Deal With DOJ Means No Charges Against ECH Payment Processor
28 March 2007
March 28, 2007
U.S. prosecutors said on Wednesday they had reached an agreement to not file charges against payment processor Electronic Clearing House Inc. (ECHO.O: Quote, Profile , Research), saying the company is cooperating with the government’s probe into Internet gambling.
The company was involved in the transfer of money on behalf of online payment services known as “e-wallets,” which mostly handled illegal transactions with online gambling Web sites, the U.S. Attorney’s Office in Manhattan said.
The company has been cooperating with prosecutors since January and has agreed to disgorge $2.3 million, representing the net proceeds from the services it provided to e-wallets since 2001, the government said.
ECH shares were off 37 cents, or 3 percent, at $11.86 in midday trading on Nasdaq.
The company could not immediately be reached for comment, but it said on Tuesday that it was a witness in a federal investigation and expected a non-prosecution agreement with the government.
It also said on Tuesday that a deal to be acquired by financial software maker Intuit Inc. (INTU.O: Quote, Profile , Research) had been called off. The companies entered into a merger agreement on Dec. 14.
ECH provided payment processing and collection services to e-wallets from 2001 until the beginning of 2007, prosecutors said.
Last October, it began shutting down processing and collection services for e-wallets and froze about $21 million in funds belonging to such companies, prosecutors said.
A criminal prosecution of the company “would not serve the public interest,” the U.S. Attorney’s Office said.
The legality of Internet gambling in the United States was ambiguous for many years, but it was effectively banned last October when U.S. President George W. Bush signed legislation outlawing online gaming financial transactions.
Earlier this year, federal prosecutors in Manhattan charged Stephen Lawrence and John Lefebvre, founders of NETeller (NLR.L: Quote, Profile , Research), with money laundering in connection with services the British payment processor provided to Internet gambling sites.