| | |  | | | | Online Payment
A federal prosecutor in Missouri claims that PayPal, eBay's online payments subsidiary company, violated the USA Patriot Act by processing Internet gambling transactions.
EBay said it received a letter from the U.S. Attorney for the Eastern District of Missouri indicating its that PayPal violated the act. The U.S. Attorney's Office's opinion subjects PayPal to a potential civil forfeiture of earnings from the transactions as well as potential criminal liability, eBay said. The letter offered a settlement of possible claims if PayPal agreed to turn over its earnings from online gaming sites between Oct. 26, 2001, and July 31, 2002, plus interest. EBay responded that PayPal had acted in ``the good-faith belief'' that it had not violated the act. While not disclosing the settlement amount, the company said it was more than what PayPal earned from online gaming transactions during the period, which occurred prior to eBay buying PayPal.
EBay spokesman said the company's lawyers are reviewing the settlement offer and no decision has been made whether to accept it. EBay purchased PayPal in October 2002 for $1.5 billion and stopped processing online gambling payments in November, citing regulatory uncertainty. For all of 2002, about 6 percent of PayPal's $237 million in revenue came from processing online gaming payments, eBay said. ``This confirms eBay's decision to discontinue PayPal's online gaming activities, Bottom line, this is non-material to eBay's business and will not impact cash flow or earnings.
The Patriot Act increased prison terms and fines for certain financial crimes, expanded U.S. criminal law to include offenses such as cash smuggling and operating illegal money-transmitting businesses, and called for impound of assets. Responding to a federal subpoena, PayPal in July provided documents and information related to its services for online gambling merchants at the request of the U.S. Attorney for the Eastern District of Missouri. The U.S. attorney was appointed to that post in 2001 by Attorney General John Ashcroft, a critic of online gambling, and was previously a corporate fraud specialist in private practice.
Several major credit-card companies in recent years also stopped processing online betting payments. Gambling online is banned in the United States but 5 million Americans wager through off-shore entities. Online gambling is also under fire in Congress, where both the Houses are considering legislation to close loopholes in the law, including barring credit-card issuers, banks and other financial institutions from accepting payments. Since PayPal has exited the business, other payment mechanisms have cropped up, including credit and debit cards offered by foreign processors. |
| | |
|
