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United States of America v. Jay Cohen

Docket No. 00-1574, 260 F.3d 68 (2d Cir., July 31, 2001)

The Second Circuit affirmed the conviction of defendant Jay Cohen of conspiracy to, and substantive violations of, 18 U.S.C. §1084, which, inter alia, prohibits the use of wire communication facilities to transmit wagers in interstate or foreign commerce. The Second Circuit held that defendant violated this statute by using both the Internet and telephones to transmit calls from bettors in New York, where gambling is illegal, to World Sports Exchange in Antigua, where gambling is legal, during which transmissions bets were placed. Defendant was sentenced to a term of 21 months in prison.

Defendant was the President and apparently one of the owners of World Sports Exchange ("WSE"), an organization engaged in offering "bookmaking" services on United States sporting events. WSE was based in Antigua where gambling is legal. However, WSE sought to entice Americans to use its services to place bets. Toward that end, it ran ads for its services in newspapers, and on radio and television, that were circulated and/or appeared in the United States. These ads invited Americans to place wagers with WSE. To place a wager, an individual first had to open an account with WSE, by wiring or transferring at least $300 to Antigua. Once this account was established, the individual, via either an 800-toll free number or the Internet, could inform WSE of the bet he wished to make. WSE would instantly confirm the bet, and the outcome would be credited to or deducted from the bettor's account, as appropriate. WSE usually received a "vig" of 10% of the amount wagered. In one 15 month period, over $5.3 million was wired to WSE, who received at least 60,000 calls from the United States by November 1998, of which at least 6,100 came from New York. FBI agents placed a number of bets over the WSE service from New York.

For his role in these activities, defendant was convicted by the District Court of violating each of the substantive provisions of 18 U.S.C. §1084(a), which, inter alia, prohibits the "use [of] a wire communication facility" to transmit in interstate or foreign commerce (a) bets or wagers, (b) wire communications which entitle the recipient to receive money or credit as a result of a bet or wager or (c) information assisting in the placement of bets or wagers.

Cohen advanced a number of arguments on appeal, each of which was rejected by the Second Circuit, which affirmed his conviction.

Defendant claimed that his conduct did not run afoul of the statute because he fell within the ambit of the safe harbor provision of 18 U.S.C. 1084(b). This section provides, in part, that Section 1084 does not prohibit the transmission of "information assisting in the placing of bets or wagers on a sporting event or contest from a state or foreign country where betting on that sporting event or contest is legal into a state or foreign country in which such betting is legal."

Defendant argued his conduct was protected by 1084(b) because all betting took place in Antigua. All that occurred during the communications between New York and Antigua, according to defendant, was the conveyance of information that assisted in the placement of a bet in Antigua.

The Second Circuit rejected this argument, and held that Section 1084(b) did not provide defendant with a safe harbor both because the information in question was transmitted to and from New York, where gambling is illegal, and because such information constituted the actual bet itself, and not just information that assisted in the placement of a bet. The Court supported its finding by pointing to a communication between an FBI agent and a WSE operator, where the agent asked if he can "place a bet right now," was told that he could, and then proceeded to place a bet which was confirmed by the operator.

The Second Circuit also found that defendant had the requisite mens rea to commit the crime in question. Said the Court "it mattered only that [defendant] Cohen knowingly committed the deeds forbidden by §1084, not that he intended to violate the statute. … This belief regarding the legality of betting in New York are immaterial."

The Court also rejected defendant's claim that the conviction should be overturned by operation of the rule of lenity given the ambiguous nature of §1084. The Second Circuit held the statute clear, and thus that the rule of lenity was inapplicable to the case at bar.

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