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Emily D. Swoboda

Numerous Developments in Carruthers/BoS Cases

7 February 2007

Lawyers for ex-BetonSports (BoS) CEO David Carruthers on Friday filed pre-trial motions in the criminal case against the one-time outspoken advocate of I-gaming regulation in the United States. The defense is hoping to quash some of the charges relying on the First Amendment, Fifth Amendment and certain international treaties as grounds for dismissal.

Carruthers was arrested in July 2006 in Dallas and charged with 22 counts of conspiracy, racketeering and fraud in connection with taking Internet bets from the United States. The charges came out of a sealed indictment issued by a federal grand jury in the Eastern District of Missouri.

Four corporations known in the indictment as the Kaplan Enterprise, BoS and Florida-based marketing companies DME Global Marketing & Fulfillment, Inc., Direct Mail Expertise, Inc. and Mobile Promotions, Inc., and 10 individuals were also indicted on the same charges.

Motion to Dismiss RICO Charges

Carruthers' lawyer, Scott Rosenblum, filed a motion to dismiss count one of the indictment--the racketeering conspiracy--on grounds that the charges are unsubstantiated and fail to allege actual racketeering.

According to court documents, Rosenblum is claiming Carruthers' actions in promoting and advertising with respect to BoS are not prosecutable because such actions are protected commercial speech under the First Amendment.

He also claims that the government's allegations were based on a misinterpretation and misapplication of federal statutes relating to Internet gambling, resulting in a violation of the 5th Amendment Due Process Clause and customary international law with respect to principles regarding jurisdiction to prescribe.

To secure a RICO conviction, the government must prove both the existence of an enterprise and the connected pattern of racketeering activity. Rosenblum said the government fails to allege that the Kaplan enterprise was perpetrating more than one scheme, thus failing to allege a pattern of racketeering activity.

"In the instant case, the enterprise was allegedly perpetrating one scheme and one scheme only--conducting a business of providing wagering services on the Internet," the defense said in court documents. "To that end, it allegedly committed numerous "predicate" acts, or acts to facilitate its business activity. As there is only one scheme, the Indictment fails to allege a 'pattern' of racketeering activity under the statute."

Using the US Violation of the WTO Treaty

The ongoing legal dispute with Antigua and Barbuda over U.S. restrictions on I-gaming has resurfaced in the press and in the courtroom.

Antigua, which hosts several online gaming operations, filed a complaint against the United States with the World Trade Organization (WTO) in 2003, claiming the United States had destabilized its lucrative online gambling industry.

In April 2005, the WTO's Dispute Settlement Body adopted the report of its Appellate Body, which ruled that the United States' prohibitive approach to foreign gambling services violates international trade agreements. The United States was given until April 3, 2006 to adjust its laws to provide fair treatment to both domestic and foreign I-gaming providers, but failed to do so. It has taken measures against online gambling, such as enacting the Unlawful Internet Gambling Enforcement Act in October.

Rosenblum used not only this violation, but a violation of an even older, yet similar treaty--the 1815 Commerce and Navigation Treaty--as grounds for dismissal. (The United States and Britain made an agreement in 1815 to regulate the commerce and navigation between their respective countries, territories and people in such a manner as to render the same reciprocally beneficial and satisfactory freedom of commerce.)

The other defendants in the case in December filed similar pre-trial motions to dismiss the charges against them, including citing the United States' violation of the WTO treaty; however, the prosecution has already recommended that motion be dismissed.

"The Treaty cited by the defendants does not give any individual rights to any person, and federal law specifically states that no obligation under the Treaty that conflicts with U.S. law shall have effect," Prosecution said in court documents. "Therefore, the motions should be denied."

Motion for Leave to File Additional Motions

Rosenblum also filed a motion asking for additional time to file additional motions, claiming the defense was not given enough time to review the evidence before the pretrial motion deadline of Feb. 2.

While Rosenblum said Carruthers does not anticipate filing additional motions, the request is simply to afford the defense the luxury of doing so should the need arise.

According to court documents, however, Rosenblum claims that due to the complexity of and the volume of documentary evidence, Carruthers has not had a full opportunity to examine the complete discovery in this case. He also said that Carruthers was not provided the evidence until long after he was promised.

"On Wednesday, January 31, 2007, Defendant was finally provided with all of the discovery on DVD discs from the scanning project," the papers said. "As such, Defendant has not had a full opportunity to examine all the documentary discovery in the case."

It may be unlikely that the court will grant Carruthers additional time to file pretrial motions, according to previous court documents.

In a document titled "Consolidated Response to Motions to Extend Time and Request for Uniform Pretrial Schedule" (Dec. 19, 2006), the prosecution granted a previous request by Carruthers for additional time to file pretrial motions, but stated that Carruthers had been provided the entire discovery.

"Defendant Carruthers filed his motion for thirty additional days in which to file pretrial motions on December 14, 2006 (Doc. #165)," the document said. "In his motion, defendant Carruthers stated he had not been provided with discovery. This is incorrect. As stated in the Government's consolidated response to requests for additional discovery and bills of particulars filed on November 6, 2006 (Doc. #150, filed under seal) the defendants have been provided with complete discovery in this matter. Counsel for the defendant has chosen to delay his review of disclosed documents until after they have been scanned. That is his choice. However, the documents themselves have been available to him since September."

BoS Faces Contempt Charges

In other BoS news, the company is being held in contempt of court and fined $5,000 per day for ignoring criminal charges.

U.S. District Judge Carol Jackson on Friday said the company deliberately ignored court orders without just cause or excuse.

Jackson found the company in contempt for violating a Dec. 28 order to appear and ordered the company and its officers and directors to pay $5,000 beginning immediately. The fines will continue until a representative of the company comes forward.

BoS has not shown up for a single hearing since the company was indicted. Friday's hearing was called so the company could explain why it shouldn't be penalized for ignoring the criminal charges.

BoS counsel Jeffrey Demerath has said that he has been instructed by the company not to appear.

Jackson said Demerath called her chambers on Thursday and informed her that he had been once again instructed by his client not to appear.

"I clearly believe BetonSports' actions are contumacious and disregard the court's order without any excuse,'' Jackson said.

A not guilty plea was entered by the court on the company's behalf on Jan. 11.

The company in November settled a related civil suit that closed down its business to U.S. bettors.


Motion to Dismiss Count One -- RICO Conspiracy, or Parts Thereof

Memorandum of Law in Support of the Motion to Dismiss Count One -- RICO Conspiracy, or Parts Thereof

Motion for Leave to File Additional Motions

Numerous Developments in Carruthers/BoS Cases is republished from
Emily D. Swoboda
Emily D. Swoboda