In a sharp escalation of their crackdown on Internet gambling, United States prosecutors said yesterday that they were pressing charges against the chief executive of BetOnSports, a prominent Internet gambling company that is publicly traded in Britain, and against several other current and former company officers.
Federal authorities arrested the chief executive, David Carruthers, late Sunday as he was on layover at Dallas-Fort Worth International Airport on his way from Britain to Costa Rica. In a hearing yesterday in Federal District Court in Fort Worth, he was charged with racketeering conspiracy for participating in an illegal gambling enterprise.
Also at the hearing, the court granted the government's request for a temporary restraining order preventing BetOnSports from accepting wagers from customers in the United States and requiring it to return money held in the accounts of American customers.
In addition to Mr. Carruthers, the government filed charges against 10 other people involved with BetOnSports and with three Florida marketing companies that prosecutors say were involved in promoting illegal gambling.
The charges, particularly those against Mr. Carruthers, who runs a company that has been a symbol of the investment potential of offshore casinos, raise complex legal and political questions. And they are the most direct attack in several years on offshore Internet casinos, setting up a showdown with an industry that has grown increasingly brazen in promoting online wagering in the United States.
The gambling sites allow people to place bets on sporting events and play casino games like blackjack from their computers. The companies keep their computer servers in places like the Isle of Man, Antigua and Costa Rica, where BetOnSports has its operating headquarters.
A BetOnSports spokesman declined to comment, saying the company's board was meeting late last night to assess the situation. Some industry executives have said the offshore casinos cannot be prosecuted because while they take wagers from American bettors, the physical operations are outside United States jurisdiction.
Prosecutors assert that under the Federal Wire Act of 1961, the providers and promoters of Internet sports books and casinos are participants in a criminal enterprise.
The fact that these operations are legal in their home jurisdictions "does not entitle them to do business in the United States," said Catherine L. Hanaway, the United States attorney for the Eastern District of Missouri, which brought the indictment. The charges announced yesterday indicate that "their efforts to avoid U.S. law enforcement will be challenged and brought to justice whenever possible."
In addition to Mr. Carruthers, prosecutors brought charges against Peter Wilson, BetOnSports's media director; Gary Kaplan, the company's founder; and several of Mr. Kaplan's relatives, whom the indictment alleges were involved in the business. The indictment was returned June 1 but was sealed until yesterday.
Also charged were operators of Direct Mail Expertise Inc., DME Global Marketing and Fulfillment Inc. and Mobile Promotions Inc., Florida-based companies that prosecutors say helped promote the offshore casinos in advertisements. Those accused are charged with various counts of racketeering, conspiracy and fraud for providing and promoting illegal gambling.
A woman who answered the telephone yesterday at a number listed for Direct Mail Expertise said she knew nothing about the company or its legal problems. A message left on the answering machine of DME Global Marketing yesterday was not answered. No listing was available in Florida for Mobile Promotions.
The indictment seeks to have the accused forfeit $4.5 billion in holdings.
The restraining order, issued by Judge Catherine D. Perry of United States District Court, lists more than a hundred casino Web sites that it says are controlled by the defendants.
"This is a shot across the bow," said Lawrence G. Walters, a Florida lawyer who specializes in Internet gambling law. "They're letting the industry know, 'We're about to come after you.' "
The indictment sent BetOnSports's shares skidding; they fell 16.5 percent to close at $122.50. According to the indictment, marketing materials from BetOnSports claimed that in 2004 and 2005, the company took 98 percent of its wagers from customers in the United States.
The company's spokesman said yesterday that that figure was now down to between 70 percent and 80 percent.
The charges reinforce a growing divide between the United States' policy on Internet gambling and its popularity in much of the rest of the world, not just among gamblers but also with investors. Some popular sites have sold shares to the public and are experiencing growing revenue and, in turn, interest even from major American investment houses, which hold shares of the online casinos in their mutual funds.
There is also a disconnect between the government's efforts to prohibit online casinos and the activities of hundreds of thousands of Americans who regularly place bets over the Internet.
Last week the House of Representatives overwhelmingly approved legislation to crack down on Internet gambling operations, including criminalizing the processing of payments to such operations by financial institutions. The Senate has not yet voted on the bill.
This is not the first time prosecutors have gone after the operator of an Internet gambling site. In 1998, federal prosecutors indicted Jay Cohen for operating a sports betting Web site that violated the Wire Act, and in 2000 he was sentenced to 21 months in prison.
But operators of offshore casinos have been emboldened in recent years, in part because they have received the stamp of legitimacy from foreign governments. They have expanded their efforts to market in American magazines and on radio and television, and with success: analysts say that more than half of all Internet wagers come from residents of the United States.
Mr. Carruthers has been particularly outspoken about trying to get the United States to change its policies, visiting frequently to press his case with the news media and investors.
"He's been very vocal and didn't think that there was anything the government could do," Mr. Walters said.
Ms. Hanaway, the United States attorney in Missouri, said the arrest happened during this visit because "it's when we knew he was coming." Asked whether it presented a challenge to prosecutors that Mr. Carruthers is not an American citizen, Ms. Hanaway said, "Thus far, no."
Sue Schneider, publisher of Interactive Gaming News, an online magazine focusing on the Internet casino industry, said the charges would have at least one major chilling effect on the industry's officers. "I imagine the number of executives coming through the U.S. on connecting flights will come to a screeching halt," she said.