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UK Blacklists Kahnawake Over Absolute Poker Scandal

5/7/2008 1:44:28 PM

Graeme Hamilton, National Post

MONTREAL - After establishing itself as a global hub of online gambling, the Mohawk reserve of Kahnawake is reeling from a British government decision to effectively blacklist the territory, and a cheating scandal involving a Mohawk-owned poker site.

The British Department for Culture, Media and Sport announced last week that it has refused Kahnawake|s application to be added to a new "whitelist" of jurisdictions permitted to advertise online gambling in the lucrative U.K. market. Reasons for the refusal were not made public.

"We are keenly disappointed in the U.K.|s decision, which ignores the long-standing alliance between our nations," Kahnawake Grand Chief Michael Delisle said in a statement. He complained that the Kahnawake application was not given "fair and objective consideration."

The British decision came on the heels of a $500,000 fine assessed on Jan. 11 by the Kahnawake Gaming Commission to the popular Web site Absolute Poker, which is owned by former Kahnawake grand chief Joe Norton through his company, Tokwiro Enterprises.

A gaming commission investigation, launched after players on the site complained about irregular betting, found that one or more people associated with Absolute Poker were racking up huge jackpots by using software that revealed the other players| hidden cards. The cheating, which has been estimated to have yielded up to $700,000, went on for six weeks beginning on Aug. 14, 2007, the commission found, and involved seven different user names.

Subsequently, people inside Absolute Poker deleted gambling logs in an effort to cover their tracks, the commission found. The commission did not name the cheaters but said there was no evidence the activity was initiated or sanctioned by the company|s management.

Bobby Mamudi, an industry analyst who is managing editor of the London-based Gaming Intelligence Group, said the $500,000 fine is peanuts for a company that he estimates pulls in between $150,000 and $250,000 a day from online gamblers.

The cheating feeds the worst suspicions of those in the general public who assume online gambling is rigged, Mr. Mamudi said. "Had the same incident taken place in any other industry, and most likely within our industry in properly regulated markets, the culprits would have faced a very public dismissal, swiftly followed by a criminal investigation of their activities," he wrote on his Web site.

Mr. Norton, who was instrumental in bringing the online gaming industry to Kahnawake and who stepped down in 2004 after 24 years as grand chief, declined to be interviewed, but issued a statement saying the problems have been fixed.

"Our customers, I think, recognized that both the affected players and Absolute Poker were victims of this cheating, and as the [Kahnawake Gaming Commission] report said, Absolute Poker, as a company, neither benefited nor was involved in the fraud," Mr. Norton said. "Our customers also recognized that, once Absolute Poker fully understood the extent of the cheating, we moved to reimburse affected players, lock down our security, and co-operated fully with the regulators."

The black eye of the cheating scandal was worsened by the U.K. decision, which gives online gambling companies a major incentive to relocate to jurisdictions with the British stamp of approval. So far, approval has been given to all countries within the European Economic Area, as well as Tasmania, Alderney and the Isle of Man. Antigua, Netherlands Antilles and the Alberta reserve of Alexander have been rejected.

Approval depends on a jurisdiction|s ability to show it has adequate regulations to protect underage and problem gamblers, to keep out crime, to ensure gambling is conducted fairly, and to prevent money laundering.

In an interview, Mr. Delisle blamed theQuebecgovernment for thwarting the Kahnawake application. He said the refusal letter from the U.K. mentioned information provided by the Quebec Justice Department.

Neither Quebec nor Ottawa recognizes Kahnawake|s right to host online gambling operations on computer servers in the reserve, but the governments have been reluctant to force the issue, fearing a confrontation. The Mohawks claim they have a sovereign right to run online casinos.

Chuck Barnett is a member of the board of supervisors of Mohawk Internet Technologies, the band-run company that operates the servers hosting the gambling sites. He said the 65 companies licensed by the Kahnawake Gaming Commission "are obviously concerned" about the U.K. decision. The companies run about 400 different gambling sites, giving Kahnawake the third-greatest number of such sites in the world, just behind Antigua and Costa Rica.

Mr. Delisle said the British decision runs counter to the United Nations Declaration on the Rights of Indigenous Peoples, which says natives cannot be "deprived of their means of subsistence and development." He is hoping to appeal the decision.

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