Hosenball, M. (1999, October 18). Sex, bets, and bikers: Vancouver’s starnet communications was a high-flier until a police raid spooked investors. Newsweek, pp. 50-51.

OVERVIEW

In the early 1990s, Ken Lelek and friend Lloyd Robinson ran an agency which booked strippers for nightclubs. As they talked with Paul Giles and some other friends, they realized they could make a whole lot of money "selling sex on the Internet." Their new Web sites included Sizzle.com, Chisel.com and Redlight.com—featuring "live strip shows and all manner of hardcore pornography." Soon it bragged of customers "in more than 60 countries."

These entrepreneurs realized how much money betting could bring in.

By 1997…online customers could enter the cybercasino and play blackjacks or craps, or put down wagers on college and professional sports. The company enlisted sports celebrities, including former heavy-weight boxing champion Larry Holmes, to endorse its gambling sites.

Profits soared. Starnet’s reveneus for fiscal 1999 totaled $9.7 million. (Its stock soared) from 37.5 cents November (1998) to $29. by July (1999). At its peak, Starnet’s paper value neared $900 million.

But just as its success was being heralded in Vancouver, Canada and elsewhere—and as the company was applying for membership in the Nasdaq stock market—Canadian police swooped into its offices. It happened at dawn in August 1999, after an 18-month investigation.

Pornography on the Internet is not illegal. But it was the role of the Canadian Hell’s Angels, a biker group considered the area’s worst criminal gang, that turned the police in this direction. Although Lloyd Johnson was never an official part of Starnet, he is a leader in the bikers and has provided strippers for Starnet’s live Internet shows. More important, Project Enigma, as the police probe was termed was searching out illegal gambling. In both Canada and the U.S. providing gambling services without a license is illegal. And Starnet did not have a license. Moreover, graphic depictions of sado-masochism violates Canadian anti-obscenity laws.

News of the police raid caused Starnet’s stock to crash to single digits:

(Starnet’s) president, Paul Giles, has moved the company’s headquarters to the Caribbean haven of Antigua, outside the reach of Canadian and American regulators. That may give Starnet a brief respite from the prying eyes of the law, but the stakes for the mushrooming Internet gambling industry just got a lot higher.

QUESTIONS FOR REFLECTION AND DISCUSSION

1. What do you see as the dangers of unrestricted license on the Internet? What options do we have?
2. Specifically, what harm can the portrayals of pornographic sex, extreme violence, and on-line gambling do? Are these dangers real and substantiated?
3. What kind of regulation and restriction do you favor?

IMPLICATIONS

1. Increased freedoms and complexities of modern life seem to parallel a void of solid morality shared in our societies.
2. The Internet is a great advance and boon to contemporary life. It also has its dangers. It adds to our workload even while saving time. It can provide company for lonely people and information to those who might not have it. But it can also become addictive, leading vulnerable people to crime or victimization.
3. Greedy entrepreneurs will exploit the prurient interests and addictions without moral regard or concern of harmful consequences.
4. Negative features of the Internet must first be regulated individuals themselves, be reinforced by the family, schools and religion, and finally be restricted and regulated by legal means.
5. If regulating the Internet is primarily a personal matter, the training of children is essential.

Dean Borgman cCYS