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Table of Contents

Lead Story

The B2B tortoise: Plodding to win

News

Industry Update

POS terminal makers take off the gloves

Intuit - ECHO kaput, fed crackdown afoot

Wal-Mart drops plea for ILC

SEAA meeting offers added-value advice, vendors

Interchange Charts

Features

AgenTalkSM:
Marlene O. Smith

GS Advisory Board:
Global economy, global business?

A look ahead: ATMs and the next 10 years

Tom Harper
ATMmarketplace.com

Views

PIN pad security: Get a grip

Bulent Ozayaz
VeriFone

Education

Street SmartsSM:
Something ventured, something gained

Dee Karawadra
Impact PaySystem

Card Association rules to work by

David H. Press
Integrity Bankcard Consultants Inc.

I'm in heaven: Your merchants' new mantra

J. David Siembieda
CrossCheck Inc.

All-star processing – Part I: Deployment

Marcelo Paladini
Cynergy Data

Company Profile

Crossgate Dynamics LLC

New Products

Encryption-happy PIN-entry devices

SecurePIN
ID Tech Inc.

A real sticky merchant service

Third-party guarantee program
Assurz Inc.

Colorfully foiled fraud

Poweroll two-sided color paper
TransAct Technologies Inc.

Inspiration

Who needs the whole enchilada?

Departments

Forum

Resource Guide

Datebook

Skyscraper Ad

The Green Sheet Online Edition

April 09, 2007  •  Issue 07:04:01

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Intuit - ECHO kaput, fed crackdown afoot

Electronic Clearing House Inc.'s foray into processing Internet wallets for online gaming six years ago has had unfortunate consequences. Intuit backed out of an agreement to buy the company when ECHO disclosed and quickly settled a federal probe in late March for $2.3 million.

The acquisition would have given ECHO broader market scope. Intuit is the maker of QuickBooks, Quicken and TurboTax software.

ECHO accepted a nonprosecution offer from the government regarding ECHO's role as processor to Internet wallet sites, which typically hold funds for online gamblers.

The $2.3 million the company will disgorge is its estimated profits from processing and collection services provided to such clients since 2001, ECHO Chairman and Chief Executive Officer Joel M. Barry said in a conference call with investors March 27, the day of the disclosures.

ECHO was never identified by U.S. attorneys as the target of the probe, he said. Rather, the Justice Department has enlisted the company as a witness against other parties.

ECHO ceased most Internet wallet business when the Unlawful Internet Gambling Enforcement Act was signed into law in October 2006. It is now out of the Internet wallet business entirely. Barry said he could not discuss under what laws the government is pursuing its case.

Dissenting opinions

Intuit and ECHO mutually agreed to terminate the contract, a decision criticized by investors on the call. "Given the beating your stock is taking - down over $7 [per share] - if you had taken a price cut, ... it might have been better for shareholders," said investor Paul Glazer.

Intuit may have backed out of the deal because of its own disappointing earnings, "so their threshold for risk might have been lower," commented Dorsey R. Gardner, President of Kelso Management Co.

"I don't understand how that's in your best interest," said Troy Hottenstein of RG Capital Management. "You should have held them to that deal."

The Intuit deal "spread us across a broader market than we would like to operate in," Barry said. "We still believe the value of ECHO is very high." Gardner suggested Intuit's decision gives ECHO other merger opportunities: "I thought you were selling kind of cheap. At today's prices, selling at one-times revenues is a huge discount," he said.

Barry said as ECHO refocuses on its traditional market, it will see operational savings from a new processing platform, which was in development for several years. "The Intuit transaction represents an endorsement of our business strategy" of focusing on technology and embedded software solutions, said Charles Harris, ECHO's President and Chief Operating Officer. ECHO reported revenue of $75 million for 2006.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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