, and this should give us pause.

I'd agree with your point about terminology to an extent, by which I mean I do agree that those two terms have negative connotations that conjure up Tony Soprano or Al Capone. However, connotation is not definition. In other words, the DOJ is not accusing the indicted of being Tony Soprano. They are accusing them of specific crimes with specific legal definitions, the limits and breadth of which I (and, based on the caveats with which you kicked off this post, you) am not entirely sure of.

I'd say that one very good reason to avoid committing a crime would be to avoid the associated (and perhaps unfair) connotation, though. I miss FTP and especially Stars a lot already. If their execs are found guilty of these crimes, we will all wish they had avoided such connotation, since we as poker enthusiasts will each get a small drop of tar from their brush.

Unknown said...

Does anyone else think this whole thing is just an end-around designed to shut down the established poker sites, thus opening the door for the Harrah's and MGMs of the world to launch their own online gambling industry? Wholly endorsed, regulated, and taxed by politicians -- with their hands in the proverbial cookie jar, of course.

Don Donkey from Peoria, IL said...

Good Points and Thank You for mentioning me in your blog.

Michael (@jinxclev) said...

Grump, I don't have much to say on the initial thoughts on the poker site shutdown, but I do want to say I like how you highlighted your potential bias and used a personal example to illustrate it.

It's the kind of thing I like to read.