Contract
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U.S. Department of
Justice
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United
States Attorney
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Southern
District of New York
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The
Xxxxxx X. Xxxxx Building
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One
Saint Andrew's Plaza
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New
York, New York 10007
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October
29, 2009
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Via
Federal Express
Xxxxxxx
Xxxxxx, Esq.
Sarafa
Law LLC
00 Xxxx
Xxxxxx, Xxxxx 00
New York,
NY 10005
Xxxxxx
Xxxxxxx, Esq.
Xxxx,
Xxxxxxxx, Xxxxxxxx & Xxxxxx LLP
000
00xx
Xxxxxx, XX
Washington,
DC 20005
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Re:
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Optimal Group
Non-Prosecution Agreement
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Dear
Xxxxx and Sir:
On the
understandings specified below, the Office of the United States Attorney for the
Southern District of New York (the "Office") will not criminally prosecute
Optimal Group Inc. or its subsidiaries (collectively, "Optimal") for any crimes
(except for criminal tax violations, as to which this Office cannot and does not
make any agreement) related to processing by Optimal, its predecessors, or
acquired companies of internet gambling related transactions originating from
customers in the United States through and including 2006. This conduct is
described more fully in the Statement of Facts, attached hereto as Exhibit A,
which is incorporated by reference herein. This Agreement is entered into by
Optimal pursuant to authority conveyed by resolution of the Board of Directors
of Optimal. A copy of this resolution is attached hereto as Exhibit
B.
Moreover,
if Optimal fully complies with the understandings specified in this Agreement,
no information provided to the Office or at its request by or on behalf of
Optimal (or any other information directly or indirectly derived therefrom) will
be used against Optimal in any criminal tax prosecution. This Agreement does not
provide any protection against prosecution for any crimes except as set forth
above, and applies only to Optimal and not to any other entities or any
individuals. Optimal expressly understands that the protections provided to
Optimal by this Agreement shall not apply to any successor entities, whether the
successor's interest arises through a merger or plan of reorganization or
otherwise, unless and until such successor formally adopts and executes this
Agreement. The protections arising from this Agreement will not apply to any
purchaser of all or substantially all of the assets of Optimal, unless such
purchaser enters into a written agreement, on terms acceptable to this Office,
agreeing in substance to undertake all of the obligations set forth in the
"Continuing Obligation to Cooperate" section of this Agreement, set forth
below.
Xxxxxxx
Xxxxxx, Esq
Xxxxxx
Xxxxxxx, Esq.
October
29, 2009
Page
2
Continuing
Obligation To Cooperate
Optimal
acknowledges and understands that the cooperation it has provided to date in
connection with a criminal investigation by this Office, and its pledge of
continuing cooperation, are important and material factors underlying this
Office's decision to enter into this Agreement. Accordingly, Optimal agrees to
cooperate fully and actively with the Office, the Federal Bureau of
Investigation (the "FBI"), and any other agency of the government designated by
the Office (including the FBI, the "Designated Agencies") regarding any matter
relating to the Office's investigation about which Optimal has knowledge or
information.
In this
regard, it is understood that, in connection with any matter relating to
Optimal's business and operations Optimal: (a) shall truthfully and completely
disclose all information with respect to the activities of Optimal, its officers
and employees, and others concerning all such matters about which this Office
inquires, which information can be used for any purpose, except as limited by
the second paragraph of this Agreement; (b) shall cooperate fully with this
Office and the Designated Agencies; (c) shall, at the Office's request, use its
best efforts to assist this Office in any prosecution or investigation by
providing logistical and technical support for any meeting, interview, grand
jury proceeding, or any trial or other court proceeding; (d) shall at the
Office's request, use its best efforts promptly to secure the attendance and
truthful statements or testimony of any officer, agent, employee, or former
officer, agent or employee, at any meeting or interview or before the grand jury
or at any trial or other court proceeding; (e) shall use its best efforts
promptly to provide to this Office, upon request, any document, record, or other
tangible evidence relating to this Office's continuing investigation in this and
related internet gambling-related matters about which this Office or one or more
of the Designated Agencies may inquire, and will assemble and organize
documents, records, information, and other evidence in Optimal's possession,
custody, or control as may be requested by the Office or the Designated
Agencies; and (f) shall bring to this Office's attention all criminal conduct by
and criminal investigations of Optimal or its employees that come to the
attention of Optimal's board of directors or senior management, as well as any
administrative proceeding, civil action or other proceeding brought by any
governmental authority in which Optimal is a party, related to the operation or
management of Optimal's business. It is further understood that Optimal shall
commit no crimes whatsoever. Moreover, any assistance that Optimal may provide
to federal criminal investigators shall be pursuant to the specific instructions
and control of this Office and designated investigators. Optimal's obligations
under this paragraph shall continue until the later of (1) a period of three
years from the date of the signing of this Agreement or (2) the date on which
all prosecutions arising out of the conduct described in the opening paragraph
of this Agreement are final.
Xxxxxxx
Xxxxxx, Esq
Xxxxxx
Xxxxxxx, Esq.
