Law360 reported on a new brief filed this week in Eastern Pennsylvania federal court by Kaplan, the former boss of the Costa Rica-based BetOnSports, which went belly-up in 2006 after being targeted by US authorities for taking online sports wagers from American bettors.
The Internal Revenue Service (IRS) has long claimed that Kaplan owes the US government millions of dollars due to his failure to file tax returns for the years 2004 and 2005, during which time he sold $97m worth of shares in BetOnSports ahead of the company’s listing on the London exchange.
Kaplan sold his shares via two trusts based in the Isle of Jersey. In 2010, Kaplan settled the Kaplan Family Trust (KFT) and its underlying investment firm Nineveh Investments, under Bahamian law as a successor to the Jersey trusts. The Bahamas-based Equity Bank & Trust acts as the KFT’s trustee.
In 2015, Kaplan lost an appeal of the IRS back-tax demand. In July 2017, Kaplan’s family convinced the Bahamian Supreme Court that the assets in question “do not form a part of the personal assets of Gary Kaplan,” which the family hoped would cause the IRS to back off.
But last December saw Pennsylvania federal Judge Jan Dubois reject the Bahamian court ruling on the grounds that it “did not have jurisdiction over the US” and further ruled that Nineveh Investments hadn’t “carried the burden of proving the substance of Bahamian law.”
Kaplan’s Monday filing asserts that Bahamian law should hold sway because KFT was “created and operated” in the Bahamas, and that neither the KFT nor any of its beneficiaries has any “presence” in Pennsylvania. The filing also pushes back against the IRS’ claim that Kaplan’s role as KFT’s settlor means he has the power to direct the actions of KFT’s protector.
In 2007, Kaplan was arrested in the Dominican Republic and extradited to the US. In 2009, he reached a deal with federal prosecutors that required him to serve 51 months behind bars – although he’s believed to have been released two years into his sentence – and forfeit $44m deemed to be the proceeds of his illegal gambling activity.
That same year, Kaplan’s brother Neil Kaplan and sister Lori Kaplan-Multz pleaded guilty to their own racketeering and conspiracy charges over their roles in helping to operate BetOnSports.
BetOnSports CEO David Carruthers, whose 2006 arrest in Dallas marked the start of the company’s downfall, served 14 months in federal prison before his release in April 2011. BetOnSports’ customers lost millions of dollars held in their accounts when the feds brought their hammer down.