Editorial: BetonSports - One Year Later

One year ago today, the industry woke to news that one of its own had been arrested by U.S. authorities. Ex-BetonSports (BoS) CEO David Carruthers was apprehended at the Dallas Ft. Worth International Airport on July 16, 2006 while en route to his home in Costa Rica.

Details of the arrest were still foggy, but one thing remains certain: the industry has suffered since that day.

We learned the next day that Carruthers, 10 other individuals, BetonSports Plc and three other companies had been indicted and charged with conspiracy and money laundering in connection with illegal Internet gambling in the United States.

One day after the news hit the headlines, industry stocks in the United Kingdom took a spill, losing close to £300 million. But, while shares slowly recovered from the shock, the hit on the industry had a damaging effect.

And it helped neither the industry nor the BoS case that little more than two months later the United States Congress passed the Unlawful Internet Gambling Enforcement Act (UIGEA), which wiped out 75 percent of the global online gambling market, for which the U.S. government gave itself a giant pat on the back.

And look at what has happened to BoS. Once one of the leaders of the sports betting industry, BoS will likely become a cautionary tale of "what not to do in the Internet gambling industry."

The company appeared to be making all the wrong moves until May, when it pleaded guilty and began negotiations with the U.S. Justice Department (DOJ). Maybe they had a strategy, but the rationale for not answering the charges for almost a year and continuously missing court appearances was not evident to me.

After negotiations with the DOJ concluded, BoS agreed to supply witnesses and evidence in the pending case against the co-defendants. What that means for the defendants is unclear, but the trial is going to be a circus.

Meanwhile, Carruthers, who has been living on house arrest in St. Louis, Mo., is probably up for a renewal on his lease.

So, here we are, one year later, probably looking at a trial date of the middle of 2008.

What's holding up the trial? It makes sense that the arrest of BoS founder Gary Kaplan, apprehended in the Dominican Republic in March, would cause a delay. Kaplan, being held in custody in St. Louis, has the right to file pre-trial motions just as the other defendants have over the last seven months, which will slow the process.

Recently, a new defendant, Penelope Tucker, was added to the indictment. Tucker, who was added to the roster at the beginning of July, was arrested shortly thereafter.

Tucker began working for Kaplan while he still ran BoS, and continued the relationship after his departure. According to court documents, Tucker is responsible for assisting Kaplan as late as January 2007, while he was a fugitive.

Tucker will also have to file motions.

Speaking of the pre-trial motions, the government has not budged an inch. In January, each of the defendants filed motions to dismiss the racketeering charges on grounds that the government had failed to allege a pattern of racketeering. Judge Mary Ann Medler, who has been overseeing the case, ruled in May that the defendants failed to present proper grounds for dismissal.

The defendants also filed a motion to dismiss the entire case based on the U.S. violation of the World Trade Organization (WTO), which has yet to see a ruling. This could be a good sign, considering the WTO situation over trade sanctions (a.k.a. United States vs. the world). The United States refused to adhere to the last ruling at the WTO involving a dispute between itself and Antigua over restrictions on I-gaming, and went so far as to announce its intent to withdraw gambling services from its commitments to the General Agreement on Trade in Services. Subsequently, several members of the WTO, including Australia, Canada, Costa Rica, the European Union, Japan, India and Macau, filed compensation claims against the United States.

So, that's where the case stands now. At least that's what I've observed over the last year having attended every hearing in St. Louis and covered every angle of the story.

While we wait, there are still two defendants/fugitives at large. And if the government gets lucky and arrests Norman Steinberg (reportedly untouchable and living the good life in Costa Rica) and Peter Wilson (whereabouts unknown), we may not see this go to trial before the next FIFA World Cup.