Online Gambling-Site Owners Busted
July 17, 2006 -- -- Internet gambling was dealt a major blow today when a federal grand jury returned a 22-count indictment against 11 people and four corporations on charges of racketeering, conspiracy and fraud, the Department of Justice announced.
Among those charged was one of the Web's most popular gambling destinations, BetonSports PLC, which owns several Internet casinos and sportsbooks, and the founder of BetonSports.com, Gary Stephen Kaplan, as well as BetonSports.com CEO David Carruthers..
Carruthers was arrested by FBI agents in Dallas on Sunday afternoon as he was returning to his home in Costa Rica from a trip to the United Kingdom. Carruthers, who was traveling with his wife, has been under investigation by a federal grand jury in Missouri, and IRS and Justice Department officials in Washington.
After word of Carruther's arrest began to circulate on the Internet this morning, shares of the publicly traded BetonSports dove almost 17 percent on the London Stock Exchange.
Later in the afternoon the Justice Department announced that Carruthers and Kaplan had been indicted by the federal grand jury in Missouri.
The indictment charged Carruthers, Kaplan and nine other individuals -- including Kaplan's brother and sister, Neil Kaplan and Lori Multz -- with tax evasion, racketeering and conspiracy. Gary Kaplan has not paid federal wagering taxes on $3.3 billion on wagers taken by the firm, according to the indictment.
Along with BetonSports.com also indicted were three Florida-based companies: Direct Mail Expertise, DME Global Marketing and Fulfillment Inc. and Mobile Promotions Inc. Four of the owners and operators associated with the Florida firms have been indicted as well.
"Illegal commercial gambling across state and international borders is a crime," said U.S Attorney Catherine Hanaway of the Eastern District of Missouri in a press release. "Misuse of the Internet to violate the law can ultimately only serve to harm legitimate businesses. This indictment is but one step in a series of actions designed to punish and seize the profits of individuals who disregard federal and state laws."
Kaplan, who lives in Costa Rica, has a long history of sports betting, the indictment said. Kaplan and others operated illegal sports betting operations in New York and Florida in the early 1990s and then moved their operation to Antigua and Costa Rica in 1996-97, according to the indictment. In July of 2004 Betonsports PLC, a holding company was incorporated under the laws of the United Kingdom and became a publicly traded company.
"Through all these relocations, Gary Kaplan and the other defendants always operated, and caused the operation of their primary revenue-producing business, illegal sports wagering in the United States," the indictment said.
According to industry analysts, almost of the more than $10 billion that is wagers placed online each year comes from bettors in the United States. In 2003 the Justice Department estimated that 1,800 such sites generated about $4.2 billion in wagers. Last week, the House of Representatives passed an online gambling bill which would bar credit card companies from making payments to online gambling websites.
The indictment was returned by the grand jury on June 1, 2006, but it was kept under seal because many of the defendants were outside of the United States. Five individuals are currently in custody, arrest warrants have been issued for the remaining defendants who are believed to be outside of the United States.
Prosecutors in the case also received a restraining order from a federal judge that forces BetonSport.com to stop taking wagers from inside the United States.
The order also seeks to return money to account holders who currently have money being held in accounts held by the Website. According to the BetonSports.com Website, they have roughly 1.2 million registered users.
Carruthers had an initial appearance at the federal court in Forth Worth, Texas, today. He will remain in custody until a detention hearing, which is set for Friday.