[Clips] How High-Living Founder Of BetonSports Fell, Fled

Tue Feb 27 12:11:48 PST 2007

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  Date: Tue, 27 Feb 2007 15:09:37 -0500
  To: Philodox Clips List <clips at philodox.com>
  From: "R.A. Hettinga" <rah at shipwright.com>
  Subject: [Clips] How High-Living Founder Of BetonSports Fell, Fled
  Reply-To: clips-chat at philodox.com
  Sender: clips-bounces at philodox.com

  <http://online.wsj.com/article_print/SB117253841220420064.html>

  The Wall Street Journal

  How High-Living Founder
  Of BetonSports Fell, Fled

  By JOHN R. EMSHWILLER and PETER SANDERS

  February 27, 2007; Page B1

  Gary Kaplan used to throw lavish parties in Costa Rica and plaster the name
  of his thriving online gambling company on New York City buses. Now, the
  48-year-old founder of BetonSports PLC and the multibillion-dollar industry
  he helped spawn are in reduced circumstances -- the man on the run, the
  industry in disarray.

  Mr. Kaplan is a fugitive from a racketeering conspiracy and fraud
  indictment filed last year in a St. Louis federal court charging him with
  heading a criminal enterprise that illegally took in over $3.5 billion in
  wagers since 2001.

  Several Kaplan colleagues have also been charged, including former
  BetonSports chief executive David Carruthers, who was arrested at the
  Dallas-Fort Worth airport in July during a brief stopover on a flight from
  London to the company's headquarters in San Josi, Costa Rica. Mr.
  Carruthers and several others charged in the case have pleaded not guilty
  and are awaiting trial. Mr. Kaplan's whereabouts are unknown.

  The Kaplan indictment is part of a broader federal crackdown in which
  several executives from other foreign online gambling operations and
  credit-card processing companies have been indicted. Last October, Congress
  passed a law banning almost all forms of online gambling. Recently, the
  Justice Department served subpoenas for records on investment banks that
  had helped BetonSports and other online gambling companies raise money
  through public stock offerings.

  Industry observers estimate that online wagering, which had hit about $12
  billion annually, is down by as much as 50%. BetonSports has largely closed
  down operations. Federal authorities estimate that 98% of the company's
  business came from the U.S.

  The saga of BetonSports and Mr. Kaplan demonstrates how some online
  gambling sites rose fast -- and crashed hard -- by operating at, or beyond,
  the edge of the law. While Mr. Kaplan has a checkered background that
  includes run-ins with law enforcement, he may have gotten as far as he did
  in part by surrounding himself with executives like Mr. Carruthers, who
  came to BetonSports with a mainstream business background.

  Before he was an international online gambling impresario, Mr. Kaplan, a
  New York native, was a bookie and was busted in 1993 by that state's
  authorities for running an illegal sports-betting operation, according to
  his federal indictment. He moved to Florida, where he allegedly continued
  his bookmaking operation, and then on to Aruba and Antigua before later
  finally settling in San Josi. The Costa Rican capital, with light-handed
  gambling regulation and a ready work force, began attracting other online
  betting operations.

  Mr. Kaplan made a splash. He took over a nine-story office building in a
  shopping-mall complex and outfitted it with a day-care center for workers'
  kids as well as luxurious suites and a rooftop pool for visiting high
  rollers that BetonSports sometimes flew in for huge galas.

  BetonSports headquarters also housed a shooting range -- a reflection of
  Mr. Kaplan's fascination with guns and an obsession with personal security,
  say people who know him. He, his wife and two children routinely traveled
  with armed bodyguards.

  The bodyguards were, at least in part, "an ego thing," says Kenneth
  Weitzner, founder of Eye on Gambling, a Web site that tracks Internet
  gambling. Mr. Kaplan created the illusion that he thought went with a
  successful gambling operation, says Mr. Weitzner, who visited Mr. Kaplan at
  his Costa Rican operation. Another acquaintance called Mr. Kaplan "tough
  and intimidating." In one tale, he supposedly shot a computer monitor after
  BetonSports lost big on a football game.

  As BetonSports grew into one of the biggest online gambling companies, it
  tried to move mainstream. Mr. Kaplan hired veteran gambling-industry
  executives, such as Mr. Carruthers, who had worked for Ladbrokes, a major
  British wagering company. In 2004, BetonSports had an initial public
  offering in London that raised about $100 million and its stock was listed
  on a branch of the London Exchange.

  While Internet gambling is legal in many countries, the U.S. has long
  contended that it violated various federal statutes -- even before the
  specific ban was enacted last fall. Federal officials made periodic efforts
  to attack online gambling, but the companies often managed to operate
  relatively freely in the U.S. BetonSports was able to run U.S. marketing
  campaigns, including ads on 250 New York City buses in 2003.

  But even as the industry soared, federal agents were building criminal
  cases. Some of BetonSports' "customers" in 2002 and 2003 turned out to be
  undercover investigators gathering evidence that went into last year's
  indictment.

  BetonSports's name has appeared in press reports in connection with a 2005
  criminal case filed by New York City prosecutors against an allegedly
  mob-connected gambling operation that was sending bets to an entity in
  BetonSports's headquarters building in San Josi. In those articles,
  BetonSports officials said that the entity simply leased office space and
  was evicted after the indictment. BetonSports wasn't charged in the New
  York case.

  Some observers find the government's crackdown on Internet gambling
  curious, given the national explosion in gambling casinos and lotteries in
  recent years. These people wonder whether the initiative will backfire by
  pushing gamblers to less reputable operations.

  The recent criminal cases and legislation are " an anti-consumer-protection
  movement because they're eliminating the most reputable publicly traded
  companies," says Nelson Rose, a California law professor and gambling-law
  expert. In recent years, BetonSports and others, including some U.S. casino
  operators, had lobbied Congress to legalize online gambling, arguing that
  it could then be regulated and taxed.

  As for Mr. Kaplan, he is being sought by U.S. and international
  law-enforcement officials, including Interpol, whose Web site carries a
  wanted poster for him. Though his home was in Costa Rica, some believe he
  has left that country. One rumor has him and his family in Israel, there on
  an Israeli passport. If he is apprehended or returns voluntarily to the
  U.S., he will have to answer the pending charges in the St. Louis federal
  case. If convicted he could face a long prison sentence and large financial
  penalties.

  --
  -----------------
  R. A. Hettinga <mailto: rah at ibuc.com>
  The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
  44 Farquhar Street, Boston, MA 02131 USA
  "... however it may deserve respect for its usefulness and antiquity,
  [predicting the end of the world] has not been found agreeable to
  experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
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-- 
-----------------
R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'