The following are the full releases that both the United States Attorney for the Southern District of New York (USAO) and NETELLER made today concerning the agreement made between the two entities.
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First NETELLER'S statement:
NETELLER Announces Settlement of US Situation
Wednesday, 18 July 2007: NETELLER Plc (LSE: NLR), the independent global online payments business, today announces that the Company has entered into a Deferred Prosecution Agreement ("DPA") with the United States Attorney's Office for the Southern District of New York ("USAO"). The DPA represents the resolution of the USAO's investigation into the Company.
Pursuant to the DPA, the Company has consented to the filing of a criminal information relating to transactions between Internet gambling merchants and persons located in the United States. The USAO has agreed to defer the prosecution of any federal charges and, as a consequence, the Company will not be convicted of any federal crime, as long the Company fulfils the set conditions of the DPA during the two year term of the agreement.
At the conclusion of the two year term, the criminal information will be dismissed. The key terms of the DPA are set out in more detail later in this announcement. The United States District Court for the Southern District of New York has approved the deferral of the prosecution. As part of the DPA, the Company has also agreed to forfeit US$ 136 million to the United States. This amount includes the approximately US$ 60 million that the USAO has previously seized.
Additionally the Company announces:
- Following this resolution, the Company will seek to publish its audited annual accounts for 2006 and have its shares restored to trading on AIM as soon as practicable thereafter.
- The Company is using its best efforts to allow withdrawal requests as soon as possible and US customers will be able to sign in to their NETELLER account to request the withdrawal of their funds by no later than 30 July 2007. The exact date upon which US customers will be able to make requests will be communicated to US customers via email and through our website.
Ron Martin, President & CEO, said "This agreement resolves the USAO's investigation relating to the Company's former US business activities. We believe that this settlement is in the best interests of NETELLER and its shareholders."
"Our customers, employees and shareholders have all patiently waited for this resolution. We anticipate within the next few weeks that we will have fully implemented the plan for the return of funds to our US customers and are hopeful that, by that time, we will have restored the Company's shares to trading on AIM. We can now begin to refocus our efforts on building and strengthening the NETELLER business in the growing markets of the European and Asia Pacific regions. I look forward to sharing further information about the Company's progress over the coming months."
Key terms of the Deferred Prosecution Agreement
The settlement takes the form of a two year DPA with the USAO. In the DPA, NETELLER has consented to the filing with the United States District Court for the Southern District of New York of a criminal information charging NETELLER with participating in a conspiracy in violation of certain US laws. If NETELLER fulfils its obligations under the DPA, the criminal information will be dismissed, following the two year term.
Specifically, the DPA contains the following main points:
- NETELLER, as detailed in the "Statement of Admitted Facts" attached to the DPA, admits that it had operated in the US an unlicensed money transmitting business and had participated in the performance of financial transactions for the purpose of promoting unlawful transactions between internet gambling merchants and persons located in the US.
- NETELLER agrees that it will pay an amount to the United States totalling US$ 136 million which is disgorgement of certain profits received by NETELLER from the activities described in the Statement of Admitted Facts. This amount includes the approximately US$ 60 million that the USAO has previously seized. NETELLER agrees that it will satisfy the remaining portion of its forfeiture obligation with a payment of US$ 40 million to be paid on or before 15 October 2007, and the remaining balance (approximately US$ 36 million) to be paid on or before 17 January 2008.
- NETELLER agrees to cooperate fully with US authorities in all matters relating to the ongoing investigations by the USAO.
- NETELLER agrees to fully implement procedures and controls to prevent illegal transactions between internet gambling merchants and persons located in the US and to continue to retain Navigant Consulting Inc., a forensic accounting firm, to monitor NETELLER's compliance with these procedures and controls.
Distribution Plan to be implemented
As announced on 4 June, the Company has agreed to a plan for the distribution of funds to its US customers. The agreed plan details the process and mechanisms by which US customers will be able to initiate the return of their funds after the plan is implemented. NETELLER is using its best efforts to start implementing the plan as soon as possible and, in any event, by no later than 30 July 2007. The Company will communicate to US customers via email and through its website the exact date upon which such customers will be able to make requests.
