The Tribune

By NOELLE NICOLLS

Tribune Features Editor

nnicolls@tribunemedia.net

WITH wrangling over the gambling referendum threatening to kill the government’s winning momentum, Prime Minister Perry Christie did the politically prudent and most intelligent thing: postpone the referendum.

It truly would serve no one to have the public voting amidst so much confusion and entanglement. But the Prime Minister had few others to blame for his unforced errors: the most glaring, his lack of transparency concerning the national lottery; and the most naive, underestimating the power of the black crab.

More disappointing, however, than some of the prime minister’s actions, was the decision of the opposition Free National Movement (FNM) to play tit-for-tat with the referendum. Rather than showing leadership and being transparent about its own failures and actions as government, the FNM seemed intent on sabotaging intelligent debate with politricks.

I can certainly understand the temptation, considering the PLP’s infamous flip-flop regarding the 2007 referendum, an action that severely set the women’s movement back. But in the interest of national development, the FNM’s actions were only serving their selfish interests.

Representatives of the FNM government met with web shop owners during its last term in government. Consultation with industry produced draft legislation. The former government had plans to move forward with regularising the industry without the theatrics of a referendum.

Former Prime Minister Hubert Ingraham blindsided negotiators when he took the public position to can the efforts, presumably cowering to the church lobby.

In my estimation, the FNM could and should show much more leadership on the issue by plugging the gaps in which the government formerly seemed unwilling to fill. Rather than questioning the source of the data for which the present government is now making its revenue projections, for example, why not disclose insights garnered from the industry data it also had access to. The FNM knows much more about the inner workings of the industry, the loopholes in the law and the challenges associated with prohibition than it is currently disclosing.

Unfortunately, there is no shame in politics with beating a dog when it is down. In true opportunistic style, the FNM has sought to capitalise on the PLP’s missteps.

Now that all parties have a bit of breathing room, perhaps there is space for intelligent debate. For that purpose I will not use the FNM’s 17-point questions as my guide.

I would like to continue with my examination of the prohibition option, specifically looking at the wisdom or feasibility of pursuing a ban on webshops in light of the changed dynamics of the numbers business. I do not believe Bahamians have fully grasped how the Internet and global commerce has completely changed the game.

What is clear to me is that whether the vote goes up or down on the referendum, the government will need new legislation to move forward, no matter the direction.

I hear politicians and clergymen throwing around names such as “criminal enterprises” and “crime bosses” to describe the proprietors of webshops, but they only have theories to substantiate their claims. There is no doubt, webshops have gamed the system, but I maintain the onus is on their detractors or the state to prove the illegality of their actions in court.

I have some knowledge of the inner workings of the business and evidence suggests to me that webshops have a strong case. In at least some instances, the proprietors of webshops have valid gaming licenses in external territories, such as the United Kingdom. The website on which they run their gaming shops are hosted outside of the Bahamas. In essence, these are international businesses owned by Bahamians.

Transactions are processed on international servers, which also house all of the associated data. Even receipts are generated from the online system.

This is why government raids almost always result to naught. The webshop is a shell of a virtual company. The computers contain nothing of substance.

These businesses are so technologically advanced, there is much to be admired and gained. One source said webshops are more advanced than the banks. I believe them. The money being put into software development in the gaming industry, just imagine if some of those funds were directed towards other business and social development software.

The industry, for example, has its own Employee Interpol system, which is a digital employee database that tracks employees who are fired.

Employees that are flagged in the Interpol system are blacklisted in the industry.

They cannot get hired. This software is proprietary, which means the money is not going to Microsoft or some other international software company; it is creating Bahamian wealth.

In fact, I hear talk about government revenue from the gaming industry being directed towards education, sports, culture and the usual suspects. I say the money should be invested in tech entrepreneurship and creative enterprises. Imagine what could be achieved by such a stream of capital to finance Bahamian innovation in technology and the creative industries.

But I digress.

How the industry works: one webshop might own more than 15 gaming websites that cater to different international markets, being duly licensed and regulated as a gaming provider by a country other than the Bahamas. They might also own brick and mortar gaming assets, such as casinos or slot machines in other parts of the region and the world. Is it criminal for a Bahamian to legally establish a business in another country if Bahamian law prohibits such a business within Bahamian territory?

The proprietors of webshops, in at least some instances, have legal international bank accounts and presumably fulfil whatever tax, disclosure or licensing obligations they have to the countries in which they are domiciled. When they walk into their banks, they are greeted as “the chief” not as criminals; they are considered respectable business men not shady crime bosses. They have audited accounts. The FNM and PLP governments know this.

And in the Bahamas, while only a small percentage of their business is credit card business (15 per cent in one instance) there are legal ways to handle cash revenue. (Most well paid lawyers know how to game the system).

Bahamian law does not require financial disclosure of personal income; and it does not obligate people with money to keep their personal cash assets in banks. As for business license fees or other tax obligations, web shops are able to satisfy their requirements annually.

On the larger point, important questions must be considered regarding Bahamian jurisdiction and global commerce. To what extent does Bahamian law apply outside of the Bahamas? If a Bahamian purchases a Miami lottery ticket in Miami, is that Bahamian committing an actionable offence under the laws of the Bahamas? If that Bahamian is found in possession of the Miami lottery ticket inside the Bahamas, is that an offence under the Gaming and Lotteries Act?

What online web shop gaming has created is a grey environment in which a Bahamian can access an international lottery (as they would a Miami

lottery in Miami) from anywhere they have access to the Internet, including web shops. If anything, the existing Bahamian law has more backbone with respect to the patrons of web shops versus the proprietors.

The proprietors of web shops are not licensed to conduct gaming business in the Bahamas, which is quite fine, because they are not claiming to do so.

