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Ex-Neteller directors detained in seperate arrests
Industry observers are still scratching their heads over the arrest in the United States of two ex-founding directors of Isle of Man-based public company Neteller this week.
Although still shareholders of the successful and legally registered financial processing company, Canadians John LeFevre and Steve Lawrence had severed executive and directorship ties with it when they were arrested Monday morning in Los Angeles and the St John island in the US Virgin Isles.
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Neteller subsequently issued a brief statement, at the same time suspending trading in the company shares in what appeared to be an effort to stave off investor panic until cool thinking and the availability of facts could prevail.
In the statement, the company noted that the two men had been arrested while travelling separately in the US, but emphasised that neither had any connection with Neteller beyond being shareholders. The statement commented that Neteller has not received any communication on the arrests from the US authorities.
The arrested men founded Neteller, which deals mainly with global online gambling transactions, in 1999. Lefevre severed links other than as a non executive director and major shareholder in 2002, whilst Lawrence served as chairman of the company until May 2006 before standing down to become a non-executive director.
The Neteller statement revealed that Lawrence resigned as a non-executive director of the company on 13 October 2006 having stepped down as non-executive chairman of Neteller on 11 May 2006. Lefebvre resigned as a non-executive director of the company on 15 December 2005.
Both men are understood to visit and have homes in the USA, and one report suggested that LeFevre was arrested at his Malibu house.
Although no reasons were initially made public regarding the men's detention, industry speculation inevitably tied it to the key international position that Neteller holds as the major online financial vehicle used by gamblers. Its pre-eminence became especially significant following the October enactment of the U.S. Unlawful Internet Gambling Enforcement Act, which seeks to cripple the online gambling industry in that country by banning financial transactions with Internet gambling companies.
Neteller's position in a reputable sovereign jurisdiction beyond the reach of the US authorities made it a potential target for US authorities charged with the implementation of the Act in the eyes of many . There is little doubt that the strategic direction it takes on the US legislation will have a major influence on the efficacy of the UIGEA.
With over 3 million customers in 160 countries, 3 500 merchants, and over $7 billion in annual transactions, Neteller operates the largest independent online money transfer business in the world. The group specialises in providing innovative and instant payment services where money transfer is difficult or risky due to identity, trust, currency exchange, or distance.
The management has hitherto fiercely defended the group's independence, which has allowed it to support thousands of retailers and merchants in many geographies and across multiple industries.
The UIGEA had serious repercussions for Neteller, with the shares plunging by over 60 percent, although a recovery was evident in recent times.
If the motivation for the LeFevre and Lawrence arrests is connected to online gambling then it follows what many industry experts describe as a trend by US enforcement officials to arrest senior executives if they enter the USA.
Last year saw the arrest of CEO (since replaced) David Carruthers of BetonSports, and shortly after that the seperate arrest of the non-executive chairman of Sportingbet, Peter Dicks.
Both men were in transit when they were detained on covert warrants issued by different states for Internet gambling related charges that have yet to be heard. Whilst Dicks was released by the courts on legal grounds, Carruthers awaits trial and is under house arrest in St Louis on a million dollar bail. Bet on Sports is widely perceived to have been ruined by the affair.
US officials were also active two years ago in disrupting millions of dollars worth of industry advertising in the USA simply by suggesting to media owners that advertising for online gambling companies may be in contravention of the law. There were no prosecutions to enable the opinion to be tested in the courts, although one company paid a significant settlement.
In 2002, New York AG Eliot Spitzer investigated e-cash processor PayPal and the company agreed to stop taking online gambling business and paid a substantial settlement.
Both arrested men are substantial shareholders in the company. Lawrence is the majority beneficial owner of Corvina International Ltd. which holds a total of 7 085 541 ordinary shares representing approximately 5.91 percent of the issued share capital of the company. Lefebvre is the beneficial owner of Eagle Medallion Fortress Investment Corporation which holds a total of 6 638 094 ordinary shares representing approximately 5.54 percent of the issued share capital of the company.
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