When facing federal charges related to illegal gambling, it's crucial to understand that the underlying offense is just the tip of the legal iceberg, with potential legal jeopardy extending far beyond.
Depending on the circumstances behind the alleged offense, prosecutors frequently charge additional offenses in conjunction with gambling crimes, significantly increasing the complexity of the case and the severity of potential penalties, which can be severe and life-altering.
These related charges often target the financial activities that support the alleged gambling operation, such as handling proceeds, tax-related matters, or whether the illegal activity was part of a larger organized criminal operation.
Section 18 U.S.C. 1955 forbids running illegal gambling businesses as part of racketeering activity. Those who operate, finance, manage, direct, own, or oversee such enterprises can be sentenced to up to five years in prison and face fines.
Federal law prohibits illegal gambling businesses, but their legality varies based on local or state laws where they operate. To violate federal law, at least five individuals must be involved, and the business must either operate for more than 30 consecutive days or make over $2,000 in a single day.
The law also defines "gambling" to include activities like pool-selling, bookmaking, slot machines, dice games, lotteries, bolita or numbers games, and selling chances. It is also a federal offense for any U.S. citizen or resident to own, run, or carry out gambling operations on a "gambling ship."
Let's look at some of the more common additional crimes that could be charged to increase or enhance your potential penalties.
Money Laundering (18 U.S.C. § 1956)
Under 18 U.S.C. § 1956, money laundering is a federal crime to conduct a financial transaction involving the proceeds of "specified unlawful activity" (which includes illegal gambling), typically to make the money appear to have come from legitimate sources.
The government must prove that you knew the money came from an illegal source and that the transaction was intended to either promote the unlawful activity or conceal the money's origin, ownership, or control.
This statute is incredibly broad, encompassing a wide range of financial transactions. Prosecutors may argue that any attempt to make illegally obtained gambling proceeds appear legitimate constitutes money laundering.
A conviction under this statute carries severe penalties, including up to 20 years in federal prison and substantial fines, often up to $500,000 or twice the value of the property involved in the transaction, whichever is greater.
Tax Evasion (26 U.S.C. § 7201)
The Internal Revenue Service (IRS) is often involved in investigations of illegal gambling operations. Income from all sources, legal or illegal, is taxable under federal law.
Tax evasion, as defined by 26 U.S.C. § 7201, is the willful attempt to evade or defeat any tax imposed by the Internal Revenue Code.
In the context of an illegal gambling enterprise, this can involve failing to report income generated from the operation, hiding assets, or using shell companies to obscure earnings.
To secure a conviction, prosecutors must demonstrate a willful act to evade taxes and the existence of a tax deficiency. A conviction for tax evasion is a felony and can result in up to five years in prison, fines up to $100,000 for an individual ($500,000 for a corporation), and the costs of prosecution.
These penalties are in addition to any sentence for the underlying gambling offense.
Conspiracy to Defraud the United States (18 U.S.C. § 371)
Conspiracy is a common charge in federal cases involving multiple individuals.
Under 18 U.S.C. § 371, it is illegal for two or more people to conspire to commit any offense against the United States or to defraud the United States or any of its agencies. In gambling cases, this often involves conspiring to impede the IRS's lawful functions by concealing taxable income.
To prove conspiracy, the government must show that an agreement existed between at least two people to break the law, that you knowingly and willfully joined that agreement, and that at least one member of the conspiracy committed an "overt act" to further the goal.
This overt act need not be a crime in itself; it can be any action, however minor, that advances the conspiracy. A conviction for conspiracy to defraud the United States carries a penalty of up to five years in prison and significant fines.
RICO Act (18 U.S.C. §§ 1961-1968)
The RICO Act (Racketeer Influenced and Corrupt Organizations) is a powerful tool federal prosecutors use to target criminal enterprises.
To bring a RICO charge, the government must prove the existence of an "enterprise" that engaged in a "pattern of racketeering activity." Illegal gambling is specifically listed as a predicate act that can form the basis of a RICO charge.
A "pattern" requires at least two predicate acts within ten years. If a gambling operation is found to be a criminal enterprise under RICO, individuals involved can face enhanced penalties for their participation.
RICO convictions can lead to prison sentences of up to 20 years (or life, if the underlying crime allows for it), forfeiture of all assets derived from the criminal enterprise, and substantial fines.
Wire and Mail Fraud
These charges concern the use of wire communications-including the internet the U.S. Postal Service to support a gambling scheme that defrauds victims. Recent indictments of NBA players and coaches included charges of wire fraud conspiracy for exploiting insider information.
The Travel Act
This law bans using interstate commerce facilities-like travel or shipping commit illegal acts, including gambling. Typically, the maximum sentence is 5 years, but it can be increased to 20 years if aggravating factors are present, such as links to violent crimes.
Unlawful Internet Gambling Enforcement Act (UIGEA)
This law prohibits gambling businesses from knowingly accepting payments related to illegal online gambling. It carries a penalty of up to five years in prison and can also result in a lifetime ban from legal gambling activities.
Enhancements under Federal Law
- Enhanced penalties for violence: Similar to the Travel Act, offenses linked to illegal gambling that involve violence, extortion, or other illegal acts now carry harsher penalties. For instance, indictments for rigged poker games included charges of extortion and robbery.
- Sentencing guidelines: Sentencing at the federal level considers the severity and scope of the crime, the amount of money involved, and the defendant's role. These rules may lead to longer prison sentences for those participating in large-scale, organized gambling operations.
For more information, contact our federal criminal defense lawyers, Eisner Gorin LLP in Los Angeles, CA.
