Double Down

Gary Kaplan put all of his chips on BETonSPORTS and drew the worst hand of his life. Now hes making tuna casserole in a St. Louis jail.

All of this, the industry knew, was being carefully monitored by law enforcement. Only a month before the bash, the U.S. Attorney for the Eastern District of Missouri subpoenaed PayPal about its Internet gambling transactions. At the same time lawmakers in Congress were reviewing bills aimed at stymieing the industry. The scrutiny did nothing but embolden Carruthers. The following year he hit the road to educate U.S. media, lawmakers and lobbyists on industry practices and quickly distinguished himself as the trade's poster boy for regulation.

"You have to wonder when the U.S. will wake up and get a clue on what the rest of the world is doing," Carruthers once said. "You have operators begging to be taxed in the U.S. and all the politicians want to do is try to pass legislation that is aimed at prohibition."

In fall 2003 the industry suffered an economic blow when such media outlets as the Howard Stern Radio Show and The Sporting News yanked ads because of the St. Louis-based investigation. Carruthers responded with a petition drive calling for an end to the inquiry. In BOS' typically brazen fashion, he rolled out the campaign on the stoop of Stern's parent company's headquarters in New York. "The only thing that would have been better was if they had brought the microphones down to the street and interviewed us," Carruthers told the St. Charles-based Interactive Gaming News.

Carruthers' then-attorneys advised that because he was a UK citizen the U.S. government had no standing to arrest him. But in fact, he would be the first taken into custody nearly three years later.

In 2004 prosecutors offered a plea bargain to a Miami marketing vendor who'd coordinated promotions for BOS. The firm's attorney was unconvinced that laws were broken and refused the deal. The same year, Norm Steinberg paid a visit to prosecutors in St. Louis. The exact details of their conversation are unknown. According to court filings, however, Steinberg returned to Costa Rica with a message for Gary Kaplan: "The prosecutors wanted Gary Kaplan above all else."

BETonSPORTS planned to open its 2006 football season with a $30 million ad campaign featuring nuns: inflatable women of the cloth flying over football crowds and alongside BOS billboards with the tag line: "Last night Sister Marietta won a Hail Mary." The promotions would have set a decidedly new image for the company.

David Carruthers had overhauled the management of the firm in the two years since its public float, a fact he touted in annual reports. Neil Kaplan by now was long gone. Lori Kaplan, reportedly to her dismay, was let go in 2005. Norm Steinberg no longer had an office in the building. BOS, to be sure, was no longer a family business.

Carruthers professionalized the operation by bringing in a cadre of British executives with decades of experience in the business. They were beginning to upgrade technology and weed out drug-addled employees. Kaplan, for his part, had become depressed after selling most of his shares and gone on a two-week cocaine binge, according to court papers. But by 2006 he was consulting for the company again. Former employees say he was helping BOS strike partnerships in South America while Carruthers worked on business development across Asia.

In the company's annual report dated May 31, 2006, Carruthers stated: "BOS will remain at the forefront of any debate, winning friends and influence." Unofficially, the firm was predicting profits of $44 million for the coming year. The very next day on June 1, a grand jury in St. Louis handed down its sealed indictment. Six weeks later authorities arrested Carruthers at the Dallas airport as he and his wife made their way to Costa Rica from London. According to a friend, Carruthers had no inkling of the magnitude of the charges he was facing. He thought the company would bail him out the next day and business would go on as usual.

On the contrary. The BOS board of directors fired Carruthers a week later, most likely in hopes of avoiding prosecution. For the last year the Scot has been under house arrest at a rented apartment in Clayton on the Park, learning Mandarin Chinese, watching Boston Legal and rooting for the St. Louis Cardinals. BOS went belly-up last fall.

"There was talk right after the arrest that Gary would never have shut down the company," says Tom Jensen. "He would have made them drag him out of there. The problem was they had become so transparent by becoming a public company. If they were still private, Gary would have probably said to the feds, 'Come on down here and pound sand.'"

To this day speculation rages in the industry as to why BOS became a Justice Department target. Some people believe it was because there was illegal "credit" betting allegedly occurring under Kaplan's watch. The old-school, corner-bookie business model basically allows a gambler to make multiple wagers without depositing money offshore. On the weekly "settlement day," an "agent" and the bettor meet to collect or pay out.

Other insiders blame Kaplan's and Carruthers' aggressive self-promotion. Many believe the public disclosure associated with the company's IPO precipitated its demise. "There are people that have filled the void left by BETonSPORTS," observes Chris Flood, Kaplan's lead attorney.

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