Pentagon: What Happens In Vegas... Is Apparently Charged To Defense Dept. Credit Cards

from the your-tax-dollars-on-red dept

Once again, we find the public sector lagging behind the private sector in terms of efficiencies, technological aptitude, etc. In this particular case, the public sector is slipping down the "hiding your hooker/gambling purchases from your employer" curve:

A not-yet-released Defense Department investigation has found civilian and military employees used government charge cards to make more than $1 million in purchases at casinos and to pay for escorts, according to an internal report.

In the private sector, these purchases would normally be covered up by cash advances or by utilizing savvier services who bill customers under innocuous names. Over at the Pentagon, no one seems to care. Just put it on the DoD's tab! Who's going to take a close look at a few thousand credit card statements?

Well, the Inspector General apparently did. And discovered that this occurred 4,437 times in a one-year period. Of course, the Pentagon is trying to play this down by pointing out that this total represents only 0.5% of the charges accrued over the same period. Left unaddressed is the principle of the thing, wherein taxpayers are often displeased to find their funds have been spent on hookers and roulette spins. And, of course, this would be displeasure in addition to the preexisting disgruntlement about the normal, everyday spending that helps keep the country operating at a steady clip deficit.

The DoD official also offered this reassuring statement that safely hedges the almost-assertions while simultaneously undercutting most of the intended reassurance.

Some or all of the charges may have been paid by the individuals, rather than the government, according to the official.

This statement is a little better, although essentially meaningless without the context of the full IG report.

The Defense official said the individuals who used their cards inappropriately will be held accountable, noting action has been taken on 364 cases and an additional 79 cases are pending action.

But the most interesting statement offered in defense of Pentagon employees and their indiscretionary spending is this one:

One official speculated to Politico the individuals may have used their government -- instead of their personal -- cards to hide the illicit activities from their spouses.

I'm not sure if that makes me feel better or worse about these government employees. This is very much a human nature problem. And the government still hires from the human race because there are currently no better options. No matter how much we'd hope it would hold potential and current employees to a higher standard (perhaps higher than one we're willing to apply to ourselves), there's still going to be a certain amount of misconduct and malfeasance.

But even if occasional abuse is unavoidable and the possible motivating factors understandable, the behavior is still far from acceptable. Are we supposed to feel better that this scenario will more likely result in the repayment of charges by the employee who racked them up? Do we raise a half-hearted cheer to the possibility that DoD employees aren't trying to abuse taxpayer funds but rather hiding their gambling and escort purchases from their significant others?

I can see how facing the internal wrath of a Pentagon supervisor would be preferable to discussing this activity with a spouse… or their lawyer. But it's still a betrayal of trust -- on several levels -- even if it is only a very small percentage of the whole.

Filed Under: casinos, defense department, dod, escorts, las vegas

Feds Realize That Exploiting A Bug In Casino Video Poker Software Is Not Hacking And Not A CFAA Violation

from the about-time dept

For years, we've talked about how casinos were able to get away with not paying people who won jackpots from electronic gambling machines, by claiming that their wins were really because of software glitches. That always seemed like a highly questionable practice, but even more questionable was filing criminal charges against winners who won because of those glitches. We talked about one such case back in 2007, and then another one in early 2011. That 2011 case involved two guys, John Kane and Andre Nestor, who had figured out a bug in some video poker software from International Game Technology, a gaming giant.

The bug was very complex. It involved a series of different steps that had to be taken: play one game on the machine until you have a high payout, then switch to a different game, play until an option popped up to "double up" (basically a double or nothing proposition on a "high card wins" bet), then add more money to the machine, exit the specific game, change the denomination amount to the game maximum, and then switch back to the original game played. At that point the high payout from the initial round shows, allowing that amount to be re-awarded. On top of that, it would recalculate the award by the new denomination level, often increasing the "payout" by 10x.

Apparently Kane discovered this bug by accident from playing a ridiculous amount of video poker. His lawyer claims that Kane was obsessed with video poker and probably played it more than anyone. He also insists that there was no research or effort that went into this. It was just a fluke from playing so often that Kane found the bug -- and then got his buddy Nestor (and a few others) involved in using this bug to win an awful lot of money. When Nestor was arrested, he was reasonably angry about the whole thing:

“I’m being arrested federally for winning on a slot machine,” he said. “It’s just like if someone taught you how to count cards, which we all know is not illegal. You know. Someone told me that there are machines that had programming that gave a player an advantage over the house. And that’s all there is to it.…

“Who would not win as much money as they could on a machine that says, ‘Jackpot’? That’s the whole idea!”

