Founder of online sports betting business sentenced

Gary Stephen Kaplan, founder of the online sports wagering business BetOnSports, has been sentenced to 51 months in prison on multiple charges related to the illegal overseas operation, the U.S. Department of Justice said.

Kaplan, age 50, also agreed to forfeit US$43.7 million as part of his plea agreement, made Aug. 14 in U.S. District Court for the Eastern District of Missouri. Under the "complex" plea agreement, Kaplan pleaded guilty to charges of conspiracy to violate the RICO (Racketeer Influenced and Corrupt Organizations) statute, conspiring to violate the Wire Wager Act and violating the Wire Wager Act, the DOJ said.

The Wire Wager Act prohibits businesses from running gambling operations over communications networks.

Kaplan was sentenced Monday in St. Louis.

Beginning in the mid-1990s, Kaplan set up businesses in Aruba, Antigua and eventually Costa Rica to provide sports book services to U.S. residents through toll-free telephone numbers and Web sites, including BetOnSports.com, the DOJ said.

BetOnSports advertised "heavily" to solicit U.S. residents to place sports wagers by telephone and over the Internet, the DOJ said.

Kaplan’s toll-free telephone lines terminated in Houston or Miami, and then were forwarded to Costa Rica by satellite transmitter or fiber-optic cable. Some of Kaplan’s Web servers were located in Miami and were remotely controlled from Costa Rica. U.S. residents became customers of BetOnSports by depositing funds on account and placing wagers over U.S. toll-free telephone lines and via the Internet using the deposited funds.

BetOnSports attracted a large number of U.S. customers, the DOJ said. By 2004, the company's headquarters in Costa Rica employed about 1,700 people. In 2003, BetOnSports had close to 1 million registered customers and accepted more than 10 million bets totalling more than $1 billion, the DOJ said.

In mid-2004, Kaplan took BetOnSports public on the London Alternative Investment Market, and the initial public offering netted him more than $100 million, the DOJ said.

"Kaplan was unique in the scope and scale of his illegal operation," acting U.S. Attorney Michael Reap of the Eastern District of Missouri said in a statement. "Despite his immense profits, he is living in federal custody. This case should serve as a warning to others who might choose to defy the laws of the United States on such a grand scale."

Kaplan has been in custody without a bond set since his arrest in March 2007.

The IDG News Service is a Network World affiliate.