October
29, 2009
Page
3
Forfeiture/Disgorgement
Obligations
Optimal
agrees that it will pay a total of $ 19,182,418.18 (the "Property") to the
United States as part of this Agreement, as property involved in or proceeds
received from the activities described in the Statement of Admitted Facts, all
of which will be forfeited to the United States. The Property will be subject of
a civil forfeiture complaint to be filed against Optimal in the United States
District Court for the Southern District of New York. Optimal and this Office
agree that the $19,182,418.18 seized to date by this Office shall be applied to
satisfy Optimal's forfeiture obligation under this paragraph. Optimal agrees
that it will not file a claim with the Court or otherwise contest any civil
forfeiture action and will not assist a third party in asserting any claim
against the Property. It is further understood that Optimal will not file or
assist anyone in filing a petition for remission or mitigation with the
Department of Justice concerning the Property.
Additional
Obligations
It is
understood that, should Optimal commit any crimes subsequent to the date of the
signing of this Agreement or fail to comply with its forfeiture/disgorgement
obligations as described above, or should it be determined that Optimal or any
of its representatives have given false, incomplete, or misleading testimony or
information, or has otherwise violated any provision of this Agreement, (a)
Optimal shall thereafter be subject to prosecution for any federal offense of
which this Office has knowledge, including perjury and obstruction of justice;
(b) all statements made by Optimal's representatives to this Office, or one or
more of the Designated Agencies, including but not limited to the appended
Statement of Facts, and any testimony given by Optimal's representatives before
a grand jury subsequent to the signing of this Agreement, and any leads from
such statements or testimony, shall be admissible in evidence in any criminal
proceeding brought against Optimal and relied upon as evidence to support any
penalty imposed on Optimal; and (c) Optimal shall assert no claim under the
United States Constitution, any statute, Rule 410 of the Federal Rules of
Evidence, or any other federal rule that such statements or any leads therefrom
should be suppressed. In addition, any such prosecution that is not time-barred
by the applicable statute of limitations on the date of the execution of this
Agreement may be commenced against Optimal, notwithstanding the expiration of
the statute of limitations between the signing of this Agreement and the
commencement of such prosecution. It is the intent of this Agreement to waive
all defenses based on the statute of limitations with respect to any prosecution
that is not time-barred on the date that this Agreement is
signed.
Xxxxxxx
Xxxxxx, Esq
Xxxxxx
Xxxxxxx, Esq.
October
29, 2009
Page
4
It is
understood that Optimal acknowledges and accepts as accurate the facts set forth
in the Statement of Facts attached as Exhibit A, which is incorporated by
reference herein. Optimal hereby agrees to maintain, with respect to its
operations, a permanent restriction on providing payment processing services for
gambling merchants in connection with customers in the United States in
violation of the law of the United States or the law of any jurisdiction within
the United States.
It is
understood that this Agreement does not bind any federal, state, or local
agencies, any licensing authorities, or any regulatory authorities. If requested
by Optimal, this Office will, however, bring the cooperation and remedial
actions of Optimal to the attention of other prosecuting and other investigative
offices or other licensing or regulatory authorities.
Xxxxxxx
Xxxxxx, Esq
Xxxxxx
Xxxxxxx, Esq.
October
29, 2009
Page
5
With
respect to this matter, this Agreement supersedes all prior understandings,
promises and/or conditions between this Office and Optimal. No additional
promises, agreements, and conditions have been entered into other than those set
forth in this letter and none will be entered into unless in writing and signed
by all parties.
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Very
truly yours,
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XXXXX
XXXXXXX
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United
States Attorney
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Southern
District of New York
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By:
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/s/
Xxxx Xxxxxx-Xxxxx
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Xxxx
Xxxxxx-Xxxxx
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Xxxxxxxx
Xxx
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Assistant
United States Attorneys
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/s/
Xxxxxxx Xxxxx
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Xxxxxxx
Xxxxx
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Chief,
Criminal Division
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AGREED
AND CONSENTED TO:
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/s/
Xxxx Xxxxxxxx
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October
30, 2009
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Pursuant
to Authority Conveyed By Resolution of the Board of Directors of
Optimal
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Date
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APPROVED:
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/s/
Xxxxxxx Xxxxxx, Esq.
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October
30, 2009
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Xxxxxxx
Xxxxxx, Esq.
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Date
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Xxxxxx
Xxxxxxx, Esq.
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Exhibit
A
STATEMENT OF
FACTS
Corporate
History and Structure
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1.
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Optimal
Group Inc. ("Optimal") is a Canadian corporation established in 1984.
Under its previous name of Optimal Robotics Corp., Optimal was a provider
of self-checkout systems to retailers and, through wholly-owned
subsidiaries, of repair and field services to retail, financial services
and other third-party accounts.
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2.
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In
2004, following the sale of its self-checkout business and to reposition
its business activities, Optimal acquired Terra Payments Inc. (formerly
SureFire Commerce Inc.), a provider of payment processing and electronic
commerce services. In conjunction with this acquisition, Optimal changed
its name from Optimal Robotics Corp. to Optimal Group
Inc.
