BetOnSport's Kaplan had to turn $43 million over to feds

BetOnSport's Kaplan had to turn $43 million over to feds

Special to A.M. Costa Rica


Gary Kaplan, the founder of BetOnSports, has pleaded guilty to federal racketeering charges and agreed to surrender more than $43 million, according to the U.S. attorney's office in St. Louis, Missouri. Kaplan will serve between 41 and 51 months in federal prison, according to the deal he made with prosecutors. David Carruthers, another executive of the operation, pleaded guilty April 1 in the same jurisdiction.

U.S. federal officials now say that Kaplan and his associates caused the loss of from $7 to $20 million to about 250 customers. These are believed to be U.S. citizens who had active accounts at the BetOnSports operation when Carruthers, a British citizen, was snagged while changing planes in the United States.

The guilty pleas conclude a lengthy investigative and prosecution effort by several law enforcement agencies, including the IRS and the FBI. Kaplan has been in custody without a bond set since his arrest in March 2007. Sentencing has been set for Oct. 27, 2009.

BetOnSports employed hundreds of young Costa Ricans and had facilities in Mall San Pedro. Kaplan began closing down the operation after the arrest of Carruthers. Kaplan had been a fugitive until March 2007 when he was arrested in the Dominican Republic.

Pursuant to a complex plea agreement, Kaplan, 50, entered pleas of guilty to charges of conspiracy to violate the racketeering statute, conspiring to violate the Wire Wager Act and violating the Wire Wager Act. He appeared before U. S. District Judge Carol E. Jackson in St. Louis. As part of the plea, Kaplan caused the wire transfer of more than $43 million from a Swiss bank account to a U.S. District Court bank account approximately one week prior to enter his guilty pleas.

Kaplan said in court Friday that beginning in the mid to late 1990s, he set up business entities offshore in Aruba, Antigua and eventually Costa Rica to provide sportsbook services to U.S. residents through Internet Web sites and toll-free telephone numbers. He founded, operated and controlled, with others, the enterprise known as “BetOnSports.”

BetOnSports advertised heavily in the United States to solicit U.S. residents to place sports wagers by telephone and over the Internet, said law enforcement officials. BetOnSports-related entities controlled toll free numbers and domain names advertised by BetOnSports.

Technologically, Kaplan’s toll-free telephone lines terminated in Houston or Miami, and then were forwarded to Costa Rica by satellite transmitter or fiber-optic cable. Some of Kaplan’s Web servers were located in Miami and were remotely controlled from Costa Rica.

U.S. residents became customers of BetOnSports by depositing funds on account and placing wagers over U.S. toll-free telephone lines and via the Internet using the deposited funds, said officials. Funds were sent from the U.S. customers to BetOnSports operations outside the United States and the company sent winnings from outside the United States to its U.S. customers.
BetOnSports was highly successful and attracted a large number of U.S. customers. By 2004, the BetOnSports organization’s principal base of operations in Costa Rica employed approximately 1,700 people. During the year ended Jan. 31, 2004, BetOnSports had close to 1 million
registered customers, and accepted over 10 million sports bets in a cumulative gross amount that exceeded $1 billion, officials estimate.

In mid-2004, Kaplan made a successful public offering of the stock of BetOnSports on the London Alternative Investment Market that netted him over $100 million. Those funds eventually found their way into various Isle of Jersey trusts which invested the funds in Swiss bank accounts.

Carruthers was hired by Gary Kaplan in approximately June, 2000, as chief executive officer of BetOnSports.com. Carruthers agreed to conduct the enterprise through, what officials claimed was a pattern of racketeering acts, including repeated mail fraud, Wire Wager Act violations, operation of an illegal gambling business and money laundering.

Law enforcement officials claims that the BetOnSports organization made false representations to the targets of its advertising campaigns and customers by:

• Creating and disseminating advertising throughout the United States which represented that its Internet and telephone gambling operations were legal and licensed. They failed to disclose known material facts, namely that the U.S. government and most state governments viewed such operations as illegal, and that they did not have a license to operate legally anywhere in the United States.

• Representing to potential customers that money transferred by them to BetOnSports on account was safe and readily available to be withdrawn at anytime. BetOnSports was actually using the funds to support and expand its operations, including the purchase of Easybets. When BetonOnSports ceased operations in July 2006, it could not repay its customers over $16 million held on account.

"BetOnSports was a very large and diverse operation. While BetOnSports operated offshore, their illegal activities were not outside the long arm of the law. This plea is a significant step in the government's efforts to end the proliferation of U.S.-facing offshore sportsbooks," said John Gillies, FBI Special Agent-in-Charge, St. Louis Office.

Carruthers, 51, faces a maximum penalty of 20 years in prison and/or fines of up to $250,000. Sentencing has been set for Oct. 2.

Offshore gambling was targeted heavily by the George Bush administration, which tightened the cash flow from U.S. gamblers.

Carruthers was outspoken in his defense of offshore gambling, and that may have been what got BetOnSports in trouble with authorities.

A number of sportsbooks still operate in Costa Rica. Many U.S. young men and women work at these establishments.