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 FBI is issuing letters to four telephone companies, instructing them to stop providing phone service to the Internet sportsbooks and casinos operated by BetonSports PLC. 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.
