BUSINESS WEEK
High Stakes For Casino City CEO Michael Corfman is suing the Justice Dept. over online gambling ads
Ever since he was a teenager in Washington State, Michael A. Corfman
has had a penchant for questioning authority. At his Catholic high
school in the late 1960s, Corfman worked on an underground newspaper
that he and his friends decided to call The New Protestant. The paper
ran several controversial stories, including one advocating a woman`s
right to an abortion. Another attacked plastics as an environmental
hazard, distressing administrators since one of the school`s top donors
was a plastics company exec. "Mike is not afraid to say what he thinks
is right," says Michael Schmitt, a friend who worked with Corfman on
The New Protestant.
Now, Corfman is challenging the ultimate authority: the U.S.
government. His online gambling portal, Casino City Inc., is suing the
Justice Dept. in a high-stakes lawsuit that puts Corfman in the middle
of a battle over the future of online gambling. Corfman is fighting for
the right to run advertising from online gambling operations on
Casinocity.com. U.S. prosecutors have claimed that online gambling is
illegal, and the Justice Dept. has sent letters to Web sites and
broadcasters that accept such ads, informing them they "may be aiding
and abetting these illegal activities." Many companies, including Web
giants Google (GOOG ) and Yahoo! (YHOO ), as well as radio station
owner Infinity Broadcasting, have stopped taking the advertising.
Not Corfman. He didn`t even wait to get one of the Justice Dept.`s
threatening letters. Instead, he went on the offensive, hiring Barry
Richard, one of the lawyers who represented George W. Bush in the
litigation in Florida after the 2000 Presidential election. Casino
City, a Baton Rouge (La.) company that provides news and information
about the gambling industry, depends entirely on online casino
advertising for its sales. Corfman`s argument? That the government`s
campaign is a violation of the First Amendment`s free speech
protections. The First Amendment offers some protection to commercial
speech, unless it concerns illegal activities. Corfman, and some
independent attorneys, contend that only sports betting on the Net has
been clearly declared illegal in the U.S. -- and that other wagers, on
blackjack or bingo, are still permitted. "It is inappropriate for the
government to use threats as a way to curtail free speech," says
Corfman.
The nature of the Internet creates an additional layer of legal
complexity. Because the Net is global, the ads on Casino City may be
viewed by anyone, including people in countries where online gambling
is legal. What right does the U.S. government have to stop Corfman from
showing a Costa Rican casino`s ad to a British gambler? Online gambling
is permitted in many countries, including Australia, Britain, and
Germany.
What`s more, shutting down Casino City may simply drive its business
overseas. If the U.S. government prevails in its battle with Corfman,
hundreds of Web sites outside the U.S. will line up to take advertising
from the casinos that use his company. And those sites will be just as
accessible to U.S. gamblers as Casino City. "The Justice Dept.`s
position is not good law and not good policy," says attorney Richard. A
U.S. District Court in Louisiana is expected to rule on the federal
government`s motion to dismiss the case within the next few months.
Corfman isn`t taking on Justice single-handed. The 51-year-old, who
worked as a software engineer at Digital Equipment Corp. and other tech
companies before founding his gambling portal 10 years ago, has
solicited donations from online gambling companies and trade
associations to help pay for the lawsuit. One of Corfman`s financial
supporters is Britain`s Sportingbet PLC, BusinessWeek has learned.
Sportingbet Chief Exec Nigel Payne confirms that his company has helped
fund the case, but he says it has done so through a third party, which
he declines to identify. Corfman, who won`t specify how much money has
been contributed, says he can`t afford the lawsuit on his own, since
Casino City makes a small profit on revenues of several million
dollars.
A ROCK AND A HARD PLACE Legal experts are sharply divided over the
issues. Jennifer S. Granick, executive director of the Stanford Law
School Center for Internet & Society, says it is significant that
Casino City`s ads reach people in countries where online gambling is
legal. "On the Internet, commercial speech can be broader because the
audience is a little broader," she says.
Yet the more likely outcome is that the government will prevail. Jack
M. Balkin, a law professor at Yale University, says the federal
government has the right to enforce U.S. laws on companies that operate
within the country, even if their activities are international. And the
U.S. courts don`t have an interest in extending First Amendment
protections to Web surfers beyond the country`s borders. "I think
[Corfman] is between a rock and a hard place," he says.
Corfman has a backup plan if his legal gamble is a bust. Since Casino
City`s advertising dollars would shift to another company, he plans to
sell the site to an overseas company. The site, and its ads, would
continue to be available to any Web surfer in the world.
Still, Corfman is far from backing down. "When he gets an idea and he
knows he`s right, there`s no stopping him," says Patricia Steiner, a
business consultant who is advising Casino City. When Corfman was an
undergraduate at Massachusetts Institute of Technology, he drafted a
petition to protest the Vietnam War. He worked for a month to get
several thousand signatures, from students, alumni, and even MIT
President Jerome B. Wiesner. This time, it`s the Justice Dept. that may
find Corfman`s protest difficult to dismiss.
