An American Hypocrisy? Bet on It.
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A week ago, David Carruthers, the urbane, 49-year-old British CEO of BetonSports PLC, was campaigning to legalize, regulate and tax Internet gambling in the United States.
Today, he is sitting in a Fort Worth jail cell.
As CEO of BetonSports, Carruthers oversees an online gambling empire with licensed operations in Europe and the Caribbean basin. The company has offices/online casinos in London, Costa Rica, Antigua, Guatemala, Mexico and Malaysia.
Today he's having bologna sandwiches and Kool-Aid in a Texas lockup. Perhaps the U.S. government will throw in a heaping side of American hypocrisy.
According to the Department of Justice (DoJ), BetonSports in 2003 had 100,000 active players who placed 33 million wagers worth $1.6 billion through the company's Web sites.
More than half of those wagers came from Americans.
Because of that, Carruthers is in the slammer facing enough charges to make a mob boss nervous, including racketeering, conspiracy and fraud.
"Efforts to prohibit online gambling in the United States have failed repeatedly," Carruthers said last week. "Congress should focus its energy and resources on viable solutions through regulation to protect consumers and to control underage and problem gambling."
Carruthers' comments came within hours of the U.S. House of Representatives overwhelming vote to do just the opposite: ban Internet gambling in the U.S.
That legislation seeks to clarify a murky piece of law called the Wire Act, which Congress approved in the early 1960s prohibiting placing a sports wager over the telephone.
The new House legislation extends the Wire Act to cover all forms of Internet gambling.
It is not, it is important to note, law. The Senate has yet to decide even if it will consider the House legislation. If the Senate follows the House, the bill would still need President Bush's signature, which seems a foregone conclusion.
The Bush DoJ, after all, issued the indictment that landed Carruthers in jail 10 days before the House vote. Days later, Carruthers was changing planes in Fort Worth en route to Costa Rica. Federal authorities bagged him up and, so far, he has been unable to communicate even with his company.
The DoJ, under both the Clinton and Bush administrations, has already decided the Wire Act applies to Internet gambling.
Just ask Jay Cohen.
In the late 1990s, Cohen relocated from California to Antigua to launch World Sports Exchange, an online betting service targeting Americans.
Cohen took out ads in numerous U.S. publications promoting his site. According to the FBI, the site brought in $5.3 million in wagers over a 15-month period.
The feds indicted Cohen in 1998. Cohen returned to the U.S. to face the charges, confident no jury would convict him of what Americans do every day: bet on something from state-sanctioned lotteries and horse racing sites and unsanctioned office pools and bar bets.
Cohen got 21 months in prison. The conviction was upheld on appeal and the Supreme Court refused to hear the case. His indicted co-conspirators are playing golf and still raking in the cash in Antigua.
Under the Bush administration, the DoJ jacked up the heat even more on Internet gambling. Credit card companies were pressured to not honor payments to gambling sites.
In 2003, the DoJ sent letters to broadcasters and publishers warning them that accepting offshore gambling advertising could be considered aiding and abetting illegal gambling operations.
Then Attorney General John Ashcroft followed the warning letters with federal grand jury subpoenas seeking detailed information from the broadcasters and publishers about their relationships with offshore casinos.
Later in 2003, the DoJ seized $3.2 million from Discovery Communications, the amount of money the Discovery Channel had received from offshore casino Tropical Paradise for advertising.
The media got the message: Discovery, Infinity Broadcasting, Clear Channel Communications, Yahoo and Google promptly dropped all Internet-related gambling advertising.
Nothing, however, stopped Americans from gambling online. Americans are projected to gamble approximately $6 billion through offshore sites this year. Worldwide, the total is projected at $12 billion.
And that doesn't count the legal gambling Americans spend billions on every year through casinos in Nevada and New Jersey, enough riverboat casinos to launch a fleet, lotteries and horse racing tracks.
There seems to be a disconnect between what lawmakers and the DoJ think is best for Americans and what Americans actually do in practice.
Wonder if David Carruthers is mulling all that as he sits in that Fort Worth jail cell?