The feds, of course, hit them with CFAA (Computer Fraud and Abuse Act) charges, the same highly questionable hacking law we've been writing so much about lately. The feds argued that Kane and Nestor "exceeded authorized access" -- one of the most troubling parts of the CFAA. The DOJ argued that:

In short, the casinos authorized defendants to play video poker. What the casinos did not do was to authorize defendants ‘to obtain or alter information’ such as previously played hands of cards. To allow customers to access previously played hands of cards, at will, would remove the element of chance and obviate the whole purpose of gambling. It would certainly be contrary to the rules of poker.

However, the court was skeptical of this argument, and after the 9th Circuit's ruling in last year's case against David Nosal, where they said that merely violating an employer's computer use policy did not mean you had exceeded authorized access, the court asked the DOJ to explain how the CFAA still applied in light of the Nosal ruling.

Apparently, the DOJ realized that the CFAA charges no longer made sense and, yesterday afternoon dropped those charges. In a simple filing with no explanation, the DOJ asks the court to dismiss the two CFAA-related charges in the indictment. Kane and Nestor still face a single wire fraud charge, but that's much less of a threat than the CFAA charges. At the very least, it's good to see increasing pushback on the DOJ for its regular abuse of the CFAA to pile on charges.

Filed Under: andre nestor, casinos, cfaa, doj, exceed authorized access, hacking, john kane, las vegas, video poker
Companies: international game technology

Developer Of Bookmaking Software Gets Full Kim Dotcom Treatment For 'Promoting Gambling'

from the ridiculous dept

The government's war on online gambling is really ridiculous in a variety of ways. Initially, it was driven by a weird mix of moralist groups, backed by offline casinos who didn't want the competition -- all leading to a bill that effectively (through convoluted means) banned online gambling as a part of a law to protect our ports. The casinos are now regretting their initial support for this law, because they want to get into the online gambling world themselves. But the law is in place, and US (both federal and state) law enforcement has supported it and related laws with ridiculous fervor; arresting execs of off-shore gambling sites and even execs of financial institutions that provide payment systems for online gambling sites. As with the over-aggressive enforcement of copyright law, the Justice Department has also seized many websites, sometimes even seizing the wrong websites.

However, this latest story shows just how ridiculous some of these efforts are, and just how far they can go in creating chilling effects. It's the story of the arrest and criminal charges against Robert Stuart, his wife and his brother-in-law for the work they did for their company, Extension Software. The company provides infrastructure to companies that do sports bookmaking, but they were careful to only license the software to companies in countries where such things are legal.

For their troubles they got "the full Kim Dotcom treatment" according to a writeup in Wired:

The case began in February 2011, when Stuart says he and his wife got the Kim Dotcom treatment after about 30 local Arizona law enforcement agents wearing SWAT gear and camouflage dress — some of them with bushes attached to their shoulders to blend into the woods around his house — descended on his home and threatened to send him and his wife to prison for 35 years if he didn’t cooperate.

The search warrant used in the raid said Stuart and his wife were engaged in money laundering, operating an illegal enterprise and engaging in the promotion of gambling. Stuart has tried to obtain a copy of the affidavit used to get the search warrant, but it’s currently sealed.

Yup. They sent in a SWAT team to deal with... a software developer. Because some companies who use his software might possibly have used it to allow gambling in New York (the state that's behind the charges against him). And the warrant itself is sealed, so he doesn't even know why. Then the story gets even worse. In typical law enforcement fashion, they pressured him into doing a plea deal, in which he would have been forced to install backdoor code into his software, and then hack into his own customers to retrieve information on their users any time law enforcement wanted it. He initially agreed to the plea bargain based on bad advice from what he calls "rent-a-lawyers" he found on the internet. However, before it could go before a judge, he wisely backed out.

The NY's DA has defended this effort claiming that it was all perfectly aboveboard and legal to send a SWAT team to threaten a software developer into hacking into his own customers' data for the sake of law enforcement:

Although Daniel R. Alonso, chief assistant in the Manhattan District Attorney’s Office, was reluctant to discuss the terms of the confidential plea agreement or how his office planned to implement them, he insisted there was nothing unlawful about what was proposed.