By Spencer E. Ante in New York CEO Michael Corfman is suing the Justice Dept. over online gambling ads
Ever since he was a teenager in Washington State, Michael A. Corfman
has had a penchant for questioning authority. At his Catholic high
school in the late 1960s, Corfman worked on an underground newspaper
that he and his friends decided to call The New Protestant. The paper
ran several controversial stories, including one advocating a woman`s
right to an abortion. Another attacked plastics as an environmental
hazard, distressing administrators since one of the school`s top donors
was a plastics company exec. "Mike is not afraid to say what he thinks
is right," says Michael Schmitt, a friend who worked with Corfman on
The New Protestant.
Now, Corfman is challenging the ultimate authority: the U.S.
government. His online gambling portal, Casino City Inc., is suing the
Justice Dept. in a high-stakes lawsuit that puts Corfman in the middle
of a battle over the future of online gambling. Corfman is fighting for
the right to run advertising from online gambling operations on
Casinocity.com. U.S. prosecutors have claimed that online gambling is
illegal, and the Justice Dept. has sent letters to Web sites and
broadcasters that accept such ads, informing them they "may be aiding
and abetting these illegal activities." Many companies, including Web
giants Google (GOOG ) and Yahoo! (YHOO ), as well as radio station
owner Infinity Broadcasting, have stopped taking the advertising.
Not Corfman. He didn`t even wait to get one of the Justice Dept.`s
threatening letters. Instead, he went on the offensive, hiring Barry
Richard, one of the lawyers who represented George W. Bush in the
litigation in Florida after the 2000 Presidential election. Casino
City, a Baton Rouge (La.) company that provides news and information
about the gambling industry, depends entirely on online casino
advertising for its sales. Corfman`s argument? That the government`s
campaign is a violation of the First Amendment`s free speech
protections. The First Amendment offers some protection to commercial
speech, unless it concerns illegal activities. Corfman, and some
independent attorneys, contend that only sports betting on the Net has
been clearly declared illegal in the U.S. -- and that other wagers, on
blackjack or bingo, are still permitted. "It is inappropriate for the
government to use threats as a way to curtail free speech," says
Corfman.
The nature of the Internet creates an additional layer of legal
complexity. Because the Net is global, the ads on Casino City may be
viewed by anyone, including people in countries where online gambling
is legal. What right does the U.S. government have to stop Corfman from
showing a Costa Rican casino`s ad to a British gambler? Online gambling
is permitted in many countries, including Australia, Britain, and
Germany.
What`s more, shutting down Casino City may simply drive its business
overseas. If the U.S. government prevails in its battle with Corfman,
hundreds of Web sites outside the U.S. will line up to take advertising
from the casinos that use his company. And those sites will be just as
accessible to U.S. gamblers as Casino City. "The Justice Dept.`s
position is not good law and not good policy," says attorney Richard. A
U.S. District Court in Louisiana is expected to rule on the federal
government`s motion to dismiss the case within the next few months.
Corfman isn`t taking on Justice single-handed. The 51-year-old, who
worked as a software engineer at Digital Equipment Corp. and other tech
companies before founding his gambling portal 10 years ago, has
solicited donations from online gambling companies and trade
associations to help pay for the lawsuit. One of Corfman`s financial
supporters is Britain`s Sportingbet PLC, BusinessWeek has learned.
Sportingbet Chief Exec Nigel Payne confirms that his company has helped
fund the case, but he says it has done so through a third party, which
he declines to identify. Corfman, who won`t specify how much money has
been contributed, says he can`t afford the lawsuit on his own, since
Casino City makes a small profit on revenues of several million
dollars.
A ROCK AND A HARD PLACE Legal experts are sharply divided over the
issues. Jennifer S. Granick, executive director of the Stanford Law
School Center for Internet & Society, says it is significant that
Casino City`s ads reach people in countries where online gambling is
legal. "On the Internet, commercial speech can be broader because the
audience is a little broader," she says.
Yet the more likely outcome is that the government will prevail. Jack
M. Balkin, a law professor at Yale University, says the federal
government has the right to enforce U.S. laws on companies that operate
within the country, even if their activities are international. And the
U.S. courts don`t have an interest in extending First Amendment
protections to Web surfers beyond the country`s borders. "I think
[Corfman] is between a rock and a hard place," he says.
Corfman has a backup plan if his legal gamble is a bust. Since Casino
City`s advertising dollars would shift to another company, he plans to
sell the site to an overseas company. The site, and its ads, would
continue to be available to any Web surfer in the world.
Still, Corfman is far from backing down. "When he gets an idea and he
knows he`s right, there`s no stopping him," says Patricia Steiner, a
business consultant who is advising Casino City. When Corfman was an
undergraduate at Massachusetts Institute of Technology, he drafted a
petition to protest the Vietnam War. He worked for a month to get
several thousand signatures, from students, alumni, and even MIT
President Jerome B. Wiesner. This time, it`s the Justice Dept. that may
find Corfman`s protest difficult to dismiss.
