Online gaming divides Six Nations

By Steve Buist and Joan Walters
Special to the Hamilton Spectator
(Oct 2, 2006)

The federal government has awarded more than $1.5 million in contracts this year to a company on the Six Nations reserve that is associated with illegal online gambling.

SixNet is a company listed as the operator of computer servers on the reserve that host gaming sites that include Absolute Poker, one of the world's most popular Internet gambling destinations.

Based in Costa Rica, but operating on SixNet servers, Absolute Poker gets up to 6,000 players an hour at peak times for its real-money tournaments.

Hosting such an online gaming operation on Canadian soil is an offence under the Criminal Code.

And the issue of illegal use of servers on Six Nations land has caused an explosive split on the reserve.

A Spectator investigation shows SixNet has at least six purchasing agreements with the government to supply name-brand computer software for the use of federal office workers.

The government software customers are Indian and Northern Affairs, Health Canada, Agriculture and Food, Foreign Affairs and International Trade and Public Works and Government Services.

Government officials would not answer questions specifically about SixNet.

But in general, the officials said, purchasing officers are required only to verify that a company is capable of delivering the goods it has been retained to supply.

"THEY WOULDN'T be looking at the firm as to what kind of other business interests they'd be involved in," said Allan Frost, a director at Indian and Northern Affairs, which lists SixNet as a supplier for about $950,000 worth of computer software and related goods.

The contracts raise important questions about the government's accountability and screening processes.

Duff Conacher, head of the Ottawa-based citizen group Democracy Watch, has reservations about the screening process.

"They should be doing more research," he said.

"The public service overall -- and the businesses it deals with -- should be upholding the standards that the Canadian public expect, in everything they do."

The principals behind SixNet are Jerry Montour and Ken Hill. They are major figures involved in the Six Nations' international cigarette manufacturing business known as Grand River Enterprises, which recently won a $70-million contract to supply smokes to the German army.

SixNet is located in the Grand River Enterprises building on the Ohsweken reserve.

SixNet is designated as an official aboriginal supplier to the government under a minority business support program that sets targets for spending on businesses operated by natives.

The goal is to try to strengthen First Nations enterprises by ensuring they have access to some of the $13 billion a year spent annually by government through purchasing contracts.

George Butts, a director general at Public Works, the government's central purchasing group, said he was not aware of the details of his own department's relationship with SixNet.

But policies in general, he said, are focused on making sure contractors have the experience, finances and business credentials to deliver on commitments to the government.

There are no broader checks done before selecting a company as a supplier.

"We approach the system really from the fact that we're doing business with firms that are good corporate citizens," said Butts, a senior civil servant with more than two decades of experience in federal purchasing.

"We've got enough bureaucracy in the system, we don't try to add more layers."

For Hill and Montour, SixNet is part of a massive business operation with sales of hundreds of millions of dollars a year.

Stretching from its Six Nations base to Europe and the Caribbean, it's a conglomerate that includes everything from cigarette manufacturing, mining and bottled water to smaller operations as diverse as construction, gas bars and a junior hockey team.

The scope of the businesses and the personal economic clout of Hill and Montour give them tremendous power at Six Nations -- through the jobs they supply, the donations they make through a corporate foundation funded by the cigarette company and the day-to-day events they are able to influence.

Montour and Hill -- through their lawyer -- declined repeated requests from The Spectator for an interview about Grand River Enterprises and its associated companies.

The two men also have found themselves at the centre of legal troubles in the past.

Hill, a Six Nations Mohawk, is back in court on Oct. 11 on two assault charges related to an incident in June in Caledonia, near the site of the lengthy, well-publicized native occupation of a disputed housing development.

JERRY MONTOUR, a Mohawk from the Wahta reserve in Muskoka who lives in east-end Hamilton, spent time in jail in Canada in the late 1980s after being convicted of conspiring to import marijuana from Mexico.

Grand River Enterprises, which employs about 200 people, is the largest private employer on the Six Nations reserve and one of the largest native employers in Canada.

Many in the community see Hill and Montour as the big-money drivers of the economy of Six Nations, Canada's most populous reserve with about 22,000 members. About half of them live off the reserve.

"Probably every single person has had or will have someone in their family who has worked for GRE," said Hazel Hill, who has come to public attention as a spokesperson for the reclamation of Douglas Creek Estates -- the Caledonia subdivision occupied in the land claim dispute since February.

Hill and Montour "definitely have resources to support political agendas and initiatives that they feel appropriate," said Dawn Martin-Hill, head of McMaster University's indigenous studies program and a Six Nations resident.

"That's not abnormal for any businessman in their situation."

Over the last 15 years, Hill and Montour's operations have gradually expanded from the limited confines of Six Nations to the more sophisticated opportunities of the world at large -- including status as official supplier of 3.5 million bottles of Wahta Springs water for the famed Rolling Stones fundraising concert in Toronto in 2003 and SixNet's recent emergence as an aboriginal supplier to government.

But use of servers that enable Internet gaming sites to operate is not approved -- either by the Six Nations band council or by Canadian law.

Gaming has split the Six Nations community for a number of years.

The issue became more heated just last week when Elected Band Chief David General issued a warning to the community not to be enticed "to the dark side" by "big money and tobacco."

He said he was not referring to specific members of the reserve. He was reflecting the split between those who are drawn to the idea that gambling can produce strong revenue and business opportunities and those who worry about the impact of gambling on families and traditional First Nations society.

"I still maintain that the only way to find out if our community is willing to accept Internet gaming is to take it to a referendum," General told The Spectator. "Internet gaming is still illegal in Canada and the U.S."

