BetonSports Agrees to Permanent U.S. Ban

BetonSports, the London-based online gambling firm enmeshed in a legal maelstrom with the Department of Justice (DoJ), agreed Thursday to a permanent injunction barring the company from doing business in the United States.

The agreement settles a 22-count civil suit filed this summer by U.S. Attorney Catherine L. Hanaway against BetonSports.

The agreement does not affect the criminal charges Hanaway brought against several BetonSports executives, including former CEO David Carruthers, who remains under house arrest in St. Louis facing numerous counts of racketeering, conspiracy and fraud.

“None of the BetonSports Web sites are licensed to operate bookmaking operations anywhere in the United States,” the permanent injunction states. “Internet gambling involving interstate or international wire transmissions is not legal anywhere in the United States, except as explicitly authorized by statute.”

BetonSports ceased it U.S. operations shortly after Carruthers’ arrest. The London Stock Exchange suspended trading in the company’s shares on July 17.

According to the DoJ, BetonSports raked in $3.5 billion in online wagers from 2002 to 2004 with approximately 98 percent of the bets coming from the United States. The DoJ claims American bettors did business with the company based on fraudulent advertising promoting the legality of BetonSports.

The advertising campaign frequently used the phrase, “World’s Largest, Legal and Licensed Sportsbook.” The advertising ran on radio stations throughout the United States.

“In fact, the court found that such online gambling violates federal law. The court’s extensive findings of fact supporting the permanent injunction were based upon the record of the firm’s and its associates’ criminal conduct,” the DoJ said in a statement.

The DoJ said BetonSports did not challenge the findings although it did not formally admit any guilt.

“While the company has agreed to the permanent injunction, it is important to note that this has been done without the company admitting to or contesting any of the allegations contained within the complaint,” BetonSports said in a statement released through the London Stock Exchange.

BetonSports said in the statement it decided to settle the civil suit as a “major step in the negotiation to settle the outstanding criminal action against the company.”

The settlement also requires BetonSports to refund any balances in U.S. bettors’ accounts as of July 17 and to operate a toll free telephone service to provide refund information.

In addition, BetonSports must place a full-page ad in nationally circulated newspapers advising readers the company no longer accepts bets from the U.S. and providing refund information, including the toll-free number.

The company must place similar notices on its numerous Web sites.

The company must also relinquish its rights to its U.S. trademarks, including Betonsports.com, NASA Sports Book, Wagermall.com, Millennium Sports, Bettor’s Trust, Jaguar Sports International, Rock Island Sports, Gibraltar Sports and Infinity Sports International.

Under U.S. law, the Wire Act prohibits making gambling wagers over the telephone. Approved by Congress in the 1960s, the legislation did not anticipate the Internet, creating a legal gray area for online gambling.

The DoJ maintains the Wire Act also covers placing bets over the Internet.

In October, Congress approved and President Bush signed legislation requiring banks and credit card companies to block payments to the estimated 2,300 offshore gambling sites located outside of U.S. jurisdiction.

BetonSports’ woes began when U.S. authorities arrested Carruthers in Fort Worth, Tex., where he was changing planes en route from London to Costa Rica, where the company maintains several of its sites.

Carruthers was transferred to St. Louis, where the federal indictment was issued. He posted bail but is not allowed to leave St. Louis. In addition to the racketeering, conspiracy and fraud charges, the DoJ claims as CEO of BetonSports he failed to pay federal wagering excise taxes of more than $3.3 billion.

BetonSports fired Carruthers shortly after his arrest.