Gary Kaplan, founder of BetOnSports (BoS), has entered guilty pleas to multiple federal charges, Acting United States Attorney Michael W. Reap announced on August 14.
Pursuant to a complex plea agreement, Kaplan, 50, entered pleas of guilty to charges of conspiracy to violate the Racketeer Influenced and Corrupt Organizations (RICO) statute, conspiring to violate the Wire Wager Act and violating the Wire Wager Act.
Kaplan appeared before United States District Judge Carol E. Jackson, in St. Louis. As part of the plea, Kaplan will forfeit to the United States USD43,650,000 in criminal proceeds. If the court ultimately accepts the terms of the plea agreement, Kaplan will be sentenced to no less than 41 months and no more than 51 months, according to the Justice Department.
Kaplan admitted in court that beginning in the mid to late 1990s, he set up business entities offshore in Aruba, Antigua and eventually Costa Rica to provide sportsbook services to US residents through websites and toll-free telephone numbers.
US residents became customers of BetOnSports by depositing funds on account and placing wagers over US toll-free telephone lines and via the internet using the deposited funds. Funds were sent from the US customers to BoS operations outside the United States and BoS sent winnings from outside the United States to its US customers.
According to the prosecution, by 2004, the BetOnSports Costa Rica base employed approximately 1,700 people. During the year ended January 31, 2004, BetOnSports had close to 1 million registered customers, accepted over 10 million sports bets in a cumulative gross amount that exceeded USD1bn.
The guilty pleas conclude a lengthy investigative and prosecution effort by several law enforcement agencies, including the Internal Revenue Service and the Federal Bureau of Investigation (FBI). Sentencing has been set for October 27, 2009.
Kaplan has been in custody since his arrest in March 2007 and is perhaps the highest-profile victim of the crackdown on internet gambling by the US authorities. In addition to moral concerns about internet gambling, the US authorities were also uncomfortable that billions of dollars in wagers were flowing offshore to organizations they knew little about.
The US gambling laws have always been something of a grey area, especially since the rise of the internet. But the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 sought to clarify the situation by effectively blocking access to the lucrative US internet gambling market for offshore operators. The Act prohibits gambling businesses from knowingly accepting payments in connection with unlawful internet gambling, including payments made through credit cards, electronic funds transfers, and checks - although the legislation had been found in breach of international trade laws.
"Gary Kaplan made millions of dollars by making it too easy for people to gamble away their hard earned money without having to leave their homes," said John V. Gillies, Special Agent in Charge of the FBI in St. Louis. "Today's guilty plea should have a lasting effect because Kaplan was not only the founder of BetOnSports, he was also one of the pioneers of illegal online gambling.”
Gillies added that the FBI is busy in its pursuit of two remaining suspects. “We will follow all leads, no matter how far, to bring to justice those involved in this scheme," he said.
Acting Attorney Reap also thanked the governments of Jersey and Switzerland for their assistance in concluding the prosecution.
A comprehensive report in our Intelligence Report series examining the new possibilities that offshore e-commerce open up for business, and analysing the offshore jurisdictions that have led the way in offering professional e-commerce regimes for international business, with a particular focus on e-gaming, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report6.asp
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