Gary Kaplan used to throw lavish parties in Costa Rica and plaster the name of
his thriving online-gambling company on buses in New York. Now, the founder of
BetOnSports PLC and the multibillion-dollar industry he helped spawn are in
much-reduced circumstances — the man on the run, the industry in disarray.
Kaplan, 48, is a fugitive from a racketeering-conspiracy and fraud indictment
filed last year in U.S. District Court in St. Louis charging him with heading a
criminal enterprise that illegally took in more than $3.5 billion in wagers
since 2001.
Several colleagues of Kaplan also have been charged, including BetOnSports’
former chief executive, David Carruthers, who was arrested at the Dallas-Fort
Worth airport in July during a stopover on a flight from London to the
company’s headquarters in San Jose, Costa Rica. Carruthers and several others
charged in the case have pleaded not guilty and are awaiting trial.
Kaplan’s whereabouts are unknown.
The Kaplan indictment is part of a broad federal crackdown in which executives
from other foreign online-gambling operations and credit-card processing
companies also 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 the
investment banks that 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 a year, is down by as much as 50 percent. BetOnSports largely has
closed its operations. Federal authorities estimate that 98 percent of the
company’s business came from the United States.
The saga of BetOnSports and Gary Kaplan demonstrates how some online-gambling
sites rose fast and crashed hard by operating at, or beyond, the edge of the
law.
While 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 Carruthers, who came to BetOnSports with a mainstream
business background.
Before Kaplan became an international online gambling impresario, the native of
New York was a bookie and had been busted in 1993 by that state’s authorities
for running an illegal sports-betting operation, according to his 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 Jose. The
Costa Rican capital, with light-handed gambling regulation and a ready work
force, began attracting other online betting operations.
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’
children as well as luxurious suites and a rooftop pool for visiting high
rollers that BetOnSports sometimes flew in for huge galas.
Obsessed with security
BetOnSports’ headquarters also housed a shooting range — a reflection of
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,” said Kenneth Weitzner,
founder of Eye on Gambling, a website that tracks Internet gambling.
Kaplan created the illusion that he thought went with a successful gambling
operation, said Weitzner, who visited Kaplan at his Costa Rican operation.
Another acquaintance called 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. Kaplan hired veteran gambling-industry executives, such as
Carruthers, who had worked for Ladbrokes PLC, 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.
Sites operated openly
While Internet gambling is legal in many countries, the U.S. long has 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.
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 for last year’s indictment.
BetOnSports’ name appeared in news reports in connection with a 2005 criminal
case filed by New York prosecutors against an allegedly mob-connected gambling
operation that was sending bets to an entity in BetOnSports’ headquarters in
San Jose.
In those reports, BetOnSports officials said the entity simply leased office
space and was evicted after the indictment. Bet­OnSports wasn’t charged in the
New York case.
Crackdown questioned
Some observers find the federal government’s crackdown on Internet gambling
curious, given the national explosion in 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,” said Nelson Rose, a law professor in California who is an expert on
gambling laws.
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 Kaplan, he is being sought by U.S. and international law-enforcement
officials, including Interpol, whose website carries a “wanted” poster for him.
Although 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 Kaplan is apprehended or returns voluntarily to the U.S., he will have to
answer the indictment filed against him in St. Louis.
If convicted, he could face a lengthy prison sentence and large financial
penalties.
Source: St. Louis Today