San José, Costa Rica, since 1956

BetOnSports Closes, Employees Here Unpaid

They will fight back.

A suit filed by an online gambling lobbying group in a district court in the United States last week is the greatest hope for the struggling online gaming industry, which has suffered blows in Costa Rica and abroad due to a recent U.S. crackdown on Internet gambling.

The suit, filed by the nonprofit Interactive Media Entertainment & Gaming Association (iMEGA), seeks to restrain enforcement of a controversial law U.S. President George Bush signed last October that prevents U.S. credit-card companies and banks from processing payments to offshore online gambling businesses (TT, Oct. 6, 2006).

The law has had effects in Costa Rica and worldwide.

The London-based online gambling company BetOnSports, which recently announced it is closing up shop, once employed 1,200 workers in Costa Rica – the vast majority of whom are still owed severance pay from the company, according to Costa Rica’s Ministry of Labor.

The injunction requested by iMEGA, if granted, would prevent the U.S. government from enforcing the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006 and pave the way for Internet gambling to resume business as usual. The suit alleges the law is unconstitutional because it invades the privacy of citizens, and points to a 2004 World Trade Organization (WTO) report that found the U.S. policy on online gambling to contradict the country’s free-market access commitments, which include access to betting services, under the 1995 General Agreement on Trade in Services.

Eduardo Agami, president of the Costa Rican Call Centers and Electronic Data Association, which represents many of the so-called “sportsbooks” in Costa Rica, says the suit could turn the tides in favor of the online betting industry once again.

The industry in Costa Rica has taken a major hit since the U.S. crackdown began, prompting as many as 20 sportsbooks to close up shop in the past three years, according to Agami. He said the approximately 180 remaining sportsbooks have managed to maintain about the same level of employment, though – around 9,000.

Nearly a year after BetOnSports closed down its Costa Rica office in the Mall San Pedro, east of San José, and laid off 1,200 workers, the global company is closing.

Though the company has paid only 20% of the some $4 million it owes to Costa Rican workers who were laid off in August of last year, the Labor Ministry has no plans to take action against the company.

Ministry spokesman Giovanni Díaz explained the ministry no longer has contact with company officials. He recommended that workers seeking pay turn to the Costa Rican court system. He said it appears all representatives of the company have left Costa Rica, and most former employees have found new jobs.

Agami said the Labor Ministry doesn’t have the ability to make the company pay up.

“Who can (the ministry) take recourse to? The United States forced a total closing,” he said.

In a plea agreement signed by Bet- OnSports’ lawyer, the company plead guilty in the United States to federal charges of money laundering and racketeering May 24, less than two months after the firm’s fugitive founder Gary Kaplan was arrested at a hotel in the Dominican Republic’s capital and extradited to the United States, according to a U.S. Department of Justice statement.

Kaplan and former CEO David Carruthers, who was arrested in a Texas airport where he had stopped on a layover flight to Costa Rica (TT, July 21, 2006), both await trial.

BetOnSports will also supply witnesses and evidence in the case against Kaplan and Carruthers, who have both plead not guilty, as part of the agreement with the prosecution to avoid further criminal prosecution.

A post on the company’s Web site this week said BetOnSports is trying to collect on money it is owed so it can pay back creditors.

“It is extremely sad that such a great business has been destroyed in this fashion but we are committed to ensuring to the best of our ability that it ends properly,” said Director Clive Archer.

Listed on the London Stock Exchange, BetOnSports did not have offices in the United States and wasn’t registered with U.S. gambling authorities. BetOnSports set up call centers in countries like Costa Rica to maintain a business that relies on revenues from mostly U.S. and European clients. Though it is illegal to bet on sports in Costa Rica without government authorization, the loophole is that the sportsbooks don’t seek clients in Costa Rica and don’t actually accept the money here – they merely operate call centers and process electronic data.

“This is a direct result of the United States’ unilateral relentless attack on the industry,” Agami said of the BetOnSports closing. Agami said he would have liked to have seen BetOnSports fight the litigation and not give in to supplying evidence against its own executives, but added the company didn’t have much negotiating power facing accruing fines for having not appeared in court. The company now faces fines of up to $500,000 and billions in forfeitures and refunds to U.S. accountholders.

BetOnSports and its top executives were indicted on criminal charges relating to their U.S. advertising in June 2006 as part of a U.S. crackdown on online gambling (TT, Aug. 18, 2006).

The company’s May 24 plea “should put an end to the BetOnSports illegal gambling empire,” said U.S. Attorney Catherine Hanaway in a statement.


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