Casino News: Experts: Last arrest of BetOnSports CEO won't hurt online casinos

Experts: Last arrest of BetOnSports CEO won't hurt online casinos

 July 23, 2006, 3:21 pm (10 years ago)

BetOnSports CEO, David CarruthersFORT WORTH, Texas - One day after federal officials announced indictments of operators of an offshore Internet gambling site, there were signs of how difficult it will be to prosecute the case.

A federal judge on Monday issued an order barring BetOnSports PLC from taking bets by U.S. residents. But on Tuesday the site appeared to be operating normally, offering bets on Major League baseball and season-opening college football games.

The company's founder, Gary Stephen Kaplan, the biggest target in the indictment, was somewhere in Costa Rica. He had nothing to say about the case, according to a spokesman.

Trading of the company's shares was suspended in London on Tuesday. They fell as much as 24 percent Monday following news that the company's chief executive, David Carruthers, had been arrested and closed down 17 percent at 122.50 pence ($2.24).

In the fiscal year ended Feb. 5, BetOnSports reported a 65 percent gain in operating profit on continuing operations to $20.1 million. The company said it handled $1.77 billion worth of bets for the year, up 25 percent.

On Monday, federal officials unsealed a 22-count indictment that charges 11 people and four companies with conspiracy, racketeering and wire fraud in taking sports bets from U.S. residents. Authorities said BetOnSports falsely claimed that Internet and phone wagering on sporting events was legal and licensed.

Five of the 11 individuals were arrested, including Carruthers, who remained in custody in Fort Worth pending a detention hearing on Friday. Carruthers was arrested Sunday at Dallas-Fort Worth International Airport as he waited for a connecting flight to Costa Rica.

The Justice Department is seeking the forfeiture of $4.5 billion, plus several cars, recreational vehicles and computers from the defendants. Prosecutors convinced a federal judge in St. Louis to order BetOnSports to stop accepting bets placed from within the United States.

A company spokesman, Kevin Smith, declined to say Tuesday whether any bets were being turned down.

"We are still in a holding pattern," Smith said. "Our attorneys are mulling over all the information and deciding the next legal step."

Legal experts and those who follow the online gambling industry said it was unclear what would happen if BetOnSports defies the judge's order to stop taking U.S. bets. Americans accounted for virtually all of the company's business until recently, when it began aggressively courting bettors in Asia.

If the company continues to take Americans' bets, federal officials could respond by pressuring the governments of the United Kingdom, where BetOnSports is incorporated, and Costa Rica, its major base of operations.

But such appeals might not work, especially in Costa Rica, which has become a haven for Caribbean online sports books and casinos in the past decade because of its light approach to regulation, experts said.

"There are probably at least 140 sports books operating down there. Those are a ton of jobs," said Sue Schneider, president of a suburban St. Louis firm that tracks the industry.

About 2,000 people work at BetOnSports' offices in San Jose, Costa Rica, according to a local newspaper.

Even if BetOnSports were shut down, there are plenty of sites to take its place. Some online sports books might stop taking bets from U.S. residents, but only if the United States is a small part of their business, Schneider predicted.

The indictment is likely to have even less effect on online casinos – those that take bets on poker or other games, but not on sporting events.

In the past decade, federal officials have prosecuted many operators of online sports books with U.S. ownership or operations because federal law prohibits using phone wires to place those bets, said Anthony N. Cabot, a Las Vegas lawyer who has represented traditional and online casinos.

In a celebrated case from 2000, prosecutors won a conviction against Jay Cohen, a U.S. citizen who ran an operation in Antigua that took sports bets from Americans over the Internet. He was sentenced to 21 months in prison.

But the wire law doesn't cover other types of casino betting, a federal appeals court in New Orleans ruled. That has left some doubt about whether prosecutors can shut down poker and other casino games that target American players, Cabot said.

And unless the operators set foot in the United States – as Carruthers and Cohen did – it's difficult to extradict them, Cabot said.

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