Crackdown on Kahnawá:ke by Michael D. Lipton, Q.C. and Kevin J. Weber Introduction The Mohawk Council claims jurisdiction as a "sovereign nation" to issue gaming licenses for lottery schemes, notwithstanding the gaming and betting offences found in Part VII of the Criminal Code (the "Code"). In addition, the Mohawk Council alleges that the Kahnawá:ke have an "inherent aboriginal right" to conduct and regulate commercial gaming, protected by section 35 of the Constitution Act, 1982 (the "Section 35 claim"). They insist that the Section 35 claim renders the plain wording of the Code, which states that only a provincial government can lawfully conduct and manage gaming and betting that is "operated on or through a computer or video device," inapplicable to the Kahnawá:ke. To defend against any criminal charges that might be brought in relation to I-Gaming conducted at Kahnawá:ke, the Mohawk Council would have to present very specific evidence to support their Section 35 claim. A successful Section 35 claim would set a precedent affecting the provinces' monopoly on the regulation of gaming and betting. The federal and provincial governments do not know the nature and extent of the evidence possessed by the Mohawk Council, and therefore commencing prosecutions would expose those governments to an unquantifiable legal risk. The Quebec and federal governments and the provincial police have investigated the activities at Kahnawá:ke. In 2001, the Quebec Minister of Public Security stated publicly that online gaming activity operating from Kahnawá:ke is unlawful.1 However, no police action has ever been taken, possibly due to residual tensions dating from the summer of 1990, when a police raid at a Kahnawá:ke barricade led to a stand-off between the Kahnawá:ke people and the Canadian military. Within the last year, the unmistakable signs of an impending crackdown against I-Gaming at Kahnawá:ke have emerged. For many years, government sources seemed to make a conscious effort not to discuss what was occurring at Kahnawá:ke. Recently, that taboo has been broken on repeated occasions. However, if an active "crackdown" occurs, it will likely be done in a manner that does not directly engage either the Section 35 claim or other sovereignty-based claims. We anticipate that instead, there may be an increased effort at bringing pressures to bear on non-Kahnawá:ke actors who do business that supports the I-Gaming activities at Kahnawá:ke.
I-Gaming Prohibitions Being Introduced by Stealth? - Bill C-13
When clause 5 of the Bill was discussed before the House of Commons Justice Committee on May 2, 2007, Carole Freeman, the MP for the area that includes the Mohawk Territory of Kahnawá:ke, asked whether the Bill "addresses the issue of virtual casinos." Ms. Freeman specifically referenced the I-Gaming activities at Kahnawá:ke, making it clear that she disapproved of those activities. Senior counsel for the Department of Justice indicated that the Bill did not directly address the I-Gaming situation at Kahnawá:ke. She went on to state, however, that "[t]he other controversy you raised is a significant one, and we are working on it at the department." It is not clear whether this referred to the specific situation in Kahnawá:ke, or more general issues involving "virtual casinos," when she spoke of that "other controversy"; Madame Freeman's question referred to both. Speaking later on that day before that same committee, the Honourable Rob Nicholson, the Minister of Justice, replied specifically to Madame Freeman's question by stating: "...it's not meant to introduce either controversial or large substantial changes to the Criminal Code, because that would be more appropriate, in my opinion, for a stand-alone bill. This bill strictly deals with technical amendments." The Minister's statement is revealing. It carries with it the clear implication that the Minister had clearly already considered more wide-ranging changes to prohibit I-Gaming, having determined that it would be appropriate to make such changes by way of "a stand-alone bill." That he made this statement in reply to a question that focused on the I-Gaming activities at Kahnawá:ke is equally noteworthy.
