A New York online gambling firm is at the center of state and federal crackdowns on companies charged with illegal activity and deception.
New York Attorney General Dennis Vacco today announced plans to sue World Interactive Gaming. He sent a letter informing the firm that he intends to file a two-pronged civil suit that will allege the company was operating illegally and that it was deceiving investors.
Executives of the Bohemia, New York, firm have five days to respond and refute the charges before the suit will be filed, according to Vacco spokesperson Mollie Conkey. Executives did not return phone calls to their homes, and the company's phone number in Bohemia has been disconnected.
The Federal Trade Commission today filed a complaint against World Interactive Gaming as part of a crackdown on nearly 60 companies by the FTC, the Securities and Exchange Commission, and 20 members of the North American Securities Administrators Association in a project dubbed "Project Risky Business."
The FTC complaint alleges that the defendants told investors that "profitability would mimic 'Microsoft, Netscape, and Yahoo,'" according to a statement released by the agency today. The FTC further alleges that the company "misled consumers by claiming that World Interactive should 'conservatively' earn $100 million in its first year and that investors could expect to make $150,000 or more in one year from their $10,000 investment."
The FTC requested a temporary restraining order against World Interactive Gaming. A hearing on that request is scheduled for Monday in U.S. District Court in Manhattan, the FTC said.
World Interactive Gaming also will have to face Vacco's office once a suit is filed. "Since Internet gambling is illegal in New York, and in the rest of the country, we allege that World Interactive Gaming Corporation scammed at least 100 consumers by getting them to invest close to $2 million in what amounted to be an illegal business opportunity," Vacco said in a statement.
"Internet-related stock offerings are a 'hot ticket' on Wall Street," he added. "We believe that WIGC preyed on that fact and promoted this illegal business by making false representations, omitting important facts, using unregistered salespeople, and by telling people they'd make incredibly high returns on their investment."
Online gambling has become a tremendous global issue, and it underscores some of the major difficulties inherent in governing a medium that is essentially borderless. Last month, the Senate voted overwhelmingly to pass Sen. Jon Kyl's (R-Arizona) Internet Gambling Prohibition Act, which was added to a major spending bill--in spite of a report by the Justice Department that criticized the gambling bill for being inconsistent and overly broad.
If filed, Vacco's lawsuit will seek to prevent World Interactive Gaming from doing business in New York State, according to the statement from the attorney general's office. It also will ask for restitution, civil penalties, and costs to be specified in the suit, Vacco spokesperson Conkey said.
Conkey said Vacco plans to point to the Federal Wire Communication Act as well as parts of the New York State Penal Code for his case against World Interactive Gaming, but she declined to give further details.
She noted that, although Vacco interprets state and federal law to say online gambling is illegal, those statutes have yet to be tested in the courts. Conkey added that the U.S. Attorney in New York State has filed similar suits against Net gambling firms, but those cases are pending.
Last month, New York prosecutors filed an affidavit against World Interactive Gaming to prevent executives from transferring $750,000 in investor funds to a bank in Antigua.
Vacco began investigating the company after one of its executives unintentionally solicited a Texas State Securities Board investigator for an investment.
Conkey said World Interactive Gaming executives are scheduled to be deposed this week.