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3.
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Following
its acquisition by Optimal, Terra Payments became a wholly-owned
subsidiary of Optimal known as Optimal Payments Inc. The Optimal Payments
group of companies provided payment processing services to a variety of
merchants, including Internet gambling merchant websites. In May 2005, the
Optimal Payments group assets relating to the processing of transactions
involving Internet gambling merchant websites were transferred to FireOne
Group plc, a newly-established, Ireland-based affiliate of Optimal
Payments. In June 2005, in conjunction with the public placement of 20% of
FireOne Group's issued and outstanding share capital, the shares of
FireOne Group began trading on the Alternative Investment Market ("AIM")
of the London Stock Exchange.
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Payment
Processing Business (Optimal Payments/FireOne Group)
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4.
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Optimal's
payment processing subsidiaries provided technology and services required
by businesses to accept credit card, electronic check and direct debit
payments. Such technology and services were provided for Internet
businesses, including Internet gambling merchant websites,
mail-order/telephone-order and retail point-of-sale
merchants.
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5.
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Through
its subsidiaries, Optimal processed payment transactions in connection
with Internet gambling merchant websites through the use of credit and
debit cards, electronic debit and a stored-value, electronic wallet known
as FirePay. The Internet gambling websites were located outside of the
United States. A substantial majority of the transactions in connection
with Internet gambling merchant websites originated from customers located
in the United States, including in the Southern District of New
York.
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6.
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Optimal
continued to process transactions originating from U.S. customers in
connection with Internet gambling merchant websites until October 13,
2006, the day the Unlawful Internet Gambling Enforcement Act ("UIGEA") was
signed into law. On that date, Optimal stopped all transfers of U.S.
customer funds to Internet gambling merchant websites. Shortly thereafter,
Optimal voluntarily agreed to cooperate with the United States Attorney's
Office for the Southern District of New York in its investigation of
unlawful Internet gambling.
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7.
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From
April 2004, when Optimal acquired Terra Payments, through December 2004,
Optimal's subsidiaries processed a total of approximately $1.4 billion in
payment transactions. Of this amount, $610 million consisted of
transactions involving Internet gambling merchant websites, generating
revenue of $32.8 million. Of the transactions involving Internet gambling
merchant websites, approximately 80% originated from U.S.
customers.
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8.
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During
the year 2005, Optimal's subsidiaries processed a total of approximately
$5.5 billion in payment transactions. Of this amount, $1.2 billion
consisted of transactions involving Internet gambling merchant websites,
generating revenue of $76.3 million. Of the transactions involving
Internet gambling merchant websites, approximately 83% originated from
U.S. customers.
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9.
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During
the year 2006, Optimal's subsidiaries processed a total of approximately
$7.4 billion in payment transactions. Of this amount, $1.3 billion
consisted of transactions involving Internet gambling merchant websites,
generating revenue of $84.2 million. Of the transactions involving
Internet gambling merchant websites, approximately 82% originated from
U.S. customers.
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10.
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After
Optimal ceased processing U.S. customer transactions involving Internet
gambling merchant websites, Optimal disposed of substantially all of the
assets of its payment processing business, including the entirety of the
business formerly operated by Terra Payments. Today, through its
subsidiaries (WowWee Group Limited and related companies), Optimal is
principally a toy and consumer electronics
business.
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11.
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Optimal
knew that its payment processing services were being provided to U.S.
customers in connection with Internet gambling merchant websites. Optimal
recognizes that the services provided by the Internet gambling merchant
websites, for which Optimal's subsidiaries provided payment processing
services, violated certain United States laws, including 18 U.S.C. § 1084
and 18 U.S.C. § 1955.
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Exhibit B
CERTIFIED
RESOLUTION
I do
herby certify that the following is a true and complete copy of a resolution of
the Board of Directors of Optimal Group Inc. (the "Corporation") adopted at a
meeting of the Directors duly convened and held on October 30,
2009:
"WHEREAS the Board deems it to be in the best
interest of the Corporation to enter into a non-prosecution agreement with the
Office of the United States Attorney for the Southern District of New York,
substantially in the form reviewed by the Directors, including the Statement of
Facts to be annexed thereto.
NOW,
THEREFORE, BE IT RESOLVED:
THAT the entering into of a
non-prosecution agreement with the Office of the United States Attorney for the
Southern District of New York, substantially in the form reviewed by the
Directors, including the Statement of Facts to be annexed thereto, be and it is
hereby approved; and
THAT either of the Co-Chairmen
of the Corporation, acting alone, be and is hereby authorized and empowered, for
and on behalf of the Corporation, to execute and deliver the non-prosecution
agreement with such additions, deletions or other changes as such Co-Chairman
may approve, such approval to be evidenced by his execution and delivery of the
non-prosecution agreement.
CERTIFIED
at Montreal, this 30th day of October 2009.
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/s/
Xxxx Xxxxxxxxx
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Xxxx
Xxxxxxxxx
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Senior
Vice-President,
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General
Counsel and Secretary
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