Gary S. Kaplan, one of two fugitive founding co-owners of BetonSports sought by U.S. authorities, was arrested Wednesday night in the Dominican Republic.
Kaplan, 48, faces 20 U.S. felony charges related to the operation of BetonSports, the British-based, publicly traded wagering site.
According to the Department of Justice (DoJ), Kaplan was transferred to Puerto Rico for arraignment. The DoJ expects Kaplan to be sent to St. Louis, where former BetonSports CEO David Carruthers also faces multiple felony counts.
The 49-year-old Carruthers was arrested last July in Fort Worth, Texas, while en route from England to Costa Rica, where BetonSports once maintained its Web operations.
Kaplan, Carruthers and Norman Steinberg, another co-owner of BetonSports, are charged with running an illegal gambling operation in the U.S. In all, 11 individuals and four corporations are charged with various counts of racketeering, conspiracy fraud, money laundering and tax evasion. Steinberg is still at large.
U.S. Attorney Catherine L. Hanaway said Kaplan was the subject of a “worldwide” manhunt.
“This case helps to establish the effectiveness of the Interpol System of executing international arrest warrants,” she said in a statement. “Thanks to the assistance of many law enforcement agencies this fugitive will soon be back in St. Louis to face the charges against him.”
The indictment also alleges that Kaplan and a Florida business, Mobile Promotions, illegally transported computers and servers used to place bets and transmit wagering information across state lines. The DoJ also charged that a related Florida business, DME Global Marketing and Fulfillment, shipped equipment to Costa Rica from Florida for BetonSports.com.
According to the DoJ, Kaplan launched his gambling business through a sports book in New York City in the early 1990s. After he was arrested on New York gambling charges in 1993, Kaplan moved his operation to Florida and finally offshore to Costa Rica. He and Steinberg sold the company in the early 2000s to the English company that took it public in 2004.
Once one of the world’s largest Internet gambling operations, BetonSports quit taking wagers from U.S. gamblers last fall as part of its settlement of a 22-count civil suit filed by the DoJ against the copy. The agreement does not affect the criminal charges against various BetonSports executives.
The DoJ claims BetonSports raked in $3.5 billion in online wagers from 2002 to 2004 with approximately 98 percent of the bets coming from the U.S. The DoJ contends American bettors did business with the company based on fraudulent advertising promoting the legality of BetonSports in the U.S.
BetonSports said shortly after the U.S. indictment was unsealed, it wanted to make “absolutely clear that none of the founders of the original business has any continuing role within the company… the original founder has a consulting agreement with the company under which his role is non-management.”
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.
Given the chance to clarify the law, Congress last year did not make it illegal to place a bet over the Internet, but barred banks, credit card companies and other payment systems from processing payments to the estimated 2,300 offshore gambling sites located outside of U.S. jurisdiction.
BetonSports’ woes began when U.S. authorities arrested Carruthers, who was changing planes in Texas. 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.
Shortly after Carruthers was arrested, BetonSports fired him.