They are duly licensed to provide internet services in the Bahamas and they do just that.

Bahamians are misinformed about this entire industry. Some of the people trying to lead the debate are very small minded. Their brains seem to be

clouded by memories of Percy Munnings, Mr T or Stokes Thompson-style number houses, of which they probably have first-hand experience. As much as they desire

penance from those wayward days, the detractors of the web shop business need to get real.

In addition to challenges of jurisdiction over Internet acts, what also complicates the issue of regulation, not just in the Bahamas but globally, is the nature of the Internet itself. “Many of the problems associated with Internet gambling are intrinsic to the Internet itself,” states

US-based attorney Daryl Crone, in an essay on Internet gambling.

This point is important especially as it relates to the potential for money laundering. The gaming industry handles large sums of money, but the

threat of money laundering is applicable to all types of Internet commerce not just wagering.

“Digital cash, for instance, will find numerous applications outside of the gambling context. On the other hand, in order to reduce the use of the Internet by problem gamblers, all online operators would have to

coordinate the tracing of all payments, especially once alternative methods of deposit become commonplace. Such a feat seems beyond the realm of possibility,” stated Mr Crone

Governments that act too heavy handed with respect to online gambling regulation risk hindering the development of Internet commerce in general, which would be harmful to growth prospects in the technology sector, a vital engine of growth in the future.

Regulating the web shop business would achieve a simple, practical result: Instead of being international business owned by Bahamians, these companies would be Bahamian businesses owned by Bahamians. Instead of being licensed as internet services providers, the web shops would operate in the Bahamas under a web shop gaming license or Internet wagering or lottery services license, which would be regulated by an amended Gaming and Lotteries Act.

The big payoff: the public purse could finally reap some reward.

I for one cannot help but be slightly moved by the collective success

of the industry. The wealth created by web shop proprietors, black

Bahamian businessmen at that, is something to celebrate. It is unfortunate that the wealth was derived from the Bahamian affinity towards gambling, but blame the Bahamian moral compass for that, if you will, not the business acumen or ingenuity of web shops. Gambling can be addictive, yes, but so can sex, alcohol and religion (“Religion is the opium of the people,” said Karl Marx).

For decades, foreign business men and Bahamians inside a particular

social class have made wealth from the pockets of Bahamians and have

benefited from highly objectionable practices: such as giving away the Bahamian coastline and destroying cultural and environmental heritage sites in the name of private development. Certain groups in society are known to keep the money inside the family: they form strategic partnerships to corner a particular market and spread the wealth amongst themselves.

No one frowns on these businesses for making their money. There is no

sustained campaign against them, with people taking the position “I am

not into make them anymore rich,” claiming they have enough money.

From the political side of things, I am minded to agree with an

academic friend who said, Bahamian politicians seem to loath black people with money who do not need them. People seem to be offended by how rich Craig Flowers and his colleagues seem to be. With the million dollar figures floating around the debate, their success seems unfathomable.

It must be acknowledged that the leaders of the industry had to make

significant investments, take huge risks and innovate for the industry

to have even become something worth talking about. It is short-sighted to write off their experience as criminality or to question their integrity on

the basis of poor government oversight. Too often, people like to have a

say and reap the spoils when they were not prepared to take the risk and invest, if only their own sweat labour.

As one source said to me: “It is about the money and who gets it. It

is all political” (reference to politics in terms of power not party).

“For so long there has been a small portion of Bahamian wealth in a

selective group of guys; they have controlled the country forever and

ever.

“They keep it in the same circle. On the other hand, Bahamians have

this black crab syndrome and they feel other Bahamians should not have what they don’t have themselves. It is the culture we have grown up in,” the source said.

Here we have an industry that services thousands of Bahamian

consumers.

Over the last few months, one of the leading companies had 48,000

active users, while it had up to 120,000 registered accounts. The industry now employs over 4000 people, and wants to hire more. Who else is hiring at those volumes? Next to the government, Kerzner International is the largest employer of Bahamians (with some 6-7000 people), which I have always maintained creates a potential imbalance of power.

This is not to suggest the gaming industry will have as significant an

impact as the tourism industry in general or even Atlantis more

specifically. I am suggesting, however, that the Bahamian government

should support Bahamian home grown business.

The wealth created from the gaming industry has and could further spur

spin off industries or business expansion into new Bahamian home grown industries, and create wealth in the black community, which is starved for some true investment. There is already a trickledown effect from the gaming business.

According to my sources, the industry spends over $1 million per month

on franchise commissions. These commissions are payouts to all of the

barber shops and beauty salons, the gas stations and bars who operate web shop franchises. These establishments make an easy $1,500 in supplementary income per month, according to sources. A busy day can generate up to $300 in clean cut additional revenue. Clearly, the number industry runs deep.

Based on the expertise amongst Bahamians in the gaming industry, it is

conceivable that Bahamians could own and operate casinos in the

Bahamas.

Shouldn’t we aspire to have the casino industry one day finally turned

over to Bahamians?

Examining all of the facts, I do not see how prohibition makes any

practical sense.

I am not a gambling enthusiast. In fact, I believe people without

disposable income should not habitually gamble. However, I do believe

fundamentally people should have freedom of choice on this question.

I hear the moral arguments and I have no qualms with the church’s

position; I simply do not see the relevance in this debate. This is clearly an industry that Bahamians support in sufficient numbers to make it

viable. It is clearly an industry with historical significance in the Bahamas

(see Majority Rule discussion). It is a home grown industry that has

created wealth in the black community.

Successive governments have supported the industry indirectly through

their own inaction and directly from political contributions (via their

electoral candidates). It is time to take our heads out of the sand and bring transparency and true government oversight to the industry.