Microsoft, Google, Yahoo to Pay $31.5M Over Illegal Gambling Ads

Dec. 19, 2007 — -- Three major Internet companies have settled with the Justice Department for $31.5 million for promoting illegal online gambling, a U.S. attorney in Missouri announced Wednesday.

Microsoft, Google and Yahoo will set up a fund to air public service announcements informing young people that online gambling in the United States is illegal.

Google will pay the government $3 million and Yahoo will pay $7.5 million for their participation in advertising online gambling on their search engines.

Microsoft will pay $21 million. As part of the settlement, Microsoft will also provide $9 million to the International Center for Missing and Exploited Children.

Microsoft spokesman David Bowermaster said in a statement to ABC News that the company stopped accepting ads from online gambling sites nearly four years ago, and called the agreement with the U.S. Attorney's office a "mutually beneficial outcome" that will "provide substantial resources to protect consumers from harmful Internet content."

"We're hopeful that our educational campaign will stop young people from gambling before they start," he said.

According to Bowermaster, the company "suggested a contribution to the ICMEC as a way to advance an important cause that is a government priority."

The settlement resolves government claims that the firms made profits from promoting online gambling on their Web sites between 1997 and 2007.

"These sums add to the over $40 million in forfeitures and back taxes this office has already recovered in recent years from operators of these remote-control illegal gambling enterprises," U.S. Attorney Catherine Hanaway said in a statement.

The U.S. Attorney's office for the Eastern District of Missouri has investigated the online gambling sites, with federal grand juries returning numerous indictments for the operations.

In June 2006, a federal grand jury indicted the founder of BetOnSports.com, Gary Stephen Kaplan. Kaplan was charged with violating anti-racketeering laws, the Wire Act and tax violations.

The original indictment against Kaplan indicated that he had a long history of involvement in sports betting operations, starting in New York and Florida in the early 1990s, then moving to Antigua and Costa Rica.

In 2004, BetonSports PLC was incorporated as a holding company in the United Kingdom, and became a publicly traded company.

Kaplan was arrested in the Dominican Republic in March 2007, and has been ordered to remain in federal custody. He pleaded not guilty to the charges against him in May, and is awaiting trial.

A judge freed company CEO David Carruthers on $1 million bond, though he was ordered to be placed under electronic monitoring. He is also awaiting trial.

BetonSports PLC entered a guilty plea to a racketeering conspiracy charge in May 2007 and will be sentenced next summer in federal court in St. Louis.

According to industry analysts, of the more than $10 billion in wagers placed online each year, $4.2 billion came from bettors in the United States.