Monday, July 17, 2006

DOJ Cracks Down on Online Gambling

The DOJ is cracking down on online gambling as seen by the unsealing of an indictment that had been issued by a federal grand jury in the Eastern District of Missouri.   The  "22-count indictment charg[es] 11 individuals and four corporations on various charges of racketeering, conspiracy and fraud." (see DOJ Press Release here; see also Wall Street Journal here)  The Press Release states:

"The indictment alleges that Gary Kaplan started his gambling enterprise via operation of a sportsbook in New York City in the early 1990s. After Kaplan was arrested on New York state gambling charges in May 1993, Kaplan moved his betting operation to Florida and eventually offshore to Costa Rica. According to the indictment,, the most visible outgrowth of Kaplan’s sports bookmaking enterprise, misleadingly advertised itself as the “World’s Largest Legal and Licensed Sportsbook.” The indictment also alleges that Kaplan failed to pay federal wagering excise taxes on more than $3.3 billion in wagers taken from the United States and seeks forfeiture of $4.5 billion from Kaplan and his co-defendants, as well as various properties.

"The indictment alleges that Gary Kaplan and Norman Steinberg, as the owners and operators of Millennium Sportsbook, Gibraltar Sportsbook, and North American Sports Association, took or caused their employees to take bets from undercover federal agents in St. Louis who used undercover identities to open wagering accounts. The indictment also alleges that Kaplan and Mobile Promotions illegally transported equipment used to place bets and transmit wagering information across state lines and that DME Global Marketing and Fulfillment shipped equipment to Costa Rica from Florida for"

This indictment raises a host of questions including questions on the criminality of the alleged activities, the appropriate jurisdictional base for prosecution of these alleged activities, and the credibility of witnesses who obtained their evidence via an undercover operation (a jury might be very accepting of undercover evidence when the activities involve drugs or fraud; but will they be as accepting for conduct related to gambling?).   For an interesting discussion on whether online gambling should be illegal see the Wall Street Journal discussion here between Rep Jim Leach (Iowa) and David Carruthers, Chief Executive of BetOnSports Plc (both Carruthers and BetOnSports were charged in this indictment). It is interesting to see that this case comes out of the Eastern District of Missouri.  With  alleged online gambling, could other jurisdictions in the United States have investigated and prosecuted this case?  Is the selection of this venue another example of prosecutorial discretion?


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