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Howard Lederer Files Motion to Dismiss $42.5 Million Civil Complaint

Howard Lederer

On Thursday, Nov. 15, attorneys for Howard Lederer filed both a Notice of Motion and a Motion to Dismiss the Verified Second Amended Complaint (SAC) with the United States District Court of Southern New York.

According to the three-page Notice of Motion to Dismiss, which was filed by Elliot R. Peters and Cody S. Harris of Keker & Van Nest LLP in San Francisco: “Defendant and Claimant Howard Lederer hereby moves the Court to dismiss the $42.5 million in personam claim against Lederer for money laundering, along with the First and Second Claims for Relief in rem.”

The U.S. Department of Justice filed the Second Amended Civil Complaint involving the online poker Black Friday indictments in September introducing new forfeiture charges against Lederer and Ray Bitar, including houses and automobiles purchased with “illegal proceeds.”

In addition to giving a detailed account of Lederer’s expenditures from the end of 2006 until September 2011, the Second Amended Complaint added the Travel Act 18 U.S.C. § 1952 as a federal criminal statute in support of their forfeiture request, as well as adding eight more “Claims for Relief,” bringing the total to 12: Illegal Gambling, Travel Act Offenses, Bank and Wire Fraud, Wire Fraud, Promotion Money Laundering and Conspiracy, Concealment Money Laundering and Conspiracy, International Money Laundering and Conspiracy, Bulk Money Laundering and Conspiracy, Promotion Money Laundering and Conspiracy Relating to Full Tilt Fraud Against Players, Concealment Money Laundering and Conspiracy Relating to Full Tilt Fraud Against Players, International Money Laundering and Conspiracy Relating to Full Tilt Fraud Against Players, Bulk Money Laundering, and Conspiracy Relating to Full Tilt Fraud Against Players.

The recent 33-page Motion to Dismiss wasted little time in attacking the SAC’s legitimacy. “The SAC is so structurally complex that it takes a cartographer to understand what is being alleged and against whom,” said the Motion in the second paragraph. “As to Lederer, the allegations of scheming to defraud customers, the centerpiece of the [First Amended Complaint], are gone. The centerpiece of this complaint as it pertains to Lederer is the allegation that FTP—an online poker site operating abroad—was an illegal gambling business under the Illegal Gambling Business Act, ("IGBA"), 18 U.S.C. § 1955, rendering illegal any proceeds Lederer derived from it. Never mind that one month before the government filed the SAC, the Honorable Jack B. Weinstein, United States District Judge for the Eastern District of New York held in an exhaustive, 120-page opinion, that poker does not constitute ‘illegal gambling’ under the IGBA.”

It then went on to add: “Because the government has disclaimed any attempt to state a fraud claim against Lederer—either based on alleged bank fraud or a fraud against FTP's own customers — the in personam money laundering claim must be dismissed in its entirety, along with the First and Second in rem claims against Lederer's property.”

The Motion to Dismiss then reiterated the case’s background and legal standard before launching into a well-crafted argument section, which is where it was suggested that “the government’s IGBA claim fails to allege facts supporting an IGBA violation, and is based on an impermissible extraterritorial application of the law.” The Motion to Dismiss then argues that the IGBA claim fails for three reasons:

  • Poker is not gambling as defined by the IGBA per Judge Weinstein’s opinion.
  • ”The complaint fails to allege sufficient facts supporting a violation of state law, “an essential and substantive element “ of an IGBA charge.
  • ”Under the Supreme Court's decision in Morrison v. National Australia Bank Ltd, 130 S. Ct. 2869 (2010), IGBA does not apply extraterritorially to a business operated abroad whose only contact with the United States is that some of its poker players are based here.

From there, the Motion to Dismiss asserts that the Travel Act claim must also be dismissed. “The government cannot base its forfeiture or money laundering claims on the Travel Act because 18 U.S.C. § 1961(1)(A) requires that any predicate gambling offenses be punishable by more than a year in prison,” the Motion states. “The government's gambit is straightforward enough: knowing it cannot state a claim based on the specific gambling provision in section 1961(1)(A), it has resorted to the Travel Act, a racketeering statute whose own predicate gambling offenses arguably lack the one-year prison term requirement found in the very statute on which its forfeiture and money laundering claims are based.

