Morgan Stanley waits and wonders about fate of BetonSports PLC

The British born CEO of BetonSports.com sits in a dank Dallas prison awaiting his fate while 10 others involved to some extent with the second largest online gambling company catering to North American citizens were either arrested or await extradition back to the United States. 

Amid all this mess sits Morgan Stanley.  The investment house is one of a handful of prestigious firms that have gone all in on Internet gambling. Both it and Goldman Sachs are shareholders in BetOnSports.com.

A federal grand jury in the Eastern District of Missouri Monday returned a 22-count indictment charging 11 individuals and four corporations on various charges of racketeering, conspiracy and fraud, the Department of Justice announced today.

BetonSports PLC, a publicly-traded holding company that owns a number of Internet sportsbooks and casinos, was among the companies charged in the indictment. The founder of BetonSports.com, Gary Stephen Kaplan, 47, was charged with 20 felony violations of federal laws including: the Wire Act, Racketeer Influenced and Corrupt Organizations (RICO) Conspiracy, interstate transportation of gambling paraphernalia, interference with the administration of Internal Revenue laws and tax evasion.

Other defendants in the racketeering conspiracy include: Kaplan's siblings, Neil Scott Kaplan and Lori Kaplan Multz; Norman Steinberg; David Carruthers, chief executive officer of BetonSports.com; Peter Wilson, media director for BetonSports.com; and Tim Brown, Steinberg's son-in-law. The three other charged companies, all connected and all Florida-based as part of DME Promotions, assisted in promotions of BetonSports.com. 

While the investigation stems back a number of years (Kaplan was pushed out of the company last year), the indictment contains some ominous demands that are bound to scare investors.

In conjunction with the indictment, the United States has filed a civil complaint in federal court to obtain an order requiring BetonSports PLC to stop taking sports bets from the United States, and to return money held in wagering accounts to account holders in the United States. U.S. District Judge Catherine D. Perry issued the temporary restraining order today. A hearing in the civil case has been requested within 10 days. As authorized by federal statute, the

BetonSports shares ended down 25% in London trading while PartyGaming shares finished 6% lower on Monday.

David Carruthers, BetonSports chief executive, was traveling to Costa Rica when federal authorities arrested him at the Dallas International airport while preparing to board an American Airlines flight.  Carruthers wife accompanied  him at the time and was permitted to board the flight bound for Costa Rica.

BetonSports.com executives, most of whom started with the company after it went public on the London Stock Exchange, remained in the dark heading into Monday night. 

At the close of trading, BetonSports shares were down 24.5 pence, or 16.6, at 122.5p while PartyGaming shares were down 5.5%.

"While the civil suit filed by the United States government is clearly a concern, Gambling911.com must emphasize that much of the present BetonSports executive staff were not employed with the company at the time of an incident cited in Monday's unsealed indictment," commented Christopher Costigan, President of Gambling911.com. 

That "incident" relates to promoters utilizing a "tour bus" in Florida to take bets from undercover agents.

"This was a much publicized case that occurred approximately three years ago," Costigan emphasized.  "The promotions company in question stands out on the indictment like a sore thumb.  BetonSports.com has engaged the services of many media outlets over the years, none of whom are mentioned on the indictment."

But some of them have been flown in to St. Louis for questioning over the past few months.

St. Louis has served as the center for online gambling investigations focusing on tax evasion and money laundering. 

Online gambling operators fear a broader investigation though executives for both Bodog.com and Sportingbet.com were able to travel to and from the United States without incident over the past weekend. 

Calvin Ayre, the high profile cover boy of Forbes Magazine 2006 "Billionaire's issue" and CEO of Bodog.com, was in New York Thursday attending an E! Online/Forbes Magazine party celebrating a documentary on this year's billionaires.

"I went through (The US) last week (also) with no problems," Ayre confirmed to Gambling911.com Monday. 

Ayre himself will be hosting a much ballyhooed conference in Las Vegas next week whereby a number of online gambling executives are anticipated to be in attendance. 

Ayre insists the show will go on and he has every intention of being there. 

Related Articles:

Subpoenas flying to get information on BetonSports founder: CEO detained
BetonSports.com CEO David Carruthers indictment for racketeering
U.S. Treasury secretary Henry Paulson a friend to online gambling?
Online gambling industry news (blog)

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Alejandro Botticelli, www.gambling911.com

Originally published July 17, 2006 9:12 pm EDT