Recent news out of St. Louis has restored in me some lingering thoughts and impressions following David Carruthers' guilty plea a few weeks back.

This week the St. Louis Post-Dispatch reported that U.S. Attorney Catherine Hanaway is leaving her post to start a new law firm with former U.S. Attorney General John Ashcroft. The pair of conservative Missouri politicians, according to Hanaway, will focus on "complex litigation."

I doubt anyone reading this needs an explanation of what John Ashcroft is about, but just to put a frame of reference around Hanaway, I had my first significant encounter with her as a witness to a pep rally for U.S. Rep Jim Talent during a close election race. They paraded one ultraconservative after another across the stage until finishing with a speech from Grand Marshal George W Bush, and Hanaway, as emcee of the event, was by far the loudest (literally and figuratively) voice to be heard. I share this as a reminder that the efforts to wipe out Internet gambling in the United States are deeply rooted in staunch conservatism.

My second encounter with Ms. Hanaway was on April 1, 2009 during a press conference to announce Carruthers' guilty plea. I made an effort to ask her difficult questions and she did a remarkable job of avoiding substantial answers.

Anyway, following the day's events I wrote up a little piece, which I opted to withhold when I learned that Sue Schneider was blogging on the same topic. But the Hanaway news this week got me rehashing, and I've dusted it off to share. Here's what I wrote on April 2:

The activities surrounding David Carruthers' guilty plea in the United States' case against key persons involved with the BetonSports operation provided ample food for thought, but what stuck with me the most following the hearing and ensuing press conference was the government's sustained commitment to conveying to the public that this case is about protecting Americans.

According to U.S. Attorney Catherine Hanaway, who is prosecuting the case, thousands of online gamblers were hurt by the deceptive business practices of BetonSports for the better part of a decade. This pool of vulnerable American consumers was stung by an estimated combined $16 million in lost deposits. 

But by Hanaway's own admission, there were no known cases of BetonSports not paying customers prior to the demise of the company, which was indisputably a consequence of the 2006 indictments. And she acknowledged during the press conference that the government successfully put BoS out of business.

So let me be as frank as possible: The government's actions--not the business practices of BetonSports--predicated the loss of the BoS customer deposits.

Now, one can argue that these customers should have known they were in buyer-beware territory and that it is, therefore, not the government's fault they lost their money.
 
That's a reasonable point, one given by Hanaway during the press conference when she stated, "My concern for the consumer is that they understand that they are engaging in illegal activities and that they should not be placing bets with these companies. They have a 100 percent guarantee that they won't lose their money if they don't place the bets."

However, by taking this stance, the government divorces credibility when it tries to tell the public that the campaign against online gambling is about protecting consumers. Statements like the one made in Hanaway's  press release of April 1, 2009 by Toni Weirauch, Special Agent in Charge of IRS-Criminal Investigation - "Gambling is not a victimless crime, especially when the Internet is used with its global reach." - don't seem to resonate well against "tough luck" proclamations like that of Hanaway.

When asked to justify the government's persistent efforts to wipe out online gambling, advocates point out that they are looking out for vulnerable Americans. Hanaway, for example, testified on November 14, 2007 before the U.S. House, "Internet gambling poses unacceptable risk due to the potential for gambling by minors and compulsive gambling."

However, when I suggested during her press conference that wiping out legitimate online gambling sites is more harmful to consumers than allowing them to operate, rather than argue against that point, she reverted to the buyer-beware argument.

It's no secret that the Eastern District needs to sell the "We're looking out for the consumer" message to justify the resources used in this case. Fortunately for the DoJ  (and they are very well aware of this), the average observer doesn't know the intricacies of the case, and the average reporter will take a good sound bite and run with it rather than make an attempt to peel past the outer layers of the onion.

Further, as would any U.S. citizen, I'd like to know how much of taxpayers' money has been spent on squashing the I-gaming industry. If the Eastern District of Missouri has overspent the $50 million bounty collected via its combined settlements with Microsoft, Yahoo, Google, Sporting News, Travel Channel and PayPal, what funds are being tapped to continue the prosecutions? If they haven't spent more than $50 fighting this war, where is the settlement money going? And even if it's a wash, what's the point of this exercise? Why are we spending money on these battles rather than collecting money by taxing online gambling? And finally, now that the government is admitting after decades of out-of-control spending that it is losing the war on drugs, is there anything to be learned?

A final word about the real victims in the BetonSports saga: To date, no restitutions have been paid, and Hanaway says this is because the government couldn't collect anything from Carruthers, who had all his money in BoS stock. 

Hanaway says if they can seize any assets, they will repay those who are owed money by BetonSports. Why not dip into the $50 million bounty? The government claims in the case's most recent indictment that up to $180 million is subject to forfeiture from various entities involved in this case.

True, Carruthers is broke, but how do we know they haven't squeezed any money out of Gary Kaplan? When asked during her press conference whether the government has seized any of Kaplan's assets yet, Hanaway responded,"That's hard to know because you don't know what you don't know."

Yeah, Catherine, we know.

Now that's complex litigation.