The other Full Tilt Poker defendants in the case — Bitar, Chris Ferguson, and Rafe Furst — have yet to respond to the Second Amended Complaint. The DOJ seeks forfeitures from them for $42 million, $40.8 million, and $11.7 million respectively. Lederer’s Motion to Dismiss will be heard by the Honorable Leonard B. Sand at a time and date to be determined.

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  • yoloanrabbi yoloanrabbi

    Excellent work, well researched and well done. Speaking of Keker, Aaron Swartz, who faces up to 35 years in prison, also recently hired Keker & Van Nest to represent him, according to court documents filed with the United States District Court of Massachusetts.

    Attorney Matthias Kammber of Keker & Van Nest informed the court that Swartz's local attorney, Martin Weinberg, "will be withdrawing as counsel" and will be replaced by Cody Harris, Daniel Purcell, and top gun Elliot Peters, all of Keker & Van Nest.

    Swartz, 25, is a fellow at Harvard University's Safra Centre for Ethics and is charged with wire fraud, computer fraud, unlawfully obtaining information from a protected computer, and recklessly damaging a protected computer. If convicted on these charges, Swartz faces up to 35 years in prison, to be followed by three years of supervised release, restitution, forfeiture and a fine of up to $1 million, according to a press release issued by United States Attorney Carmen Ortiz.

    In various declarations submitted to the court, Assistant U.S. Attorneys Stephen Heymann and Scott Garland alleged that Swartz — who is not a student, faculty member, or employee of MIT — gained physical access to MIT’s computer network through a laptop computer he installed in a restricted wiring closet in the basement of a research building, and that he intentionally masked his face with a bicycle helmet to avoid identification on a video camera as he entered the closet to remove the laptop; they also alleged that Swartz used fictitious names and manipulated computer identification information to get and maintain access to MIT’s computer network, and that he took repeated and affirmative steps to evade efforts by both MIT and JSTOR to lock him out of their computer networks.

    In somewhat related news, Swartz and Larry Lessig, also of Harvard University's Safra Centre for Ethics, are presently also being scrutinized as part of an ongoing non-criminal inquiry conducted by the author stemming from myriad suspicious financial transactions in connection with circumstances surrounding Chris Young (presently an attorney with Keker & Van Nest), defunct non-profit entity CaliforniaALL, Mitchell and Freada Kapor (a director of CaliforniaALL) of The Kapor Center, Bettina Neuefeind (wife of Larry Lessig), and two non-profit entities bearing the same name of "Democracy Fund,Inc." — EIN 27-2439840 and EIN 26-3088283 — with connections to Lessig and Swartz.

    Although other potential explanations certainly exist, as matters presently stand, it appears that in 2007-2008, Democratic party agents may have participated in what appears to be unexplained financial machinations relating to the California Bar Foundation and newly created non-profit entity CaliforniaALL with respect to funds originating from major utility companies and the California Bar Foundation, in order to promote the election of Barack Obama in general, and on behalf of those seeking to promote green energy in particular.


    MORRISON & FOERSTER attorneys James Brosnahan (self-proclaimed "mastermind" behind the Democratic Party), Tony West (Barack Obama’s Chair of the California Finance Committee), Chris Young ("Obama for America" Northern California Deputy Finance Director), Annette Carnegie (2007-2008 director with the California Bar Foundation); Kamala Harris (co-chair, Obama for America and member of CaliforniaALL);

    MUNGER TOLLES & OLSON attorneys Jeffrey Bleich (president of the State Bar of California, director of the California Bar Foundation, founding member and Chair of OBAMA FOR AMERICA’s National Finance Committee who pushed for the creation of CaliforniaALL, as well as for the appointment of director Freada Klein Kapor), Brad Phillips (2007- 2008 Director of the California Bar Foundation which served as a "financial sponsor" to CaliforniaALL on behalf of Verizon Wireless and Southern California Edison, both clients of Munger Tolles & Olson) (examination of the IRS 990 Verizon Wireless submitted to the IRS shows absolutely no payments to either CaliforniaALL or the California Bar Foundation);

