BetOnSports founder Gary Kaplan pleads guilty in federal court to racketeering charges

By Cheryl Wittenauer, AP
Friday, August 14, 2009

BetOnSports founder Gary Kaplan pleads guilty

ST. LOUIS — The founder of the online gambling site pleaded guilty on Friday to federal racketeering conspiracy and other charges, concluding years of investigating and prosecuting a case in the complex world of offshore sports gambling.

Gary Kaplan, 50, who started out as a New York bookie who didn’t complete high school, and who in recent years held his business out to the world as the largest and best in the industry, agreed in a plea deal to forfeit $43.6 million in illegally obtained revenue from his criminal enterprise.

Assistant U.S. Attorney Steven Holtshouser said Kaplan won’t be left penniless.

The money, most of which will go to the U.S. government, already has arrived in the states from a Swiss bank account, and represents “more than half” of Kaplan’s total worth, Holtshouser said. Some of the proceeds may go to New Jersey and Switzerland for their cooperation in the case.

He said Kaplan has a trust “with many millions” in New Jersey and Switzerland.

Kaplan founded the offshore company in 1995, setting up entities in Aruba, Antigua and eventually Costa Rica to solicit U.S. citizens to place sports wagers by phone and over the Internet directly from their U.S. accounts. It grew to be one of the largest online gambling firms in the world.

By Kaplan’s own admission in court Friday, BetOnSports had a million registered customers and accepted more than 10 million sports bets in excess of a billion dollars in 2004 alone. By then, he was based in Costa Rica, where he employed 1,700 people and provided a day care center for their children that was next to his firing range, Holtshouser said. Kaplan took BetOnSports public on the London Stock Exchange’s Alternative Investment Market in 2004, which netted him more than $100 million that was invested in Swiss bank accounts. For the next two years, he served as BetOnSports’ consultant.

Online gaming is illegal in the U.S., and in 2006, a federal grand jury indicted Kaplan, his company and several associates. Four other former executives, including two of Kaplan’s siblings, have pleaded guilty. No one has been sentenced.

Prosecutors said the company falsely advertised that its Web-based and phone-based gambling operations were legal, and misled gamblers into believing that money transferred to BetOnSports was safe and available to withdraw at any time. Instead, investigators said, the money was used to expand operations, including purchase of a rival betting firm. When BetOnSports ceased operation in 2006, customers lost more than $16 million.

Kaplan, appearing tidy and respectable in a jail-issued orange jumpsuit, read aloud a lengthy statement to the judge detailing his company’s history, while his wife, children, a sister and nieces and nephews listened from the audience.

He told U.S. District Judge Carol Jackson that he initially believed that adhering to the laws and practices of his offshore entities in Aruba, Antigua, Costa Rica, the Dominican Republic and the United Kingdom kept him in good stead with U.S. laws. But he said he became aware as early as 2000 that such dealings violated U.S. law, and got confirmation in a legal opinion in 2002 when he tried to take the company public. Yet, he kept operating.

“I accept responsibility for my actions and I realize that as a U.S. citizen, I should have abided by U.S. law,” he said. “Nevertheless, I do not agree with the U.S. stance against offshore telephone and Internet sports betting. But I do accept full responsibility for my decisions.”

Kaplan pleaded guilty to racketeering conspiracy, violating the Wire Wager Act, and conspiring to violate it. In exchange, other charges were dropped.

Defense and prosecuting attorneys are recommending he serve anywhere from 41 to 51 months in prison, but Jackson could impose more or less at Kaplan’s sentencing Oct. 27. He will pay no fines or restitution besides the forfeiture. He has already served 29 months in jail since his March 2007 arrest in Puerto Rico.

For a year before his arrest, Holtshouser said Kaplan was “on the run, fleeing all over the world” with fake passports, “trying to establish a place where he could not be extradited.”

The case could have been filed anywhere in the U.S., but the Eastern District of Missouri’s former U.S. Attorney Catherine Hanaway, who was committed to pursuing this area of crime, Holtshouser said, went after it with Department of Justice backup and the help of undercover FBI agents who placed bets with Kaplan’s company.

Federal agents have been investigating offshore sports gambling since 1997, and BetOnSports since 2001.


March 12, 2010: 6:15 pm

Lol, i worked for this guy when he was in argentina, around 2005/6 liked to spent all kind of money. But imho he was not a bad guy.

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