“The provision you have questioned is perfectly consistent with the obligations of all law enforcement officials to follow state and federal law to secure evidence of criminal conduct,” Alonso said in an e-mail statement. “The staff of the Manhattan District Attorney’s office involved in this case, both prosecutors and investigators, have behaved ethically and consistent with their obligation to seek justice in every case.”

Eighteen months went by... and then last fall he was criminally indicted -- though all of the original charges used in his initial threat had disappeared (because they were bogus) and all the NY DA could come up with was a single charge of "promoting gambling in the first degree." Yes, because he supplies software in places where it's completely legal.

If you think secondary liability issues are important (and I do!), this case should be a major concern. The guy here just developed some useful software and sold it where it was legal to do so. That should not lead to a SWAT team descending on your house, or facing criminal charges and possible jail time. Blame the users of the software if they broke the law, but nothing that these guys did involved "promoting gambling" in areas where it was illegal. It was about providing legal infrastructure (not promotional) software. The whole thing is a shame, and shows how law enforcement's aggressiveness in trying to show themselves as being "tough on crime" can have serious implications.

Stuart notes that he's lost a bunch of his customers since the indictment, which may destroy his business entirely. And this can only lead to greater concern for other software developers as well. If they license software for completely legal purposes, but the software is then used in commission of a crime, are they suddenly (1) going to be threatened at gunpoint to hack into their customers' accounts and (2) then charged on trumped up charges as well?

Filed Under: casinos, gambling, hacking, law enforcement, new york, robert stuart, secondary liability, software development, sports bookmaking
Companies: extension software

DailyDirt: Beating The Odds

from the urls-we-dig-up dept

Everyone knows that the odds always favor the house, but every once in a while, someone figures out a way to beat the system. Here are just a few examples of clever folks who have succeeded and earned some significant winnings.

• There are a lot of guys named Don Johnson (not just the actor from Miami Vice), but one of them beat the casino odds by negotiation... and has become the most famous blackjack player in the world. So far, he's won about $15 million in Atlantic City (and he's been banned from a lot of casinos now). [url]
• Michael Larson studied the game show, Press Your Luck, and figured out that the show's Big Board wasn't random. Larson won $110,237 in cash and prizes -- which stood as a record for game show winnings until 2006 when it was broken on The Price is Right. [url]
• Mohan Srivastava usually consults as a geological statistician, but he applied his statistical insights to scratch-off lottery tickets -- and figured out that he could make about $600 per day. He's not the only one who has discovered design flaws in scratcher tickets, so there could be more lotteries out there with crackable security. [url]
• To find more interesting stuff on entrepreneurship, check out what's currently floating around the StumbleUpon universe. [url]  

By the way, StumbleUpon can recommend some good Techdirt articles, too.

Filed Under: blackjack, casinos, gambling, lottery tickets, press your luck, price is right, scratchers

Big Casinos May Now Regret That They Had Congress Ban Internet Gambling

from the oh,-whoops... dept

While there was all sorts of sanctimonious language about protecting children and the "sins" of gambling when Congress put a bill that effectively banned online gambling into a law about protecting our ports (don't ask), everyone knew the real reason why Congress banned online gambling: the big casinos were afraid of the competition. They even claimed that people wouldn't want to come to real casinos any more if they could just gamble online. It's like the claims of musicians when records first came out, that no one would ever want to see live music again. Or the idea that with a VCR, no one would want to go to the movies again. Of course, as with those situations, it turns out that the casinos are finally realizing that (1) they can actually profit directly from online gambling and (2) it probably drives more people to real casinos, rather than fewer. So, suddenly they're trying to convince Congress that it's okay to legalize at least online poker, completely at odds with what they've claimed in the past. Of course, you'll never see any of them admit that perhaps they made a mistake in getting such legislation passed in the first place...

Filed Under: casinos, legalization, online gambling, poker

Gaming Giants Still Can't Make Up Their Mind On Internet Gambling

from the wanna-bet? dept

The American Gaming Association, the casino industry's biggest trade group, is struggling to reach a consensus on internet betting, as its members take up divergent viewpoints. Some casino companies support federal regulation for it, while others want states to be able to regulate it (though maybe not Kentucky); others, of course, want to see the blanket ban continue, fearful of anything that might let new competitors in to the market. The AGA's latest approach appears to be to support legislation to study whether to legalize online betting -- which, we're pretty sure, sounds about as wishy-washy as could be.

