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BetOnSports Founder Sentenced on Federal Racketeering Charges -- Agrees to the Forfeiture of Over $43 Million
Tuesday, November 03, 2009
ST. LOUIS, Nov. 3 /PRNewswire-USNewswire/ -- Gary Stephen Kaplan, founder of BetOnSports, a large illegal offshore sports wagering business, was sentenced to 51 months in prison on multiple federal charges, Acting U.S. Attorney Michael W. Reap announced last night.
Pursuant to a complex plea agreement, on Aug. 14, 2009, Gary Stephen Kaplan, 50, entered pleas of guilty to charges of conspiracy to violate the RICO statute, conspiring to violate the Wire Wager Act and violating the Wire Wager Act. He appeared yesterday for sentencing before U.S. District Judge Carol E. Jackson in St. Louis.
As part of the plea, Kaplan has forfeited to the United States $43,650,000 in criminal proceeds. An additional amount of approximately $7 million has been forfeited in related proceedings, bringing the total forfeiture in this case to over $50 million.
Kaplan admitted that beginning in the mid to late 1990's, he set up business entities offshore in Aruba, Antigua and eventually Costa Rica to provide sportsbook services to U.S. residents through Internet websites and toll-free telephone numbers. He founded, operated, and controlled, with other co-conspirators, the enterprise known as "BetOnSports." BetOnSports advertised heavily in the United States to solicit U.S. residents to place sports wagers by telephone and over the Internet. BetOnSports-related entities controlled toll free numbers and domain names advertised by BetOnSports. Technologically, Kaplan's toll-free telephone lines terminated in Houston, Texas or Miami, Florida and then were forwarded to Costa Rica by satellite transmitter or fiber-optic cable. Some of Kaplan's web servers were located in Miami and were remotely controlled from Costa Rica. U.S. residents became customers of BetOnSports by depositing funds on account and placing wagers over U.S. toll-free telephone lines and via the Internet using the deposited funds. Funds were sent from the U.S. customers to BoS operations outside the U.S. and BoS sent winnings from outside the U.S. to its U.S. customers.
BetOnSports was highly successful and attracted a large number of U.S. customers. By 2004, the BetOnSports organization's principal base of operations in Costa Rica employed approximately 1,700 people. During the year ending Jan. 31, 2004, BetOnSports had close to 1 million registered customers and accepted over 10 million sports bets in a cumulative gross amount that exceeded one billion dollars. In mid-2004, Kaplan made a successful public offering of the stock of BetOnSports on the London Alternative Investment Market that netted him over $100,000,000. Those funds eventually found their way into various Isle of Jersey trusts which invested the funds in Swiss bank accounts.
Reap stated: "Kaplan was unique in the scope and scale of his illegal operation. Despite his immense profits, he is living in federal custody. This case should serve as a warning to others who might choose to defy the laws of the United States on such a grand scale." Reap also noted that "Kaplan's business model itself was built on a wager that the U.S. could not and would not enforce its anti-sportsbook laws to reach Kaplan. Today, Kaplan lost that wager."
"In addition to a lengthy prison sentence, Mr. Kaplan forfeited over $43 million to the United States government," said Toni Weirauch, Special Agent in Charge of IRS Criminal Investigation. "By taking away their assets and profits, we deprive them of the proceeds of their criminal activity."
"Gary Kaplan was sentenced to the maximum under the plea agreement which sends a message to those operating illegal offshore gambling enterprises," said Roland Corvington, Special Agent in Charge of the FBI in St. Louis. "In addition to being in prison, hopefully some of the money forfeited will go to useful purposes such as fighting other Internet-related crimes, such as catching child predators who think they can hide online."
This sentencing concludes a lengthy investigative and prosecution effort by several law enforcement agencies, including the IRS and the FBI. Kaplan has been in custody without a bond set since his arrest in March 2007.
Reap commended the work on the case by the FBI, Internal Revenue Service Criminal Investigation and the Chesterfield Police Department. Assistant U.S. Attorneys Steve Holtshouser, Steven Muchnick and John Bodenhausen, and Special Assistant U.S. Attorney Charles Birmingham are handling the case for the U.S. Attorney's Office. Reap also thanked the governments of the Isle of Jersey and Switzerland for their assistance with successfully concluding this prosecution.
SOURCE U.S. Department of Justice
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