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Arrest Made in Crackdown on Internet Betting

Online GamblingOnline Gambling: Arrest Made in Crackdown on Internet Betting

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.

New York Times

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17 comments. Last comment 10 years ago by cps10.
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LOTTOMIKE's avatar - cash money.jpg
Tennessee
United States
Member #7853
October 15, 2004
11338 Posts
Offline
Posted: July 18, 2006, 8:06 am - IP Logged

i think they need to tax,regulate it and make it legal.they are doing this backwards.look at the potential here.i guess because its gambling the government doesn't want to do that.its no worse than cigarettes,alcohol or porn.does anyone think this will makes things worse as far as the bill goes?

    cps10's avatar - Lottery-004.jpg
    The Carolinas - Charlotte
    United States
    Member #21627
    September 12, 2005
    4138 Posts
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    Posted: July 18, 2006, 8:11 am - IP Logged

    This certainly isn't a good sign

    The North Carolina Education Lottery - so much a joke that here are their mascots:

    Stooges

      LOTTOMIKE's avatar - cash money.jpg
      Tennessee
      United States
      Member #7853
      October 15, 2004
      11338 Posts
      Offline
      Posted: July 18, 2006, 8:11 am - IP Logged

      Mr Carruthers has been an outspoken opponent against a proposed US law banning banks and credit card companies from processing internet gambling payments.


      Despite the bill winning the backing of the House of Representatives last week, he said the move would fail due to a backlog of US legislation.


        cps10's avatar - Lottery-004.jpg
        The Carolinas - Charlotte
        United States
        Member #21627
        September 12, 2005
        4138 Posts
        Offline
        Posted: July 18, 2006, 8:14 am - IP Logged

        He was pretty stupid for announcing his travel plans through the U.S. That was just dumb. I saw a special on a company in Antigua I think it was whereby if the President was to set foot in the U.S., then he would be arrested. And I think they pointed out that it would happen to any of these gaming execs. Yet, they continued to toe the line and dared the U.S. to do something. And they did. Dumb on Carruthers' part.

        The North Carolina Education Lottery - so much a joke that here are their mascots:

        Stooges

          Todd's avatar - Cylon 2.gif
          Chief Bottle Washer
          New Jersey
          United States
          Member #1
          May 31, 2000
          23259 Posts
          Online
          Posted: July 18, 2006, 8:15 am - IP Logged

          According to the article he has been traveling to the United States regularly.

           

          Check the State Lottery Report Card
          What grade did your lottery earn?

           

          Sign the Petition for True Lottery Drawings
          Help eliminate computerized drawings!

            LOTTOMIKE's avatar - cash money.jpg
            Tennessee
            United States
            Member #7853
            October 15, 2004
            11338 Posts
            Offline
            Posted: July 18, 2006, 8:18 am - IP Logged

            This certainly isn't a good sign

            your right.it certainly adds a bad vibe to the whole situation.it remains to be seen how much it will affect the whole outcome......

              cps10's avatar - Lottery-004.jpg
              The Carolinas - Charlotte
              United States
              Member #21627
              September 12, 2005
              4138 Posts
              Offline
              Posted: July 18, 2006, 8:20 am - IP Logged

              Well, it could just be a sign that the U.S. isn't going to allow those folks to come through...telling them that they don't want online gambling, and they will do what they have to in order to show them they mean business.

              The North Carolina Education Lottery - so much a joke that here are their mascots:

              Stooges

                cps10's avatar - Lottery-004.jpg
                The Carolinas - Charlotte
                United States
                Member #21627
                September 12, 2005
                4138 Posts
                Offline
                Posted: July 18, 2006, 8:21 am - IP Logged

                According to the article he has been traveling to the United States regularly.

                Yes he has...and you would think that he of all people would know better. Sooner or later someone would either recognize him or leak his travel plans - perhaps a disgruntled employee...lol

                The North Carolina Education Lottery - so much a joke that here are their mascots:

                Stooges


                  United States
                  Member #16612
                  June 2, 2005
                  3493 Posts
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                  Posted: July 18, 2006, 11:19 am - IP Logged

                  I hope the outcome ends all companies who want to have gambling for people.

                    bellyache's avatar - 64x64a9wg

                    United States
                    Member #12618
                    March 18, 2005
                    2060 Posts
                    Offline
                    Posted: July 18, 2006, 2:20 pm - IP Logged

                    I also think they should just tax internet gambling. That way online players can still play and the government gets what it really wants, money.

                    Dance like no one is watching.

                      Todd's avatar - Cylon 2.gif
                      Chief Bottle Washer
                      New Jersey
                      United States
                      Member #1
                      May 31, 2000
                      23259 Posts
                      Online
                      Posted: July 18, 2006, 2:22 pm - IP Logged

                      I hope the outcome ends all companies who want to have gambling for people.

                      Twitch

                       

                      Check the State Lottery Report Card
                      What grade did your lottery earn?

                       

                      Sign the Petition for True Lottery Drawings
                      Help eliminate computerized drawings!

                        Avatar
                        Amarillo/Austin
                        United States
                        Member #1424
                        April 25, 2003
                        696 Posts
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                        Posted: July 18, 2006, 4:52 pm - IP Logged

                        Just6ntlc:

                        You are a strange breed of cat.  Don't you know that regular state games give terrible odds and are designed to steal your money faster than any offshore casino ever dreamed of?  Why throw rocks at something that gives the average player better odds?  Let's tax the darned thing, give the gangsters in Congress their cut and leave the average American at least one scrap of freedom.  We spend too much time protecting the idiots from themselves.

                        Orangeman                                              What?

                           

                          dvdiva's avatar - 8ball

                          United States
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                          September 17, 2003
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                          Posted: July 18, 2006, 6:24 pm - IP Logged

                          It's all about the money. The Feds just think they can seize someone's assets without too much of a fight so they do. Not to mention the big push of money coming from Tribal casino's and Vegas. The last thing Tribal casino's need is an easy and better alternative. The WA state law is far harsher than the Federal one and was pushed through on the sly thanks to Tribal dollars. The Senate will take it up because of the cash also. There are few more important things in WA DC than cash.

                            JAP69's avatar - alas
                            South Carolina
                            United States
                            Member #6
                            November 4, 2001
                            8790 Posts
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                            Posted: July 18, 2006, 6:55 pm - IP Logged

                            I hope the outcome ends all companies who want to have gambling for people.

                            Then the outcome will be seen like this.

                            Atlantic city closed .
                            Vegas closed.
                            Tribal casinos closed.
                            Thourobred horse racing halted.
                            All forms of horse racing.
                            dog tracks.
                            hai-lai.
                            All state lotteries.
                            Any type of games where winners are chosen. Publishers clearing house, Etc.
                            T.V. game shows where prizes or money is won.
                            The futures market is gambling.
                            Stock investing is gambling.
                            Working for an employer is gambling. One day a job next day none.

                            Why dont we just give the gov,t our earned dollars and they can give back food and water to us.

                            I am getting tired of these righteous jerks.

                            Shall I continue.



                            WHATT