Cops search Internet gambling company

One of the world's leading Internet gaming companies is under scrutiny by Canadian authorities, who are investigating allegations of illegal betting and bookmaking.

Officials with Vancouver, British Columbia-based Starnet Communications International Inc. said they are cooperating with law enforcement authorities, who are continuing to search for evidence at the company's headquarters today.

Representatives of the Coordinated Law Enforcement Unit, a division of the province's attorney general's office, served a search warrant Friday at 5:30 a.m. at the company's corporate offices and at the homes of six of the company's directors and officers.

Starnet's stock, which had plummeted 69 percent after news of the searches surfaced, was beginning to recover today. Traded over the counter, the stock was up $2.50 -- 61.5 percent -- to $6.5625 in early trading today.

"We are pleased to announce that our company will continue its operations and proceed with its strategic plans following minor interruptions to service over the past weekend," Chief Executive Officer Mark Dohlen said in a news release issued this morning.

"On the basis of solid legal advice, we will continue to offer shares of the company to the investing public," Dohlen said. "We are a company that is fully compliant with all applicable laws and regulations. We are confident that our operations will be reviewed positively by the appropriate authorities here in Canada and in the countries in which we conduct our business."

News of the searches sent shock waves through the Internet gaming industry, since Canada has always been considered a safe haven for the more than 350 companies that are part of the online gaming industry. Starnet provides online content and develops software for computerized gambling.

It has nearly 50 licensees that operate Internet casinos, most of them based on Caribbean islands, making it one of the top five online gaming operations in the world.

British Columbia's Coordinated Law Enforcement Unit consolidates the investigative efforts of the Royal Canadian Mounted Police's commercial crime, proceeds-of-crime and high-tech crime units and the police departments of Vancouver, West Vancouver and Delta, British Columbia.

Dave Randhawa, a spokesman for the CLEU, said the weekend searches are the agency's latest efforts in an 18-month investigation of Starnet. Randhawa said the crime unit is investigating illegal betting and bookmaking, illegal licensing of betting or gaming privileges, providing information intended for use in connection with bookmaking, possession and distribution of pornographic materials and possession of the proceeds of crime.

Starnet operates an adult entertainment site to help finance its gaming operations.

Dohlen said there were "minor interruptions" to customer service and he said the company's ability to cover wagering has not been impacted by the investigation.

"Starnet is a cutting-edge company that is a pioneer in Internet gaming," Dohlen said. "We believe the selective investigation into the operations of our company is a result of a misunderstanding of Internet issues as they relate to the process of our business and the venues in which our services are offered. There is little or no legal precedent relative to this business."

Internet gaming is being debated in the United States in the form of a bill introduced by Sen. Jon Kyl, R-Ariz. Some states, including Nevada, have made Internet gambling illegal, while others consider it forbidden by existing laws, including those governing wagering by telephone.

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