The Spectre of a Canadian UIGEA
Mr. Cullen indicated that he was considering introducing a private member's bill which had already been drafted, calling for the enactment of prohibitions similar to those enacted in the United States under the Unlawful Internet Gambling Enforcement Act of 2006 ("UIGEA"). He was quite explicit in stating that his speech was advocating specifically on behalf of Woodbine. Mr. Cullen also spoke about the U.K. model for regulating I-Gaming, and while he did not reject that approach, he certainly did not indicate that he had at his disposal a draft bill to introduce that would mimic the U.K. approach. Mr. Cullen's emphasis leads us to conclude that Woodbine is more interested in pursuing the prohibitionist approach of the U.S. than the regulatory approach of the U.K. On February 14, 2008, Mr. Cullen returned to the issue of I-Gaming in the House during Question Period. He asked a question of the Minister of Justice, and both the question and the answer bore all the hallmarks of a "planted" question; that is, one where the questioner and the responder have discussed the question in advance, and each knows what the other is going to say: "Hon. Roy Cullen (Etobicoke North, Lib.): Mr. Speaker, every day Canadians are being victimized by illegal Internet gambling operations. While it is a crime to operate Internet gambling websites in Canada, this has not stopped many offshore companies from soliciting bets from Canadians. Legitimate gaming industries in Canada, like Woodbine in Etobicoke North, are being negatively impacted by these illegal websites. It is costing them millions of dollars in lost revenues and putting Canadians out of work." "When is the government going to act? What steps is the government going to take to address this problem? Or does it not care?" "Hon. Rob Nicholson (Minister of Justice and Attorney General of Canada, CPC): Mr. Speaker, to the contrary. We want to do everything we can to assist legitimate gaming enterprises." "That being said, the hon. member quite correctly points out that Internet gambling is illegal, with three exceptions. That being said, I have asked department officials to look into ways in which we might assist with the enforcement of the Criminal Code. I would be glad to get back to the hon. member. I will report back to him as soon as I see him again in the gym." Nothing Mr. Cullen said referred explicitly to the Kahnawá:ke, nor did the reply of the Minister of Justice. However, just a few weeks later, on March 3, 2008, when the Minister of Justice released a statement which clearly indicated that the government was looking at measures to prevent Canadians from having access to offshore I-Gaming services, it was indicated that the Kahnawá:ke situation was a primary consideration of the government. Further, it indicated that the possible enactment of a "Canadian UIGEA" of the kind suggested by Mr. Cullen was being considered: "'Following recent concerns surrounding Internet gambling in Canada, the Minister of Justice [Rob Nicholson] has asked his officials to examine whether the enforcement of the Criminal Code provisions could be assisted with other measures,' said Genevieve Breton, Mr. Nicholson's director of communications. "The 'other measures' are understood to be moves to restrict banks and credit card companies from conducting financial transactions with illegal Internet operators. Similar legislation was enacted in the United States two years ago."2 However, "other measures" could also include prosecutions under the Code for entities that operate in Canada, outside the Mohawk Territory of Kahnawá:ke, and which provide assistance to those I-Gaming activities. In addition, it is our understanding that tax authorities are considering joining in the effort by identifying those entities and prosecuting them if Canadian taxes were not paid on all monies received in relation to I-Gaming activities conducted at Kahnawá:ke.
Absolute Poker Scandal
This scandal earned a great deal of publicity, first being brought to the public eye in the New York Times' "Freakonomics" blog in October 2007, and moving from there to coverage by ABC News, MSNBC and other major media outlets. A simulation replaying the gameplay to highlight the cheating was posted on YouTube, where it was viewed by hundreds of thousands. Particularly damaging to the reputation of Kahnawá:ke was the fact that Absolute Poker is or was at one time controlled by Joe Norton, a former Kahnawá:ke grand chief. On January 11, 2008, the KGC issued a disciplinary decision in the Absolute Poker matter, arising from an independent audit carried out by Gaming Associates at its behest beginning on October 17, 2007. The decision did not identify the persons who had committed the cheating, but tacitly acknowledged that these persons had some internal position with Absolute Poker: "The Commission has identified the person(s) responsible for the impugned activities and has directed that AP take action to have these person(s) removed from playing any role in AP 'mind and management' and/or operations and to provide proof...that this has been done." At the same time, the KGC held that there was no evidence Absolute Poker had sanctioned these actions or were intended to benefit Absolute Poker. In the final decision, the KGC ordered that certain conditions be added to the permit authorizing Absolute Poker to operate from the Mohawk Territory of Kahnawá:ke, requiring that Absolute Poker pay a fine of US$500,000 along with the costs of the audit and investigation, and requiring Absolute Poker to post a security deposit for two years to be set off against any future breaches.
