Money laundering alleged

Federal prosecutors say seven Las Vegas residents used Draper as the staging grounds for an elaborate money-laundering service for illegal Internet gambling sites, which at one point was processing more than $100 million in transactions.

During an evidentiary hearing in federal court on Monday, federal prosecutors gave a glimpse of an automated laundering system that ran parts of its operation in Draper, London, Korea and Antigua. They say the system would allow online gambling sites to process credit card transactions without reporting to credit card companies and banks that the transaction was for gambling purposes.

Federal agents say U.S.-based gambling patrons would place bets on illegal gambling Web sites that offered gambling games and sporting-event betting. The bets were then forwarded to servers managed by Baron Lombardo, Count Lombardo and Richard Cason-Selman. Gateway Technologies and Hill Financial Services Inc. out of Draper would then process credit card transactions, reporting the transactions as something other than bets. The laundered funds would then be sent back to Web sites.

"This process was entirely automated," said assistant U.S. attorney Loren Washburn, who said the system was run on custom software and complex accounting software.

The operation catered to more than 40 gambling sites and also did transactions for an online pharmacy, which sold prescription drugs, as well as several adult sites.

IRS agent Jamie Hipwell testified that the investigation uncovered several e-mails in which group members wanted to find a bank that would be willing not to process its transactions with the betting transactions code. Hipwell said the group settled with a Korean bank, which later was fined by Mastercard and Visa for violating transaction policies.

The e-mails also showed group members wondering if they should move their operation overseas to London.

Washburn said in addition to the credit card operation, the group also ran a second, more manual system in which gambling wins from Web sites were wired via Western Union to a contact in the Philippines.

The group was charged in May of last year with counts involving racketeering, bank fraud, wire fraud and money laundering.

Defense attorneys contend that some of the seven had nothing to do with the credit card side of the operation but rather were focused on the Western Union operation. They are seeking to have charges dropped against their clients.

Attorneys for the group also say much of the government's witness testimony comes from former employees from the Draper offices who were disgruntled and went to authorities.

U.S. District Judge Ted Stewart will weigh the government's evidence to determine if it is enough to support taking the defendants to trial.

A trial has been scheduled to begin May 10, 2009.

---

E-mail: gfattah@desnews.com