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BetonSports: Behind the Internet Gambling Arrest of Gary Kaplan

written March 30, 2007

The founder of BETonSPORTS, Gary Stephen Kaplan, was arrested late Wednesday in the Dominican Republic, a U.S. attorney in Missouri said on Friday.

Following Kaplan's arrest in the Dominican Republic, the U.S. attorney said he was sent by Dominican authorities to Puerto Rico to make an initial appearance before a U.S. Magistrate Judge.

Kaplan was indicted for racketeering, conspiracy and fraud among other charges, arising from the operation of BetonSports.com and a plethora of other web sites he was involved with.

The U.S. attorney's office in St. Louis, Missouri plans to ask the Magistrate Judge to order that Kaplan be sent to St. Louis immediately or be held in custody pending a hearing to remove him to St. Louis, and that he be held without bond.

You don't have to be a brain surgeon to understand the laws of extradition between countries. All one has to do is go to google and search for the extradition treaty between The Dominican Republic and the United States which went into effect decades ago.

Why was such a savvy man so foolish to be hiding out in The Dominica Republic?  Perhaps I can explain a little that is running through my mind now.  Reflecting back on this man, he made many mistakes..

I have met Gary Kaplan on several occasions during my visits to Costa Rica.  And although many in the industry didn't like the man, he was always cordial and polite to me.  Gary Kaplan will always be recognized as the man who first revolutionized online sports betting because of his brilliant marketing schemes.

Gary did have some roots to the Dominican Republic which may have contributed to his arrest. 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.  Gary Kaplan was one of the bookmakers who decided to make the change.

''We needed a place big enough to hold us, and we've finally found it,'' said Gary Kaplan , the former CEO of BetOnSports (referred to as BOS), which industry insiders say was the biggest offshore gambling company in the world. After trying Aruba and then Antigua, BOS settled in Costa Rica in 1998. The company occupied 60,000 square feet of a San José office tower and then signed leases to add 40,000 more by 200, not only to accommodate growth in its work force, which numbered 800, but to add a health club, spa and smoke shop to entertain visiting high rollers.

BetonSports had already spent more than $5 million on communications infrastructure that allows tens of thousands of wagers to flow into its telephones and computers every day. The company had 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,'' said Kaplan who was 41 back then, a former New York City neighborhood bookie.

The growth is funded by bettors from all over the world. BetonSports's web site could 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 were 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,'' recalled 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.''

With its vast plains of computer terminals and cadres of smartly dressed secretaries, BOS seemed 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. When BOS was formerly named Nasa International, it pulled several photos of rockets and astronauts off its web site 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, Lloyd's of London forced BetonSports to stop boasting that the British company was insuring bettor's money. BOS also had been in a long-running dispute that has created a noisy buzz in gambling circles.

It had 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 BetonSports wouldn't have accepted them under his real name. ''We always demand proof of identity before paying off a winning bet, lLet him show up with some proof, and we'll pay him'' said Kaplan.
 
Ironically, BOS had always been on thin ice when it comes to phony names. Kaplan always introduced himself -- including to a Wall Street Journal reporter when I was there -- under the name Greg Champion. Employees were instructed to call him simply G to avoid a slip-up in front of visitors. Kaplan seemed to feel he had some dangerous enemies; he was always accompanied by a phalanx of bodyguards, and often practiced target-shooting in a firing range inside BOS's offices.

Associates say that one of his main worries had always been being captured by the FBI.  It appears that his greatest fear of all was well founded.

The industry is certainly a safer place without Gary Kaplan around, but as mentioned previously, we may never see a more successful marketing tycoon as Gary.

written by Kenneth B Weitzner--EOG

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