Go Directly To Jail

#124 © Copyright 2006, all rights reserved worldwide. Gambling and the Law® is a registered trademark of Professor I Nelson Rose, Whittier Law School, Costa Mesa, CA

Why is David Carruthers, the now-former chief executive of BetOnSports, sitting in jail in Missouri, while his direct competitors are still taking bets from Americans?

Both Carruthers and BetOnSports have been charged with major federal felonies, including violations of the Wire Act and racketeering. Prosecutors also got a temporary restraining order (“TRO”), requiring the company to stop taking bets from the U.S. and to return all the money held in accounts of American patrons. The government is seeking prison sentences of many years, and $4.5 billion in penalties.

On August 10, 2006, the company announced it will close down most of its operation and fire 800 employees, to focus on taking bets from Asia, in an attempt to save its business.

Yet, there is no sign of other operators making major cutbacks. In fact, Playboy has announced that it is going to start its own Internet gambling website.

The major problem for the U.S. Department of Justice (“DOJ”) is that it is difficult to go after someone in a foreign country who refuses to return to the United States.

The major problem for David Carruthers was arrogance. He truly believed that because BetOnSports was licensed and operated out of foreign countries, and was publicly traded in London, that he was not subject to U.S. anti-gambling laws.

The federal government has few good anti-gambling statutes, but it does have enough to strike anyone stupid enough to walk in front of its guns wearing a bright target on his chest.

The DOJ’s strongest criminal statute is the Wire Act. The DOJ asserts that the Wire Act covers all Internet gambling. But courts have held the Act is limited to businesses which take bets on sports events and races. So the DOJ is not going to arrest a regular player, or an operator who does not take sports bets, because it would lose those cases.

Given the problems with existing laws, prosecutors had to wait until an online sports bookie made the mistake of coming within the country’s borders.

It was not hard to see that the DOJ wanted to arrest someone so that it could intimidate everyone else in the industry.

Two weeks before Carruthers was arrested, I gave a formal Legal Opinion to an online operator telling him not to visit the United States.

Even sports bookies are safe, if they remain outside of the U.S.

Carruthers is British. That’s no protection. A foreign citizen is subject to all United States federal and state criminal laws, except in extremely unusual circumstances, such as having diplomatic immunity.

But American law does not allow trials in absentia – a person accused of a crime cannot be convicted unless he is physically present in court.

Of course, some defendants jump bail, but since they have been in court, their voluntary absence does not prevent a trial. Internet gambling operators won’t face that issue, since no judge is going to set them free on bail. It is hard to imagine a greater flight-risk than a multi-millionaire living in another country. The best someone like Carruthers can get is house arrest, with an ankle bracelet preventing him from leaving the city.

The right to be present at trial is part of the common law, the Federal Rules of Criminal Procedure, and, most importantly, the U.S. Constitution. Having a federal or state criminal trial while the defendant is in another country would deny the defendant his constitutional right under the Sixth Amendment to confront witnesses.

So the question becomes, how to get the defendant back to the U.S. to stand trial.

Carruthers gave the easiest answer: show up. Even though he was only going to be in the country for a few hours, to change planes from England to Costa Rica in Dallas, he voluntarily chose to step foot on American soil.

The situation is radically different for anyone, American or foreign, who refuses to come to the U.S. The usual answer given is extradition. But the U.S. cannot extradite someone, even an American citizen, let alone a resident of another nation, unless he falls under the terms of an extradition treaty. And very few treaties include “gambling” on their list of crimes.

If there is no neat and tidy way to get a defendant back to the U.S. using legal process, how about messy and less legal means? Courts have allowed criminal trials to go forward, even when the defendants had been kidnaped in another country by government or private agents and forced to return against their will.

Of course, invading another country is a serious matter. The federal government sent military forces into Panama, ostensibly to arrest Manuel Noriega for violating American drug laws. And the Israeli Mossad grabbed the Nazi mass-murderer Adolf Eichmann in Argentina. But no one is arguing that illegal gambling is a crime against humanity.

Private bounty hunters have grabbed wanted people in Mexico, and smuggled them back into the U.S. to stand trial. These agents are now themselves wanted in Mexico, for kidnaping.

Civil suits against foreign operators are a little bit easier. But even here, no action can be taken against a person or company in another country unless they have been properly served.

Many nations have signed the Hague Convention, which allows countries like the U.S. to sue residents of other signatories. But the process for service is difficult and takes enormous amounts of time and effort.

Ironically, it may be easier to serve an Internet gaming operator who is hiding and who is in a country, like Costa Rica, that has not signed the Hague Convention. In a lawsuit over the use of the name “Rio,” the Las Vegas casino operator was able to obtain a court order allowing it to serve its complaint by email on a Costa Rica defendant, who could not be found. Email service is not allowed under the Hague Convention.

Even if a foreign gaming website is properly served, it may not have to change its operation for years. BetOnSports decided to close down its U.S. action operations in Antigua and Costa Rica mainly to try and salvage its stock price. Foreign countries do not normally give much respect to a TRO, which is issued after a quick hearing, to which the defendant does not even have to show up.

It is a different situation if a U.S. court issues a judgment after a full trial.

Of course, for that to happen, the American prosecutors or plaintiffs would first have to arrest or serve the online gaming operator.

I don’t think you are going to see too many of them changing planes in Dallas any more.

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© Copyright 2006. Professor I Nelson Rose is recognized as one of the world’s leading experts on gambling law. His latest books, Gaming Law: Cases and Materials and Internet Gaming Law, are available through his website, www.GamblingAndTheLaw.com.