Restoration of trading to AIM
As stated in the Company's announcement of 13 July, the Company continues to make progress regarding the ongoing suspension of the Company's shares from trading on AIM. The Company is in discussions with its advisers and AIM and understands that the admission of the Company's ordinary shares to trading on AIM has not to date been cancelled.
With today's announcement of a resolution of the USAO investigation, the Company is now focused on finalising and publishing its audited annual accounts for 2006. The Company will endeavour to post the 2006 accounts to its shareholders as soon as practicable following which the Company anticipates that trading in the Company's ordinary shares on AIM will be restored.
Further details will be announced as and when they become available.
About the NETELLER Group
Trusted by millions of consumers in over 160 countries to move and manage billions of dollars each year, the NETELLER Group operates the world's leading independent online payment business. The Group specializes in providing innovative and instant payment services where money transfer is difficult or risky due to identity, trust, currency exchange, or distance. Being independent has allowed the Group to support thousands of retailers and merchants in many geographies and across multiple industries.
The Group is quoted on the London Stock Exchange's AIM market, with a ticker symbol of NLR. NETELLER (UK) Limited is authorised by the Financial Services Authority (FSA) to operate as a regulated e-money issuer. For more information about the Group visit www.netellergroup.com.
And the USAO's Statement
ISLE OF MAN-BASED INTERNET PAYMENT COMPANY NETELLER PLC ADMITS CRIMINAL WRONGDOING AND AGREES TO FORFEIT $136 MILLION FOR CONSPIRING TO PROMOTE INTERNET GAMBLING BUSINESSES
MICHAEL J. GARCIA, the United States Attorney for the Southern District of New York, announced today that NETeller PLC ("NETeller") -- an Internet payment business based in the Isle of Man and publicly traded on the Alternative Investment Market ("AIM") of the London Stock Exchange -- has admitted to criminal wrongdoing and has agreed to forfeit $136,000,000 in criminal proceeds as part of an agreement to defer prosecution of NETeller for its participation in a conspiracy to promote Internet gambling businesses and to operate an unlicensed money transmitting business. A felony Information specifying the charges against NETeller; a Statement of Admitted Facts by NETeller; and the Deferred Prosecution Agreement, which was accepted by United States District Judge P. KEVIN CASTEL, were filed today in federal court in Manhattan.
The Charges
The felony Information filed today charges that NETeller participated in a conspiracy, in violation of Title 18, United States Code, Section 371, to: (i) use the wires to transmit in interstate and foreign commerce bets and wagers on behalf of persons engaged in the business of betting and wagering, in violation of Title 18, United States Code, Section 1084; (ii) conduct illegal gambling businesses, in violation of Title 18, United States Code, Section 1955; (iii) conduct international monetary transactions for purposes of promoting illegal gambling, in violation of Title 18, United States Code, Section 1956(a)(2)(A) ; and (iv) conduct an unlicensed money transmitting business, in violation of Title 18, United States Code, Section 1960. The Information also contains a criminal Forfeiture Allegation against all property involved in or derived-2- from the criminal wrongdoing, in the amount of at least 1 billion dollars.
The Criminal Wrongdoing
As set forth in the Information and the Statement of Admitted facts: In 1999, STEPHEN ERIC LAWRENCE and JOHN DAVID LEFEBVRE began developing the Internet payment system that was used by NETeller and its predecessors to provide online payment services to Internet gambling companies. In April 2004, NETeller became a public company and listed its shares for trading on the AIM of the London Stock Exchange. At the time, NETeller openly stated in its prospectus, issued in connection with its initial public offering ("IPO"), that its conduct violated the law in the United States. At its peak in September 2005, NETeller had a market capitalization of approximately $2 billion. Over the years, NETeller and its predecessors processed more than $10 billion in payment transactions for customers in the United States related to the Internet gambling industry, and consistently derived approximately 75% or more of its annual profits from such
transactions. NETeller's illegal conduct in the United States did not end until January 2007, when LAWRENCE and LEFEBVRE were arrested on warrants issued by the United States District Court for the Southern District of New York. Earlier this month, both LAWRENCE and LEFEBVRE pleaded guilty to charges that they conspired with others to operate an unlicensed money transmitting business and to promote illegal gambling by providing payment services to enable offshore Internet gambling businesses to access customers in the United States. LAWRENCE and LEFEBVRE each face a maximum term of imprisonment of five years and a maximum fine of $250,000 or twice the gross pecuniary gain from the offense. In addition, LAWRENCE and LEFEBVRE each admitted to forfeiture allegations requiring them to personally forfeit an additional 100 million dollars to the United States, which they are expected to pay in full prior to sentencing. LAWRENCE and LEFEBVRE are currently scheduled to be sentenced by Judge CASTEL on October 29, 2007.
