Chad Elie

The Chad Elie Plea Hearing Transcript, Excerpt #2

chad-elie2We’re back with another Sunday Special, an excerpt from the plea hearing transcript where online-poker payment processor Chad Elie pled guilty in his Black Friday criminal case.  Elie pled guilty to two counts, conspiracy to commit bank fraud and operating a gambling business, and received a six-month sentence and $500,000 fine.

Elie was recently released after serving 85% of his federal six-month sentence, and continues with his own civil malpractice case against prominent gaming attorney A. Jeff Ifrah.  As part of that case, Ifrah introduced (as an appendix to his own motion top dismiss Elie’s suit) the complete transcript of Elie’s Black Friday plea-deal hearing.

While our last post looked at some of the relevant excerpts from the transcript as they pertained to Elie’s claims against Ifrah, this time out we’ll look at another transcript, wherein Elie confirmed some of the details of his ongoing role in the online-poker processing.  As part of the deal, Judge Lewis A. Kaplan asked Elie to confirm his own poker-processing background.  Here’s that excerpt:

The Court: Did you for all or some part of the period from in or about May 2008 to and including April 14, 2011 serve as a payment processor for, at various times, each of the three entities [Full Tilt, PokerStars, Absolute Poker] identified in the original indictment in this case as the poker companies?

The Defendant: Yes, your Honor.

The Court: Did you as charged in the information in 2008 assist Australian processor Intabill in disguising poker payment transactions for the poker companies including by establishing a bank account that you represented would be used to process so-called payday loans but that you in truth and in fact was used to process transactions for PokerStars?

The Defendant: Yes, your Honor.

The Court: Did you in or about the summer of 2009 establish a bank account at Fifth Third Bank that you claimed would be used to process payments for various Internet membership clubs but that in truth and in fact you used to process millions of dollars in payments for the poker companies?

The Defendant: Yes, your Honor.

The Court: Did you beginning in and around the fall of 2009 and continuing into 2011 offer to invest millions of dollars into three failing banks, including SunFirst Bank, all of which have since been ordered closed by bank regulators  in return for processing Internet poker transactions?

The Defendant: Yes, your Honor.

The Court: Did you from in or about May 2008 to and including April 14, 2011, or at least some part of that period, in the Southern District of New York and elsewhere, combine, conspire, confederate, and agree with at least one other person to commit bank fraud, in violation of the laws of the United States?

The Defendant: Yes, your Honor.

The Court: Did you during the same period combine, conspire, confederate, and agree with at least one other person to violate Title 18 Section 1955 of the United States Code?  [This refers to the illegal gambling business count, which appears to have been an inclusion expressly sought by the DOJ prosecutors.]

The Defendant: Yes, your Honor.

The Court: In each case, did you do that willfully and knowingly?

Mr. Berke [Elie’s attorney]: May we have a moment?

The Court: Of course.

(Pause)

The Defendant: Yes, your Honor.

The Court: Was it a part and object of the conspiracy that you and others willfully and knowingly would and did execute a scheme and artifice to defraud to a financial institution, the deposits of which were insured by the Federal Deposit Insurance Corporation?

The Defendant: Yes, your Honor.

The Court: Was it further a part and an object of that conspiracy that you and co-conspirators would obtain money, funds, credits, assets, securities, and other property owned by and under the custody of that financial institution by means of false and fraudulent pretenses, representations and promises, all in violation of U.S.C. Section 1344?

The Defendant: Could I have one second, your Honor?

(Pause)

Mr. Berke: Your Honor, if I could just clarify one instance.  I think the allegations are that based on the misrepresentations, the banks made decisions to process certain transactions that they would not otherwise as opposed to money was actually taken from the bank other than funds that were under their control as part of the processing.

I think Mr. Elie can certainly state that he understood based on various statements, the banks agreed to process transactions that they understood were not, that they would not have otherwise processed if they had understood that it had related to poker.

The Court: Mr. Elie, do you agree with counsel’s statement?

The Defendant: Yes, your Honor.

The Court: Mr. Goldstein, does that do it for the government?

Mr. Goldstein [SDNY DOJ attorney]: Just to proffer that in so doing —

The Court: Before we get to the proffer, is that satisfactory to the government?

Mr. Goldstein: It is, your Honor.

The Court: If you want to make a proffer I will now hear it.

Mr. Goldstein: The proffer is that in so doing, it exposed the bank to financial risk and loss by virtue of processing those transactions.

The Court: Was it a further part and an object of the conspiracy, Mr. Elie, that you and others would and did conduct, finance, manage, supervise, direct, and own all and part of illegal gambling businesses, namely businesses that engaged in and facilitated online poker, in violation of New York Penal Law Sections 225.00 and 225.05 and the laws of other states and which businesses involved five or more persons who conducted, financed, managed, supervised, directed, and owned all and part of such businesses and which businesses have been and have remained in substantially continuous operation for a period in excess of 30 days and had gross revenues in excess of $2,000 in a single day, all in violation of 18 U.S.C. Section 1955?

Mr. Berke: Your Honor, in connection with this separate object of the conspiracy, I think what Mr. Elie can certainly state is that he understood that they were processing transactions for poker companies that had five or more employees, were in continuous operation for more than 30 days, and had gross revenue of more than $2,000 per day.  He certainly knew that poker was gambling.  He certainly knew that the government had taken the position that Internet poker was illegal gambling under the statute.

The Court: Do you adopt your attorney’s statement, Mr. Elie?

The Defendant: Yes, your Honor.

The Court: Is that satisfactory to the government?

Mr. Goldstein: Yes, your Honor.

The Court: Did you, Mr. Elie, in furtherance of the conspiracy and to effect its illegal objects commit at least the following overt act in the Southern District of New York, which includes among other places Manhattan and Bronx; that is, on or about July 27, 2009, you processed an electronic check for Full Tilt Poker from the bank account of a customer in New York, New York, through a payment processing account you had established at Fifth Third Bank?

Did you do that, sir, and for that purpose?

Mr. Berke: Your Honor, again, Mr. Elie can certainly say that he understood that the companies for which he was processing transactions had customers in New York, and while he doesn’t know about this specific transaction, he doesn’t dispute it and agrees that there were customers in New York for whom he processed transactions.

The Court: Do you adopt that statement, Mr. Elie?

The Defendant: Yes, your Honor.

The Court: Mr. Goldstein?

Mr. Goldstein: That’s fine, your Honor.

And that was that; after a few more formalities, the plea was accepted, with the actual sentencing done about a month later.

One other curiosity emerges from a thorough reading of the transcript: It appears that the maximum sentence possible for Elie given the general sentencing guidelines would have been five years and a $500,000 fine.

This means that the $500,000 was likely the maximum that Elie could have been fined, so any millions that he was able to squirrel away — at the same time considering his involvement with SunFirst co-processor Jeremy Johnson, and the hiding of millions by Johnson that Elie also testified about — Elie could still have ended up coming out the other side of his recently completed prison term to a waiting nest egg.

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