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Web firms to settle gambling allegations

Microsoft, Yahoo and Google agree to pay a total of $31.5 million.

December 20, 2007|Joseph Menn and Jessica Guynn | Times Staff Writers

Three of the world's most-popular websites have agreed to pay a collective $31.5 million to settle allegations that they promoted illegal online gambling operations.

The U.S. attorney in St. Louis announced the settlements Wednesday with Microsoft Corp., Yahoo Inc. and Google Inc., which she accused of selling ads that steered U.S. Web surfers to offshore gambling websites. The Justice Department considers publishers of such gambling ads to be accessories to a crime.

Without admitting or denying liability, the three companies agreed to forfeit millions of dollars they took in from the suspect ads, and Microsoft and Yahoo vowed to run public service campaigns warning young people that online gambling is illegal.

The agreements come as part of a U.S. crackdown that has included the arrests of top executives of publicly traded British companies that have accepted online bets from Americans. The government also has reached a multimillion-dollar settlement with EBay Inc.'s PayPal subsidiary for processing gambling transactions.

A year ago, President Bush signed a law that made such wagering, and the processing of many payments related to wagering, more explicitly illegal.

All three Internet companies said they had stopped accepting gambling ads in 2004, more than six months after the government warned magazine publishers that similar ads were illegal.

U.S. Atty. Catherine L. Hanaway, who also won a $7.2-million settlement from the Sporting News in January 2006, agreed to waive any additional liability of the Internet companies.

Although they generally stopped selling such ads several years ago, she said, the settlement agreements cover the years 1997 to 2007 to provide the companies more protection from prosecution.

"We wanted to make sure we covered all possible activity," Hanaway said.

Microsoft was hit the hardest, agreeing to pay $21.5 million, including $4.5 million to the government and $7 million to the International Center for Missing and Exploited Children. The total also covers $9 million in public service advertising.

Yahoo agreed to forfeit $3 million and to provide $4.5 million in public service ads. Google agreed to pay the government $3 million.

"Microsoft stopped accepting ads from sites associated with online gambling nearly four years ago," spokesman David Bowermaster said.

Yahoo said it stopped accepting display ads for gambling companies in 2002 and U.S. search-engine ads in 2004. It accepts search ads in Britain, where online gambling is legal.

Google spokesman Jon Murchinson said the search-engine king "voluntarily discontinued running such ads, which were a very small part of our AdWords business, in April 2004."

Hanaway praised the three Internet companies for cooperating and for agreeing to help spread the word that computer gambling is illegal, even if the bets are placed with overseas companies.

She said her office was continuing to investigate whether other forms of promotion, such as the sponsorship of televised tournaments by a poker company affiliate, were "artifices to promote illegal gambling" and therefore illegal.


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