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Costa Rica: Offshore Gambling Operators Thrive

The first offshore gambling operations turned up in Costa Rica in 1997. But a major migration began the next year, when the Dominican Republic -- for years a haven for the offshore shops -- began arresting owners on hazy charges in what many of the gamblers say was a shakedown operation.

In search of a safer home, some of the shops stumbled onto Costa Rica. They liked what they saw -- a large potential labor force of college students, bilingual and computer-literate -- and what they didn't see -- a licensing requirement.

The advantages offered by Costa Rica have permitted some of the shops to grow at rates that stagger even their owners. ''We needed a place big enough to hold us, and we've finally found it,'' says Gary Kaplan, the CEO of NASA International, which industry insiders say is the biggest offshore gambling company in the world.

After trying Aruba and then Antigua, NASA International settled in Costa Rica in 1998. The company occupies 60,000 square feet of a San José office tower and has already signed leases to add 40,000 more next year, not only to accommodate growth in its work force, which already numbers 500, but to add a health club, spa and smoke shop to entertain visiting high rollers.

NASA International has already spent more than $2 million on communications infrastructure that allows tens of thousands of wagers to flow into its telephones and computers every day. The company has 500 incoming phone lines and, as an indication of Kaplan's expectations, has purchased equipment to increase capacity to 2,400 lines.

''We've been here three years, and every single day we're still building,'' says Kaplan, 41, a former New York City neighborhood bookie.

The growth is funded by bettors from all over the world (NASA International's website can be accessed in 10 different languages) who link up by telephone or computer to wager on anything from British cricket to the weight of Madonna's new baby.

Weird betting propositions are the company's specialty: most notoriously, it offered odds on whether a well-known singer would come out of the closet, and a pool on whether singer Bobby Brown, actor Jean-Claude Van Damme, or former basketball star Dennis Rodman would be the first arrested for beating his wife.

''I'm a believer in Rodman all the way, so the odds on him were short,'' recalls Kaplan. ''Bobby Brown, you think maybe Whitney (Houston, his singer wife) will keep him in check a little bit, so we put him down at the bottom.''

Even so, the wife-beating pool was not the weirdest NASA International betting line. It also offered odds on whether an experimental ion collider at Brookhaven National Laboratory would generate a black hole -- a line created after some of the Brookhaven scientists themselves called in and wanted to place bets.

''It took five of us sitting around to even figure out what they were talking about,'' says company counsel Ellen Zindler. ''And setting the odds was tough. But once we figured out that the creation of a black hole would swallow the Earth and cancel a payoff, we were OK with it.''

Whole New Look

With its vast plains of computer terminals and cadres of smartly dressed secretaries, NASA International seems light-years removed from the flaky backroom world of bookies and flimflam artists. But the company has seen its share of the weird scrapes that come with the offshore territory.

It pulled several photos of rockets and astronauts off its website after lawyers from the space agency NASA rather testily warned Kaplan that their client was getting tired of complaints about the propriety of a U.S. government agency running a gambling operation.

And last year, Lloyd's of London forced NASA International to stop boasting that the British company was insuring bettors' money.

NASA International also has been in a long-running dispute that has created a noisy buzz in gambling circles: It has refused to pay off nearly half a million dollars in winning football bets by a Southern California man.

The company says the man is a professional gambler who was placing bets under a phony name because NASA International wouldn't have accepted them under his real name.

''We always demand proof of identity before paying off a winning bet,'' says Zindler. ''Let him show up with some proof, and we'll pay him.''

But NASA International is on thin ice when it comes to phony names. Kaplan always introduces himself -- including to a Herald reporter -- under the name Greg Champion. Employees are instructed to call him simply G to avoid a slip-up in front of visitors.

Kaplan seems to feel he has some dangerous enemies; he's always accompanied by a phalanx of bodyguards, and often practices target-shooting in a firing range inside NASA International's offices. Associates say that one of his main worries is the FBI, which takes a dim view of offshore gambling.

Through A Loophole

A 1961 federal law makes it illegal to use phone lines or wires to place bets on sports across state lines or international borders. But the law contains a loophole to use phones to ''assist'' in placing bets in a jurisdiction where gambling is legal.

Offshore gamblers generally keep their money in a different country than the one where they operate their phones lines and computers (Antigua is a favorite banking location for many of the companies). These gamblers argue that when someone calls Costa Rica to put down $100 on Sunday's Dolphins game, that person is merely ''assisting'' the telephone operator there, who will actually place the bet at a bank somewhere else.

Like new pirates of the Caribbean, the offshore gamblers skitter about just outside the reach of tax collectors and the FBI.

But federal prosecutors rejected that argument pretty emphatically in 1998, when they charged 21 offshore operators with violating the law on betting by telephone.

Twelve of the defendants agreed to go out of business and either paid a fine or had the charges dismissed. (Though some of the fines were stunningly high: 67-year-old North Miami Beach businessman David Budin, who was running a telephone sports betting operation in San José, was assessed $750,000.)

Conviction This Year

The only defendant who went to trial and offered the ''assisting'' defense, a former stockbroker named Jay Cohen who was running a phone operation in Antigua, was convicted this year and sentenced to 21 months in prison. The case is under appeal.

The news sent chills through the offshore gambling industry, and Las Vegas attorney Anthony Cabot says it should have: ''They're clearly in harm's way.'' Congress nearly passed a law earlier this year that would have made the ban even more explicit and extended it to other forms of Internet gambling as well.

In an attempt to evade prosecution, many of the offshore gamblers have thrown up protective screens of foreign corporations. Millennium Sports is owned by a Panamanian corporation, known around the world for their secrecy, and general manager Tom Miller blandly says he doesn't know who the stockholders are.

NASA International's operations in San José are done through a local corporation whose officers all appear to be Costa Ricans.

Kaplan says he's not worried: ''They haven't charged anyone else since 1998, and I don't think they will,'' he says. But so far, NASA International's website isn't offering to bet on it.

Miami Herald reporter Paul Brinkley-Rogers contributed to this report.

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