March 5, 1998 in Nation/World

Prosecutors Attack Online Bookies Charged With Illegally Using Phone Lines, Offshore Defendants Don’t Deny Taking Bets

Benjamin Weiser New York Times
 

Pursuing the first federal prosecution of sports gambling over the Internet, authorities in Manhattan charged 14 owners and managers of offshore companies Wednesday with illegally using interstate phone lines to take online wagers from Americans who placed their bets with the click of a mouse.

The case against the defendants, who are all Americans and maintain that their business has been operating openly and legally, comes in an industry that has seen explosive growth in recent years. The government said Wednesday that online sports betting had garnered $600 million in gross revenues last year, up from about $60 million in 1996. In January alone, online betting services received about 40,000 “hits,” prosecutors said, which were largely associated with betting on the Super Bowl.

The government said it was not charging any bettors who used the Internet sites but that the prosecution should serve as a warning that such activity is illegal.

It was unclear Wednesday, however, what the impact of the prosecution would be. Gambling experts said that the size and anonymity of the Internet would make it impossible for the government to shut down the burgeoning industry, which consists of at least several dozen known betting services.

“You’re never going to see a shutdown,” said Anthony Cabot, a gambling law expert in Las Vegas. “What you’re going to see is a number of people being dissuaded from entering the industry, and those who are in the industry are going to take much greater precaution in hiding their ownership if they are U.S. citizens.”

In moving against the executives of the offshore companies, which are based in the Caribbean and Central America, prosecutors said they were concerned that the use of the Web had vastly expanded the market for illegal gambling in the United States, and consequently increased the risks associated with betting on professional and amateur sports.

“Cybergambling over the Internet greatly multiplies all of these risks,” said Mary Jo White, the U.S. attorney in Manhattan, whose office announced the charges Wednesday.

White said the instantaneous access of online betting was an irresistible lure both to global bookies and potential gamblers who can bet and lose large amounts of money without ever leaving home.

Two defendants were arrested at locations around the United States on Wednesday, officials said, and two more were expected to be by the end of the night. Officials said FBI agents were contacting the 10 other defendants outside the country to make arrangements for their surrender.

Some of the defendants, reached by telephone, said they were stunned at the charges, and said they had been operating their businesses openly and with the approval of their host countries.

“We’re licensed to do what we do here by a sovereign government,” said Jeff Cohen, a partner in the World Sports Exchange in St. John’s, Antigua, who only learned of the charges from a reporter. “They’re just trying to scare everyone.

“We don’t deny what we do. We just have a different opinion on where the law is.”

Another defendant, Kerry Rogers, who was arrested Wednesday, said by phone Wednesday from Las Vegas that the charges were “ludicrous” and “grandstanding” by a U.S. attorney. Rogers, who said he was the Internet provider for Winner’s Way, based in the Dominican Republic, said he planned to fight the charges.

“I think it’s uneducated,” he said, adding that he was not in the gambling business but the Internet business. “What are they defending? What are they fighting against? Who got harmed?”

The defendants, all of whom are charged with conspiracy to use the Internet and phone lines to make wagers, also include a lawyer and two former stock brokers. The defendants reached Wednesday, as well as several lawyers representing some of them, denied any wrongdoing. A lawyer for Cohen, Benjamin Brafman, called the decision to prosecute “a reach.”

Prosecutors said several dozen Internet sports-betting companies had set up operations off-shore, advertising their services in newspapers, direct mail, and on the Web.


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