In any event, Hamilton is the perfect poster boy for online poker abolitionists, who claim that online poker sites are corrupt companies who cheat their players, along with other unsavory conduct (including money laundering). But, in an ironic twist, Hamilton is also the perfect poster boy for online poker advocates.
Because online poker is essentially illegal in the United States (despite claims to the contrary), or at least is widely regarded as illegal by state and federal authorities, online poker sites invariably have located their businesses in foreign jurisdictions like Antigua, Costa Rica, Gibraltar, and the Isle of Man. This foreign residency, along with the illegality of online poker in the United States, raises significant legal problems for U.S. residents. As discussed in a previous post, a federal appeals court has ruled that U.S. residents claiming damages from alleged cheating on an online poker site cannot sue in the U.S., but must pursue their claim in the country where the online poker site is based. Similarly, those foreign-based companies are difficult targets for U.S. criminal investigations and prosecutions. Finally, the countries hosting and regulating the online poker companies often have a vested interest in protecting these lucrative companies (which are paying regulatory fees and taxes) from harmful investigations and claims for damages.
This brings us back to Hamilton and the UB super-user scandal. UB happens to be regulated by the Kahnawake Gaming Commission (KGC), part of an independent tribal authority in Quebec, Canada. Now, the KGC investigated the UB scandal, and ultimately released a report confirming Hamilton as the ringleader, identifying other account names involved in the scandal, and issuing fines and penalties against UB. The KGC, however, stated that it was solely a regulatory agency, and had no authority to press criminal charges or order civil remedies (i.e., it could not order refunds to the victims of the cheating). UB itself expressed concerns that its hands were tied in providing a satisfactory resolution to the scandal:
The KGC did release the name of Russ Hamilton as the main person responsible for the cheating scandal. Our investigation pointed to him being the person who cheated and benefited from the cheating. Our investigation did show that other individuals helped facilitate the cheating (i.e. there were people that help move money, create accounts, etc) and we have suspicions that other individuals might have been aware of the software or even aware that the scam was happening. Unfortunately, all of our evidence only involves data and we would take on serious legal liabilities if we just released a bunch of names.
We have attempted to have this brought into a court. However, it is very complicated for us, mainly because of jurisdictional issues regarding online gambling.
—UltimateBet COO Paul Leggett (5/28/2010 follow-up comment to his 5/27/2010 official UB blog post)
This comment echoed similar prior hand-wringing by UB and Leggett:
The Limits of the Investigation
Throughout the investigation we questioned as many people as possible trying to determine things like: who built the software, who benefited financially from the cheating, who else might have known about the cheating, etc. Unfortunately, every door we knocked on gave us very little additional information that we could use.
This limited the Tokiwro [sic] and KGC investigations because the only evidence available was data. Tokwiro is a provider of online gaming services and the KGC is a regulatory body for the gaming industry–neither are police forces and do not have the ability to interrogate or interview individuals in the same way as a typical law enforcement agency would.
—UltimateBet COO Paul Leggett (9/15/2009 official UB blog post)
These comments underscore the importance of legal process, both civil and criminal, in regulating honest businesses. Legal process in the criminal context includes the ability to compel witness testimony before grand juries, and to subpoena records. Legal process in a civil lawsuit (e.g., a suit for damages by players who were cheated) can include discovery of company documents and data, as well as depositions of key witnesses associated with the company. Companies based outside the United States and whose legal status in the United States ranges from murky to illegal, have no compelling reason to comply with criminal investigations or civil lawsuits in the United States, and the courts in the United States may be powerless to impose criminal or civil liability on foreign-based companies. Think how differently, and how much more quickly, the UB scandal (and other online poker scandals) would have played out if the FBI's forensic accountants were on the case. Or, if a federal or state prosecutor convened a grand jury to investigate charges of fraud. Or, if a group of cheated players discovered they were cheated and sued for damages, and had their own experts pore through UB's records.
Unfortunately, because UB was regulated by the KGC, and because UB has a murky legal status in the United States, it seems likely Russ Hamilton will simply get away with fraud. Most likely, Hamilton will never face prosecution in any jurisdiction for what by any reasonable measure was criminal conduct. To rub salt in the wound, Hamilton will likely keep all of his ill-gotten gains, being immune from any lawsuit for damages as a practical matter because of jurisdictional issues.
Russ Hamilton is clearly a liar and a cheater, and only avoided becoming a criminal by a fortuitous legal technicality. Hamilton is the poster boy for the need to regulate online poker in the United States. Online poker sites must be required to be legally accountable in the United States if they want to do business in the United States. The easiest way to accomplish legal accountability is a federal law providing comprehensive jurisdictional and regulatory requirements for online poker sites doing business in the United States. Some of the regulatory duties could be passed along to states with a strong regulatory environment in place for gaming; Nevada is a natural and obvious fit. But until some kind of legalization and regulation of online poker occurs, online poker players remain at risk for becoming victims of online poker fraud, with no legal recourse.