White List Rejection
The DCMS maintains a list of jurisdictions that license I-Gaming operators; inclusion on the list allows licensees based in those jurisdictions to advertise freely in the UK. The DCMS added Tasmania to the white list on January 11, 2008, and it rejected the applications of Kahnawá:ke and Antigua on the same day. The DCMS did not publicly release detailed reasons for rejecting the application, stating only that Kahnawá:ke "did not meet its criteria" under the relevant UK legislation, with a spokesperson saying that the decision was based on "legal considerations." The Absolute Poker scandal was identified by some as a sticking point counting against the Kahnawá:ke application.3 The Kahnawá:ke took the position that their application was not afforded fair and objective consideration, later indicating that the decision of the DCMS made reference to a letter received from the Quebec Justice Department. The Kahnawá:ke clearly believe that the provincial government stymied their application.
Cyber World Group Prosecution
The charges referred to "virtual casinos and computers" kept and operated in Kahnawá:ke, but the police did not collect evidence by raiding the Kahnawá:ke reserve. Rather, the evidence in question was obtained from a raid at the offices of Cyber World in Montreal, nowhere near the Mohawk Territory of Kahnawá:ke. No charges were laid against any person or entity residing on the Kahnawá:ke reserve. Chuck Barnett, a member of the Board of Supervisors for MIT, states that no Mohawk person or entity "was even remotely contacted" by the police during the months following the raid, adding: "As somebody who lives, breathes, eats and sleeps every day of my like in Kahnawá:ke Mohawk Territory, I can easily say there have been no policing actions from external police forces here relative to this or any other I-gaming related issue." The prosecution and conviction of Cyber World was carefully framed in such a way as to refrain from openly challenging the Section 35 claim. Cyber World operated from Canadian offices outside Kahnawá:ke, and the permit granted by the KGC was granted to Golden Palace Ltd., not Cyber World. Accordingly, the jurisdiction of the KGC to grant such a permit was not directly challenged. Had the authorities wished to challenge the jurisdiction of the KGC or the Mohawk Council of Kahnawá:ke to regulate the activities of GoldenPalace.com, it would have been a simple matter to charge the KGC and/or the Mohawk Council of Kahnawá:ke with aiding and abetting Cyber World, or other charges under the Code relating to engaging in unauthorized activities in relation to the conduct, management or operation of a lottery scheme. In any event, since Cyber World entered a guilty plea, there was no judicial reasoning in the case relating to the Section 35 claim. The Quebec government and police have followed a "hands-off" policy with regard to gaming activities taking place on the Kahnawá:ke, and it is arguable that none of the actions taken to date represent a change to this policy. Quebec is indicating, however, that it has no compunction about prosecuting activities in support of I-Gaming regulated by the KGC, where those support activities take place in Quebec and outside Kahnawá:ke. The actions taken against Cyber World should be compared with more recent police raids relating to narcotics. On March 26, 2008, the Quebec provincial police (in conjunction with the RCMP and U.S. Drug Enforcement Agency) conducted drug raids on the Mohawk Territories of Kahnawá:ke, Kanesatake and Akwesasne, doing so with the consent and assistance of Mohawk law enforcement authorities. The different procedures followed in those raids demonstrate that the policy of the Quebec government and police remains that they will only take part in law enforcement activity on the Mohawk Territory of Kahnawá:ke when they have the support and assistance of Mohawk authorities.
Conclusion
This must be seen in the context of the pressures being exerted on the Kahnawá:ke at the same time. Law enforcement actions that nibble at the edges of their jurisdiction; behind-the-scenes provincial government actions directed at frustrating the efforts of the Kahnawá:ke to receive international recognition for their I-Gaming regulatory regime; and by indications that the "Canadian UIGEA" threat appears to be directed in large part at the Kahnawá:ke. Particularly vulnerable to this "crackdown" are entities operating within Canada but outside Kahnawá:ke, and which are currently providing goods or services to the Kahnawá:ke in support of the I-Gaming conducted there, or which have provided such goods or services in the past. Criminal charges, tax audits, and a variety of other pressures may be brought to bear against these entities. Banks and other payment providers should keep their eyes on the horizon for any proposals for a Canadian version of UIGEA. Such legislation could well require financial institutions to place all online financial transactions emanating from the Mohawk Territory of Kahnawá:ke on a "high-risk" list. |