If you’ve watched the i-gaming industry for any time, you know that Superbowl and March Madness timeframes are when the law enforcement entities typically trot out new indictments, arrests or other law enforcement announcements as they try to remind Americans that “illegal internet gambling” is a problem. This year was no different when the Department of Justice offered up a guilty plea by David Carruthers in the BetOnSports case.
Watching the news conference with US Attorney Catherine Hanaway, I continued to be struck by the “victims” references to those players who lost money on deposit with BetOnSports. Unfortunately, some of the mainstream media in attendance (who may not be as familiar with the industry) parroted those terms themselves. But, others picked up on the situation and realized that, had the DoJ not seized all the assets and essentially shut the company down, those players would not be in this situation. One local TV reporter even asked her if it should be legalized and taxed. (Hanaway was quick to point out that she’s no longer a legislator and works for the government now.)
In the court documents, they say that they’ve seized over US$180M in assets (mostly from Gary Kaplan and his array of relatives in the operation). If player protection is truly a concern, it will be quite interesting to see if and how the US government makes sure that these players are made whole. And they will be keeping Kaplan's assets. Gary Kaplan is the big fish in this scenario and even Hanaway was referencing him as a “kingpin”. Whether he goes to trial and is found guilty or does a plea agreement (and my money’s on either of those two options), he will lose a substantial amount of those assets….at least the US$16M that DoJ claims was owed to the victims.
But, there are some interesting lessons learned in this process and please forgive me the sports analogies.
Piling on: It’s become clear in watching this case as well as other federal cases with some folks I know (not in the industry) that the federal government has almost infinite resources to use when they want someone. In Carruthers’ case, his first charge was a single racketeering (RICO) charge. But, by the third superseding indictment, the charges had mushroomed. In the end, the single count that he pled guilty to in that third indictment was over 8 pages long and included the kitchen sink.
Interference: That’s clearly how the US government has viewed the pesky WTO complaint from Antigua and perhaps even the modest complaining of the EU. It’s now obvious that going through legitimate channels takes years and simply doesn’t seem like more than a fly in the ointment to the US. While those are both noble efforts, let’s not hold our breath.
Holding: I don’t know how many times folks (US citizens but mainly not) have asked about the misnomer of a “speedy trial”. I was surprised those not living in America even knew of that concept but I guess it’s a testament to the popularity of Law and Order globally. Well, 2 years and 9 months after getting arrested, Carruthers recently finally saw a trial set (Sept. ’09). Now, clearly, a lot of the delay was the result of a plethora of new motions continually being entered by the Kaplan legal team. But, in this as well as other cases, running out the clock by the DoJ seems to be an effective strategy in depleting resources and patience of defendants who’d like to get on with their lives with a dime left in their pocket.
One of the most amazing things I’ve learned about the US legal system in this process is that house arrest counts for nothing in sentencing. A defendant can only be credited with time actually spent behind bars. So, apparently wearing a monitoring device and getting pre-approval for where and with whom any time out of the “house” will be spent is just a picnic.
It’s been interesting to see the comments and reactions to this development. Our friends at Covers decided to write their own spoof of a DoJ news release about the plea agreement. While not completely accurate (they obviously had the same flawed thinking about house arrest), it does reflect the thoughts of many in the industry. It reads as such:
Carruthers was a British citizen working for a publicly traded UK company, BetOnSports, and yet he was still arrested and prosecuted in America for participating in a business that is considered legal in most of the free world.
Because of his arrest, BetOnSports, a once-thriving company, was forced to close operations and was unable to pay off the accounts of many innocent users due to the legal situation. The US Attorney's Office in the Eastern District of Missouri spent untold sums of taxpayer dollars harassing and prosecuting Mr. Carruthers, in the hopes of attaining a lengthy conviction. The fact that he is likely to be sentenced to little more than time served is an embarrassment to all attorneys involved.
This situation likely reflects little more than the District's desire to wrap up this matter before America gets forced by WTO regulations to open up the online gambling market, which would make further prosecution of Mr. Carruthers difficult, if not impossible. God Bless America .
Ironically, as we watched this saga play out in a courtroom in St. Louis , Senator Ted Stevens' convictions were dismissed by new Attorney General Eric Holder. He was setting a new tone in the DoJ by letting his attorneys know that he’ll not tolerate “prosecutorial misconduct”. Not that Ted Stevens is exactly a poster boy of integrity but Holder is making a statement. He had the following to say:
"The Department of Justice must always ensure that any case in which it is involved is handled fairly and consistent with its commitment to justice," Holder said in his statement.
Well, that’s a start and not too much to ask of our “Justice Department.”