He added that he does not know "at this time, if SixNet is pursuing providing their services to on-line casinos."

But a spokesperson for Absolute Poker said SixNet is the provider of Absolute's online servers.

"We've had our Six Nations, or the SixNet, licence for about three years and the games are hosted out of their facility in Ontario," said Jason Reindorp, a media relations spokesperson for Absolute Entertainment S.A, the Costa Rica-based parent of the poker site.

Hosting, licensing or promoting online gambling is illegal in Canada under Sections 202 and 206 of the Criminal Code.

It's not illegal to take part in online gambling as a player.

But some aboriginal communities claim they have rights as sovereign nations to license and operate online gambling systems for offshore companies, in contravention of the Canadian law.

The Kahnawake Mohawks, just south of Montreal, have been hosting hundreds of online gaming sites for the last 10 years without charges being laid.

Their Kahnawake Gaming Commission is considered one of the world's largest hosts of online sites.

At Six Nations, SixNet is listed as the computer hosting facility for online gaming sites licensed by two Internet gaming agencies based on the reserve.

The two licensing groups are known as the Six Nations Internet Gaming Regulatory Body and the Haldimand Mohocks and Allies Gaming Commission.

SixNet, Six Nations Internet Gaming Regulatory Body and the Haldimand Mohocks and Allies Gaming Commission are all located in the same office -- in the headquarters of the Grand River Enterprises cigarette factory on Chiefswood Road in Ohsweken.

A 45-page application form for those seeking an online gaming site licensed by the Haldimand Mohocks group indicates that SixNet is the exclusive hosting facility and that the gaming activities are conducted from a SixNet facility located on "Grand River Mohock Lands."

A HALDIMAND Mohocks gaming licence costs $3,000 US per month per site, along with a $5,000 US non-refundable application deposit.

The Six Nations Internet Gaming Regulatory Body also has a direct link to SixNet on its website.

Three years ago, Hill and Montour approached the Six Nations band council as representatives of SixNet in a failed attempt to seek approval for online gambling.

The two were asked to provide a legal opinion and a business plan for the proposal, which the band's Economic Development Committee says were never received.

The band council did obtain its own legal opinion, however, which suggested that "Internet gaming activity in Canada directed at customers who reside in Canada or in foreign countries was not authorized under the Criminal Code."

But The Spectator's investigation shows that even though they never received band approval, SixNet and the Six Nations Internet Gaming Regulatory Body have been involved with at least one online gaming site since around the time of the meeting with the band council in 2003.

The Spectator also discovered one signed copy of a licence issued by the Six Nations Internet Gaming Regulatory Body.

At least three online gambling sites are licensed by the Six Nations Internet Gaming and Haldimand Mohocks groups -- Absolute Poker, Absolute Poker Lady and Goal Poker.

According to the iGaming Business Directory's summer 2006 figures, Absolute Poker is the world's third-largest online poker room, based on website traffic. Reindorp, the Absolute spokesperson, indicated his company's sites are licensed by both the Six Nations Internet Gaming Regulatory Body and the Haldimand Mohocks.

Because countries such as Canada and the United States consider the delivery of online gambling to be illegal, many of the world's Internet gaming sites are hosted on computer servers located in places such as Belize, Antigua, Costa Rica or the Isle of Man.

Bowman International, a large sports betting operation, is located on the island of Mauritius in the Indian Ocean.

For those who operate online gaming sites, having computer servers offshore raises issues of reliability, service and the integrity of the games.

It also has become a thorny legal issue.

The U.S. is currently engaged in a highly-publicized anti-racketeering campaign that has targeted the operators of online gaming.

The CEO of BetOnSports PLC, a publicly-traded online gaming company, was arrested in Dallas in July as he was waiting to change planes on his way from London to Costa Rica.

The former chairman of Sportingbet PLC, another public online gaming company, was arrested last month at New York's Kennedy Airport when he stepped off a flight from England.

SixNet, the two Six Nations licensing bodies and the Kahnawake Gaming Commission are attractive to offshore gaming companies that want to take advantage of Canada's political and economic stability as well as its advanced technological capabilities.

"Canada has some of the best infrastructure in the world," said Michael Lipton, a Toronto lawyer who is considered one of Canada's leading experts on gaming law.

SixNet promotes itself as a reliable and secure state-of-the-art network that offers round the clock staffing support. In fact, SixNet's main message on its website states: "Bringing your offshore hosting back to the mainland."

Montour told Six Nations council three years ago that SixNet had spent almost $1.2 million to install special fibre wires and equipment for the computer hosting site.

There have been few Internet gambling cases tested in Canadian courts.

The precedent in this area is considered in a Vancouver case involving Starnet Communications.

THE COMPANY operated online gaming sites from computer servers in Antigua but police discovered one gaming-related server that was in Vancouver.

Starnet was charged under a section of the Criminal Code that makes it illegal to keep any machine or device for gambling, betting or recording and registering bets.

The company pleaded guilty to one count in 2001, was fined $100,000 and forfeited $4 million US under proceeds of crime provisions.

Native claims, such as those made by the Kahnawake Mohawks, that they retain sovereign rights over online gaming have never been properly defined in court.

"Has it been tested in the courts? No. Are (the Kahnawake Mohawks) carrying on openly and transparently? Yes," said Lipton.

"Does the Quebec government know about it? Yes.

"Has the Quebec government gone on record to say that it's legal or illegal? They said that it's illegal back in 2001 but they haven't done anything about it."