The Unabridged History of Winners and Losers

[Tatari Gami]

St. Augustine, Fla.-Based Web Firm Initiates Transaction Service for Casinos.
July 21, 2000 (The Florida Times-Union/KRTBN).
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St. Augustine, Fla.-Based Web Firm Initiates Transaction Service for Casinos
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July 21, 2000
Jul. 21 (The Florida Times-Union/KRTBN)--Congress this week failed in its latest attempt to pass a bill banning Internet gambling, a bill that would put a serious crimp in the business of Winners Internet Network Inc., a St. Augustine-based company that provides transaction services for Internet casinos.

But David C. Skinner Jr., president and chief executive officer of Winners Internet, wasn't losing any sleep over Monday's vote in the U.S. House of Representatives. And he won't worry when the bill, inevitably, comes up again.

Skinner has been preparing for it for years. "We founded the company on the premise that at one point in time,
there would be legislation to prohibit this," he said.

Skinner started the company in the mid-1990s to provide clearinghouse services for Internet casinos. An accountantworking in a tax consulting practice with his father, Skinner got to know the casino business by working with one of their clients, a casino in Aruba.

"I ended up learning the gaming business from the inside out," he said.

Winners Internet provides a system that assures both casino operators and gamblers that payments will be made. Of course, that kind of system can easily be adapted for other uses, and Winners Internet has been expanding its operation to provide services for all kinds of companies that do business over the Internet.

"We knew we would have to get involved in the e-commerce market," Skinner said.

Winners Internet currently gets about 20 to 25 percent of its revenues from general e-commerce and the rest from Internet casinos. Even if there is no legislation against Internet gambling, Skinner expects e-commerce revenues to become a bigger part of the company.

"I would estimate by year-end we would have at least a 50-50 split," he said.

According to the company's most recent financial report, about 85 percent of its casino revenues come from U.S. players. Winners Internet does not operate a casino, but its Web site provides links to allow users to find Internet casinos, located outside of the United States, that use the Winners Internet transaction system.

Federal laws regarding Internet gambling are murky. A 1961 law called the Interstate Wireline Act made it illegal to place bets over telephone wires, but since the Internet is sometimes wireless, there has been a legal debate over whether that law applies to Internet gambling.

To clear up the confusion, the U.S. Senate approved a bill last November that expressly prohibits Internet gambling and the House voted on similar legislation Monday. But the House bill failed, apparently over concerns about some exemptions in the bill.

The bill will likely come up again and if federal legislation is enacted to prohibit Internet gambling, Winners Internet won't do any casino business with U.S. customers. The company complies with all prohibition laws against gambling and its software is designed to deny access to anyone trying to place a bet from an illegal jurisdiction.

"They might get through for a while, but eventually we'll catch them," Skinner said.

For example, Winners Internet will not take any bets in Florida, which does have specific laws that cover Internet gambling.

"It is absolutely illegal to gamble in Florida. There is no question about that," said John Glogau, special counsel in the Florida Attorney General's office.

It would also be illegal in Florida to process transactions for gambling. But while Winners Internet's administrative office is in St. Augustine, its server -- the central computer that provides the processing services -- is actually located in Liechtenstein. Skinner had some business connections in the small European country because his father did some tax work there in the 1980s.

But don't think Winners Internet is trying to hide anything by locating its server overseas.

"We wanted to be a public company, to be an open book," Skinner said. Winners Internet is a publicly traded company with its stock listed in the over-the-counter market. It recently became what is known as a fully-reporting company with the Securities and Exchange Commission by merging with a dormant public company called Glennaire Financial Services Inc., which had fully-reporting status. So Winners Internet is now filing financial reports with the SEC.

The reports show that the company, which only went on-line in late 1999, had revenues of $822,673 and a profit of $5,067 in 1999.

Besides the legal reasons for putting its server overseas, Winners Internet also gets a competitive advantage in providing service for international customers. Its Liechtenstein server can process transactions in 13 different currencies.

"In the U.S., you would have to convert everything in U.S. dollars," Skinner said. "We were able to set up multiple accounts in multiple currencies."

As of now, Winners Internet has only four U.S. employees and 13 in Europe. But as the e-commerce business grows, Skinner said the company will consider expanding in St. Augustine and possibly putting a server there.

"We definitely want to have some kind of presence in the U.S.," he said.

By Mark Basch