    WILSON SONSINI attorneys Mark Parnes (2007-2008 director and Secretary of the California Bar Foundation), John Roos (former CEO of Wilson Sonsini in Palo Alto; a personal friend of both President Obama and Jeffrey Bleich, currently serving as the U.S. Ambassador to Japan; similar to Ambassador Bleich, Ambassador Roos acted as a "bundler" and raised over $500,000 for Barack Obama’s 2008 presidential campaign);

    DLA PIPER attorney Steven Churchwell in Sacramento (Treasurer, draft committee of OBAMA FOR AMERICA); firm where CaliforniaALL resided free of charge;

    KAMALA HARRIS (co-chair, OBAMA FOR AMERICA ; member of CaliforniaALL); Harris is the sister of Maya Harris, who is married to Tony West, the chair of Barack Obama’s California Finance Committee who now serves as third in command within the United States Department of Justice below Eric Holder and Lanny Breuer;

    CaliforniaALL Director OPHELIA BASGAL of the Department of Housing and Urban Development ("HUD"Wink: In around 2007-2008, Ms. Basgal was Vice President of Civic Partnership and Community Initiatives at PG&E, where she managed the company’s $18 million charitable contribution program, and oversaw its community engagement programs and partnerships with community-based organizations. Separately, around that time she also served as treasurer of the "California Supreme Court Historical Society." In that role, she presumably had contact with many judges, including those who were handling matters dealing with PG&E, such as Justice (Ret.) Joseph Grodin who acted as the mediator in a case Attorney General Bill Lockyer advanced against PG&E, which Jerry Brown (cousin of Geoffrey Brown) later dismissed in his capacity as the new Attorney General for California;

    LARRY LESSIG, FREADA KLEIN KAPOR, MITCHELL KAPOR, BETTINA NEUEFEIND, AARON SWARTZ: Around 2007-2008, Jeffrey Bleich caused the appointment of Freada Klein Kapor as Director of then newly-established CaliforniaALL. In a press release, the public was misled to believe that Freada Kapor is a diversity expert who operates an entity known as the Level Playing Field Institute. There was no mention that Freada Kapor is the owner of The Kapor Center, located at 543 Howard St., 5th. Floor, in San Francisco, which was used as telephone bank by volunteers of OBAMA FOR AMERICA, and received frequent visits from Bettina Neuefeind — wife of Larry Lessig — who served as the Office Manager of OBAMA FOR AMERICA in San Francisco.

    Similarly, there was no mention, that tech-guru Mitchell Kapor — founder of Lotus 1-2-3 and the spouse of Freada Kapor, is part of OBAMA FOR AMERICA's technical team.

    Also located at The Kapor Center at 543 Howard St., 5th. Floor, in San Francisco were two newly created non-profit entities launched by Larry Lessig, Aaron Swartz, Joe Trippi, and Monica Walsh (a friend of Bettina) known as "Change Congress" and "Change V2 Foundation."

    Following the 2008 election of President Obama, Larry Lessig and his wife departed California. In 2010, Larry Lessig, Monica Walsh, and others launched a whole new Section 501(C) non-profit entity known as "Democracy Fund, Inc.", EIN 27-2439840. On June 6, 2011, Larry Lessig, Monica Walsh, and others caused Change V2 Foundation (which was launched in 2008) to also operate under the name "Democracy Fund, Inc." (EIN 26-3088283).

    The case against Aaron Swartz is being prosecuted by Assistant U.S. Attorneys Stephen P. Heymann and Scott L. Garland of Ortiz’s Cybercrime Unit. UNITED STATES OF AMERICA v. AARON SWARTZ Criminal No. 11-10260-NMG . Contact the author

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