In its Statement of Admitted Facts issued in connection with the Deferred Prosecution Agreement, NETeller admitted that NETeller and its predecessors, through the conduct of certain officers and directors: (i) knowingly operated an unlicensed money transmitting business in the United States; (ii) knowingly agreed to promote illegal Internet gambling by using the wires and other means to transmit in interstate and foreign commerce bets and wagers from customers in the United States to numerous Internet gambling businesses located outside of the United States, and payments to customers in the United States from numerous Internet gambling businesses located outside of the United States; and (iii) intentionally took steps to avoid detection and jurisdiction in the United States by operating in the United States through agents and companies that were not owned, but were controlled, by NETeller and its predecessors.
The Deferred Prosecution Agreement
As part of the Deferred Prosecution Agreement, NETeller has agreed to forfeit $136 million in profits from its wrongdoing to the United States in a civil forfeiture action. In addition, NETeller will return to customers in the United States approximately $94 million which NETeller currently has on deposit in a foreign bank account. NETeller has also agreed to cooperate fully with the Government. Under the Agreement prosecution of the criminal charges against NETeller will be deferred for a period of two years, until July 2009, if specified conditions are met. At the end of that period, if NETeller has fully complied with all the terms of the Agreement, the Government will move to dismiss the Information. In addition to the foregoing, the Agreement also imposes permanent restrictions and controls on the operations of NETeller, including, among other things, that: (i) NETeller will not participate in illegal gambling transactions involving persons located in the United States; (ii) NETeller will maintain procedures and controls designed to prevent its services from being used to conduct U.S. gambling transactions; and (iii) NETeller will monitor regularly the effectiveness of its procedures and controls designed to prevent its services from being used to conduct U.S. gambling transactions, and will revise and update its procedures and controls as necessary to achieve that purpose. In order to ensure NETeller's compliance, the Agreement also requires NETeller to retain a monitor for a period of at least eighteen months. The restrictions and controls on the company's operations in the United States will remain in effect and the company's cooperation will continue after charges against the company are dismissed.
Mr. GARCIA said that the decision to file a charge against NETeller was based on several factors set forth in the Department of Justice Principles of Federal Prosecutions of Business Organizations (the "Principles" ), including: (i) the seriousness and duration of NETeller's conduct involving the processing of billions of dollars of gambling transactions in violation of state and federal law, and (ii) the involvement of senior corporate officers in the company's criminal conduct. The decision then to enter into the Deferred Prosecution Agreement with NETeller, Mr. GARCIA continued, was based on a variety of factors and considerations also set out in the Principles, including: (i) the company's frank acknowledgment of its misconduct and its willingness to cooperate with the investigation; and (ii) the company's remedial actions, including
cessation of its participation in illegal gambling transactions involving persons located in the United States; implementation of procedures and controls to prevent its services from being used to conduct U.S. gambling transactions; retention of a monitor to ensure compliance with those procedures and controls; and disgorgement of $136,000,000 in criminal proceeds.
Mr. GARCIA stated, "NETeller moved billions of dollars offshore, serving as a financial conduit that enabled Internet gambling businesses to prosper by violating United States laws. Supporting illegal gambling is not a business risk, it is a crime, and today's proceedings mark yet another example of the consequences of engaging in that conduct." Mr. GARCIA praised the tremendous investigative work of the Federal Bureau of Investigation in this case. Assistant United States Attorneys TIMOTHY J. TREANOR, CHRISTOPHER P. CONNIFF, and SHARON COHEN LEVIN are in charge of the prosecution.
