Ex-regulators working for Internet gambling

Laurence Arnold

Wednesday, April 16, 2003 | 11:35 a.m.

WASHINGTON -- For five years, they helped New Jersey enforce its laws on gambling at Atlantic City casinos.

Now Frank Catania and Keith Furlong are fighting for a far less esteemed segment of the gambling industry. As consultants for the Interactive Gaming Council, they are pushing a highly skeptical Congress to give up its attempts to ban Internet gambling.

At a hearing last month, members of the Senate Banking Committee joined witnesses representing college athletics and state and federal government in condemning Internet casinos as prone to fraud, alluring to minors, a temptation for compulsive gamblers and a potential tool for money laundering.

"I describe Internet gambling as an evil, and I do not use that word lightly," said the committee's chairman, Sen. Richard Shelby, R-Ala.

Only Catania, formerly the head of New Jersey's Division of Gaming Enforcement, spoke in support of the $6 billion industry. He urged Congress to appoint a panel to study legalizing, regulating and taxing it.

"In recent history there has not been an issue more deserving of further study than Internet gaming policy," he said.

Catania and Furlong, through their New Jersey-based consulting firm, now find themselves opposing one-time colleagues in state law enforcement. The nation's attorneys general have been among the strongest supporters of a federal ban on Internet gambling.

But Catania and Furlong say their work on behalf of the industry is consistent with their prior roles as regulators.

"I'm basically saying that this is an industry that we will not be able to stop. Therefore, we need to legitimize it," Catania said in an interview.

Gambling over the Internet occupies a gray area in American law. Some say it is already illegal under the 1961 Wire Act, which was written to outlaw sports betting by telephone.

Even so, the vast majority of virtual casino sites -- the federal government estimated there were 1,800 last year -- are run by operators based in places like Costa Rica and Antigua, beyond the grasp of U.S. law enforcement.

And the enormous reach of the Internet has complicated efforts by lawmakers to define what is illegal. Since 1998, large majorities in the House and Senate have voted to ban gambling over the Internet, but those bills were derailed by disputes over proposed exemptions for state lotteries, horse racing, Indian casinos and other segments of the gambling industry.

Furlong said he hopes lawmakers learn from their frustrating attempts at prohibition.

"They can be commended for what they want to achieve, which is protecting people," he said. "The only disagreement we have, really, is that the way to do it is through regulation."

Catania says evolving technology has made it possible for an online casino to determine who is placing a bet, and whether that person is in a state where Internet gambling is allowed. State laws governing what types of games are legal, and the minimum age to gamble, can thus be enforced, he said.

Critics disagree. Connecticut Attorney General Richard Blumenthal said attempting to regulate online casinos "will make a mockery of enforcement."

The pro-regulation forces have made minor progress. Last month, a small group of House members proposed creating a commission to study letting states legalize, regulate and tax Internet gambling.

Sue Schneider, chairwoman of the Interactive Gaming Council, said Catania and Furlong speak with authority because they have studied efforts by other nations, such as Great Britain, to embrace Internet gambling.

"A lot of times we get parochial in the U.S. and tend to ignore lessons that are fairly easy to see if we just open our eyes," Schneider said.

The nonprofit Interactive Gaming Council, based in Vancouver, represents virtual casino operators, online sports books, game developers and electronic commerce companies, most of them based in countries other than the United States.

In 1999, it hired Catania Consulting Group, the North Haledon. N.J.-based business that Catania created after leaving government. Catania is president, Furlong vice president. It is the latest in a series of partnerships between the two men.

When Catania represented Passaic County as a Republican assemblyman from 1990 to 1994, Furlong was his chief of staff.

Former Gov. Christie Whitman nominated Catania in 1994 as an assistant attorney general and director of the Division of Gaming Enforcement, a post he held until late in 1998. Furlong worked as the division's spokesman and legislative liaison.

In 1997, Catania wrote a report recommending that, "for the present," New Jersey do whatever it could to prohibit gambling over the Internet. But the report also noted that regulation -- and taxation -- could become a reasonable alternative.

In January, a New Jersey Assembly committee on tourism and gaming approved a bill that would establish a commission to study whether and how to legalize online gambling.