BUSINESS

David Carruthers Sentenced

TAGs: david carruthers, illegal online gaming

David_CarruthersSo ends one of the highest profile cases in online gambling history.

Today, Judge Carol E. Jackson of the Missouri Eastern District Court, after reviewing numerous letters for leniency and testimony at the hearing, sentenced David Carruthers to 33 months in federal prison. Today’s announcement follows the court’s acceptance of a plea agreement between Carruthers and federal prosecutors yesterday.

“I understand now that the business was operating outside the laws of the United States,” Carruthers said in a statement he read in court. “I realize I made the biggest mistake of my life… I am sorry for the actions of Betonsports and the trouble it caused,” he said.

Carruthers’ ordeal begin when, on Sunday, July 16, 2006, he was apprehended and arrested while changing planes at Dallas-Fort Worth airport in Texas, en route to his home in Costa Rica with his wife Carol from the BETonSPORTS Annual General Meeting in the United Kingdom. Carruthers remained in
detention in Fort Worth, Texas in relation to federal charges filed in Missouri under sealed indictment.

The charges leveled against Carruthers where pursuant to the US “RICO” statute (“Racketeer Influenced and Corrupt Organizations Act”) and related to his company taking wagers over the telephone and Internet from US citizens. While the indictment was against twelve defendants and included 22 counts, Carruthers was only charged with count one charge of racketeering

Betonsports suspended trading of its shares on the London Stock Exchange on July 18, 2006, a day after the indictment was unsealed. A week later, Carruthers was terminated as BETonSPORTS Chief Executive Officer, the company citing his inability to perform his contracted duties while incarcerated. Naturally, broad speculation was that such measure was designed to distance the public company from potential scandal. The company filed for liquidation and, in May 2007, through its attorney also pleaded guilty to a racketeering- related charge.

Since his arrest summer of 2006, Carruthers has been largely confined to a hotel in St Louis, Missouri, under electronic surveillance while he awaited trial.

On April 2, 2009, Carruthers pleaded guilty to racketeering charges, and agreed to cooperate in the federal investigation and prosecution of BetOnSports founder Gary Kaplan and he was to receive a sentence of no more than 33 months. He withdrew that plea and pleaded guilty again to the same
charge in October under a revised agreement with prosecutors after Kaplan pleaded guilty to the same court.

While it is widely believed that his “house arrest” in the St Louis hotel would constitute “time served” and offset his 33-month sentence, our sources reveal that typically such detentions are in fact not credited in this way. Carruthers’ attorney asked the court to reduce the sentence and take into
account Carruthers’ 32 days of incarceration and three years of house confinement. The court was unimpressed.

“I believe your apology and remorse, but I know at some point you learned that this endeavor was illegal,” Jackson told Carruthers in court. “I don’t think you thought it was a grey area. I think you knew there would be ramifications for your conduct.”

The BETonSPORTS case has often served as a lightning rod for those who oppose the draconian stance of the US Department of Justice in prosecuting European companies and their directors. Indeed, Barney Frank, Democratic congressman and chairman of the House Financial Services Committee, and
proponent of rational regulation of online gambling in the United States, described Carruthers’ apprehension at the Texas airport “one of the most Stalinist things I’ve ever seen my government do”.

Kaplan, who in August became the last of the individual defendants who fought the charges to admit guilt, was sentenced to 51 months in prison on Nov. 2. He also forfeited $43 million to the U.S. On Dec. 1, Jackson fined the company $28.2 million for its infractions. The company is attempting to repay clients who are owed money, its lawyer told the judge. “We won’t be able to pay the $28 million,” said the company’s attorney in court that day. “We have an obligation under the laws of the United Kingdom to pay the creditors first.”

While placing bets by wire is held by U.S. authorities to be unlawful in the U.S., a European Union investigation found that those U.S. laws “and their enforcement against EU companies constitute an obstacle to trade” that is inconsistent with World Trade Organization rules, the WTO said in a March,
2009 statement. “The provisional conclusions of the report imply that WTO proceedings against U.S. measures would be justified,” the EU’s 20-member European Commission said.

Norman Steinberg and Gregory James Haggard, the remaining defendants in the case, remain hiding in a Bagdad sewer at large.

Download a pdf of the full sentencing order.

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