Internet gambling executive arrested

Arrest Made in Crackdown on Internet Betting

By MATT RICHTEL
Published: July 18, 2006

In a sharp escalation of their crackdown on Internet gambling, United States prosecutors said yesterday that they were pressing charges against the chief executive of BetOnSports, a prominent Internet gambling company that is publicly traded in Britain, and against several other current and former company officers.

Federal authorities arrested the chief executive, David Carruthers, late Sunday as he was on layover at Dallas-Fort Worth International Airport on his way from Britain to Costa Rica. In a hearing yesterday in Federal District Court in Fort Worth, he was charged with racketeering conspiracy for participating in an illegal gambling enterprise.

Also at the hearing, the court granted the government’s request for a temporary restraining order preventing BetOnSports from accepting wagers from customers in the United States and requiring it to return money held in the accounts of American customers.

In addition to Mr. Carruthers, the government filed charges against 10 other people involved with BetOnSports and with three Florida marketing companies that prosecutors say were involved in promoting illegal gambling.

The charges, particularly those against Mr. Carruthers, who runs a company that has been a symbol of the investment potential of offshore casinos, raise complex legal and political questions. And they are the most direct attack in several years on offshore Internet casinos, setting up a showdown with an industry that has grown increasingly brazen in promoting online wagering in the United States.

The gambling sites allow people to place bets on sporting events and play casino games like blackjack from their computers. The companies keep their computer servers in places like the Isle of Man, Antigua and Costa Rica, where BetOnSports has its operating headquarters.

A BetOnSports spokesman declined to comment, saying the company’s board was meeting late last night to assess the situation. Some industry executives have said the offshore casinos cannot be prosecuted because while they take wagers from American bettors, the physical operations are outside United States jurisdiction.

Prosecutors assert that under the Federal Wire Act of 1961, the providers and promoters of Internet sports books and casinos are participants in a criminal enterprise.

The fact that these operations are legal in their home jurisdictions “does not entitle them to do business in the United States,” said Catherine L. Hanaway, the United States attorney for the Eastern District of Missouri, which brought the indictment. The charges announced yesterday indicate that “their efforts to avoid U.S. law enforcement will be challenged and brought to justice whenever possible.”

I don't think the blowback from this is going to benefit the government. First of all, there's a real question of jurisdiction, for one thing. Also, if these companies come under attack, their patrons are likely to join the fight. People have ignored it because it didn't really make a difference. But I think the feds have to make a case which is likely to be hard to prove.