The facts surrounding online gambling in the US are already pretty clear: previous legislative efforts may have reduced online gambling, but they've also driven American bettors to largely unregulated services and forced them to use some other often-shady services to fund their activities -- since US banks are given the responsibility to stop gambling sites' funding. The result is that gamblers keep up the same activity they were doing before, but are now exposed to more danger and risk, while US authorities are missing out on the chance to collect some taxes. This still seems pretty irresponsible, since gaming regulators in mature markets would argue that driving consumers into unregulated territory where they're not protected by laws and rules governing casinos isn't a great idea.

Meanwhile, the AGA's waffling isn't a surprise, since many of its members hate to see new competition in any form. But existing casino operators are, arguably, better placed than anyone to compete in new, highly regulated markets that don't require huge capital outlays on the scale of expensive new properties. Also, it's hard to understand how more competition for gambling dollars could hurt consumers, when competition might actually deliver them a number of significant benefits, particularly over gray-market services of questionable legality.

Filed Under: casinos, gambling, online gambling
Companies: american gaming association

New Massachusetts Law Would Open New Casinos While Throwing Online Gamblers In Jail

from the place-yer-bets dept

Sometimes it's impossible not to be cynical about the political process and what's really going on behind the scenes. Sure, people will often ascribe the worst motives to various politicians when other reasons may be more accurate, but it's difficult to see how Massachusett's governor Deval Patrick can put forth this new bill on gambling with a straight face. It pushes for the opening of three new casinos in the state, while simultaneously banning online gambling (which the federal government is already working on). Federal attempts at banning online gambling, however, have focused on stopping credit card processing and stopping the casinos themselves. Patrick's bill actually goes against the gamblers -- threatening them with up to two years in jail and $25,000 in fines. It's difficult to see how this bill can be seen as anything but a plan to try to squeeze more money out of the new casinos by making licenses a lot more valuable by totally banning the competition.

Filed Under: casinos, gambling, massachusetts, online casinos

Yet Another Casino Yanks Jackpot Prize, Claiming Faulty Software

from the unlucky-sevens dept

Apparently faulty slot machines that always seem to malfunction when someone wins big are becoming more popular at casinos -- and they're now not awarding larger sums. Last year, we wrote about two guys in Canada who thought they had won $209,000 using a slot machine, only to be told that they didn't win and it was all a computer glitch. Earlier this year there was a similar story of a man apparently not winning $102,000 at a new casino in Pennsylvania. In that case, the negative press coverage convinced the casino to pay up. The latest such case takes place at the Sandia Resort and Casino in New Mexico, where a guy was told that his $1.6 million slot machine win was actually a computer malfunction. He's suing, but he might not have much of a case -- especially since the casino is on an Indian reservation, and not subject to the US court system. Also, in this case, it's a little more reasonable to understand why the guy might not have a strong case: apparently the machine clearly stated that the payouts were limited to $2,500. Still, it makes you wonder: for all these slot machines with faulty software that's suddenly discovered after people win... what happens when machines screw up the other way? Somehow, we doubt that the casinos call them up to a room in the back (as always seems to happen in these cases) and tells them the machine screwed up and they actually won.

Filed Under: casinos, slot machine, software
Companies: sandia resort and casino

Criminal Charges For Using A Slot Machine With Faulty Software?

from the could-happen dept

We've had a few stories over the years of casinos refusing to give out slot machine prizes claiming software glitches on the slot machines. But how about charging people with a crime for using a slot machine with faulty software? Slashdot points us to a story about prosecutors debating whether or not to charge a bunch of people with criminal charges for using a slot machine that incorrectly credited every $1 as if it were $10. Now, clearly, the maker of the slot machine and the casino itself need to take some of the blame here, but prosecutors are saying (correctly) that if people knew the slot machine was doing this and used it on purpose for that reason, that's fraud. Even if that may be correct from a legal standpoint, it still looks bad. Caesars and the slot machine company should have tested the machine, and either way, charging people for criminal behavior for simply using your faulty machines can't be good for publicity.

Filed Under: casinos, slot machine, software
Companies: caesars