BETONSPORTS INJUNCTION EXTENDED TO MONTH END

(173) (27-jul-06)

Betting group stopped from taking US bets

Associated Press reports that the federal court injunction that effectively put a stop to BetonSports taking American business (see earlier InfoPowa reports) has been extended until July 31.

A hearing on the new order is scheduled for next Monday in U.S. District Court in St. Louis. The new order, signed by Judge Catherine Perry , extends a July 17 order that was set to expire after 10 days.

The temporary order is part of a civil case brought by the U.S. government to stop U.S. betting with BetOnSports. In addition, the FBI instructed telephone companies to stop providing phone service to BetOnSports.

The U.S. Department of Justice has filed a criminal case and 22-count indictment naming 11 persons and accusing BetOnSports of fraudulently taking bets from U.S. residents by phone and the Internet and failing to pay excise taxes.

As part of the criminal case, BetOnSports' Chief Executive David Carruthers , was arrested July 16 during a layover at Dallas/Fort Worth Airport. BetOnSports announced Tuesday it had ended his employment as a result of his "continued detention by U.S. authorities."

Ten others were named in the indictment, including Gary Kaplan , the BetOnSports founder, who has not been apprehended.

Meanwhile, reports from the Telegraph newspaper in London suggest that management at BetonSports is hoping that by sacking its chief executive it has won enough leverage with the Department of Justice to allow it to re-open its website "within a week".

The board, including its three British non-executive directors, is still meeting in Costa Rica, with much of its energy spent negotiating with the DoJ.

The DoJ last week obtained a restraining order from a federal district court stopping the company from taking bets from US citizens. Since then its website has been closed not just to Americans but also to punters logging in from Europe or Asia. One estimate is that the blockade is costing BetonSports up to $4 million a day. However, a source close to the company said: "We're getting our ducks in a row, both legally and commercially. We're going to be back on-line within the next few days, I hope."

How much of the website would be opened is still being negotiated and it is uncertain whether the company will be successful.

According to the Telegraph report, the company source said: "There is a major matter of jurisdiction here. Who says the DoJ has jurisdiction over a company that is listed in London, with licences in both Costa Rica and Antigua?" He said one of the options for the company was to ignore the DoJ's restraining order and open the site regardless. "Let's see the DoJ come and try to stop us."

A more likely scenario is that the company will close down its telephone betting service, unequivocally illegal under the US Wire Act, and possibly some of its sports betting website, but keep up its poker and casino live.

Even if the sacking of Mr Carruthers is enough to win over the DoJ, the move has shocked the industry. A source close to Sportingbet , BetonSports' main rival, said: "He's been hung out to dry. It's just extraordinary."

Andrew Brown , a partner at the City firm Herbert Smith and a leading employment lawyer, said: "There is the concept of innocent until proven guilty, which pertains to employment law as much as any other area of law. The fact that he has been sacked after being merely arrested rather than being convicted is very unusual."

Mr Brown urged directors to examine their liability insurance to check they are covered for being arrested on criminal charges.

Partygaming , the largest online gambling company, said that all its directors were fully indemnified even after they left the company.