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July 18, 2006
David Carruthers
The one thing that puzzles me here is why?
The chief executive of one of the UK’s largest betting websites is languishing in a Texan jail after being arrested as he changed planes in the US, sending shock waves throughout the gambling industry.
No, not why the arrest. The US authorities have been growling about such things for ages and by their interpretation of the law there certainly seems to be a case to answer. And being charged as a racketeer doesn’t surprise either, that’s simply standard in such cases.
No, the question is, why did the bloody fool fly through the US?
One other more minor question. Occasional commenter here David Gillies runs web operations in Costa Rica for someone or other. Is this connected David?
July 18, 2006 in Web/Tech | Permalink
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Comments
He was taking a gamble. Sorry.
Posted by: Q | Jul 18, 2006 11:03:56 AM
Tim, you do seem very prepared to throw away your libertarian leanings when it comes to the United States. Surely we need more outrage about this, about the arrest and about the stupidity of a law which bans people from spending their money how they like, and less blaming the unfortunate victim?
Tim adds: Sure I think the law is stupid, an entirely cynical attempt to protect the tax on stupidity that are the State lotteries. But then so is putting your head in the lion’s mouth.
Posted by: Matthew | Jul 18, 2006 11:32:00 AM
Of course the same must now apply (post Natwest Three) to anyone doing business with companies based in the US.
Posted by: Matthew | Jul 18, 2006 12:25:17 PM
I find my sympathy for the imprisoned gambling magnate somewhat qualified due to the gambling magnate being a gambling magnate.
Posted by: johnny bonk | Jul 18, 2006 1:32:25 PM
Johnny Bonk - a good dose of Paul Osterreicher to you mate.
Posted by: andrew duffin | Jul 18, 2006 4:18:00 PM
Nah, I don't touch anything to do with sportsbooks for exactly this reason. I know socially lots of people who work for them, but I have never been directly involved with offshore or online gambling.
The US stance on offshore gambling is utterly indefensible on many levels. This is very akin to the treatment of the NatWest Three. Pro-US as I am, they have to understand that the writ of US law stops three miles off the coast just like it does for everyone else. Of course the idea that you can legislate against the industry is hubristic to say the least, showing a touching faith in the ability of politicians to stop people doing things of which they disapprove.
And Tim is 100% on the money. I cannot imagine for the life of me what possessed this idiot to travel through US airspace. He runs an absolutely enormous gambling operation with vast revenues and assets. The amount wiped of the market cap of the company yesterday would have been ample to buy a private jet and keep it stationed in San José. I have absolutely nothing to fear from US authorities and I still don't want to go through US Immigration.
Posted by: David Gillies | Jul 18, 2006 9:39:54 PM
He was the token Brit. Full stop. The prime targets were the Kaplans. When they got arrested, DC got caught in the round up. In the overall scheme of things, he is inconsequential. The Kaplans will get convicted - like Jay Cohen - as US citizens breaking US laws. No surprises there.
The real issue is what happens in the UK. BoS Plc's partial compliance with the court order has led to great distortions in valuation in the UK gaming sector. Had no arrests been made in the US, BoS Plc would have little motivation to comply with the court order - since any prosecution of UK individuals would necessitate extradition from UK. And for that, the prosecutor would have to show evidence of an act that is a serious crime in the UK - as they did with the Nat West 3.
So the question becomes what alleged crimes were committed that are in fact crimes in the UK ? Most of the allegations are clearly aimed at the Kaplans - Yanks behaving badly over the past 15 years. The indictments confirm this. US gaming excise tax is only payable by US citizens - not UK citizens, not UK companies, so no UK crime. US gaming laws are only applicable to US citizens - not against UK companies acting lawfully; so no UK crime. US income tax applies to US citizens anywhere in the world or on income derived from an active business located in the US; income tax evasion is a crime in the UK, but it specifically pertains to the Kaplans in this case. Curiously enough, the only allegation against BoS that is clearly a crime in UK is mail fraud. The Kaplans ran some notoriously fraudulent magazine ads before BoS floated. So mail fraud is where BoS executives might be susceptible to extradition. (This may be a stretch because the current ads could be construed as sales puffery) But since the US DoJ already has enough Kaplans and BoS executives in custody to make their case, no extraditions are necessary or likely, given the partial compliance.
Why did BoS make a partial compliance ? To buy time. With the Kaplans and DC in jail, they must ascertain whether BoS has committed any illegal acts in UK that would expose BoS executives to extradition. Had they not complied, the prosecutor might simply institute extradition proceedings based on alleged infractions of UK laws. As it is, BoS will probably argue that the DoJ should look to the Kaplans for restitution for allegations that are not crimes in England - excise taxes owed, income tax evasion, etc. - and drop the rest for lack of jurisdiction or criminality in UK.
What has all this to do with the rest of the sector ? Not much unless a company has broken a UK law. BoS was built by US citizens with criminal records who continued to act on behalf of the company in the US illegally after it relocated to UK and was taken public. The indictments prove that US laws work where they have jurisdiction - against US citizens that are breaking that country's laws. Any speculation beyond that concerning the rest of the sector is largely unfounded.
Posted by: Jack Sprague | Jul 22, 2006 6:12:55 PM
Carruthers was a pest. His high profile advocacy of regulation was becoming a real problem for Leach and the other pro-prohibition members of the Congress.
So in order to help their chances with their 'core base' in the November Congressional elections the current neo-con bunch had to do something.
That's why it was Carruthers who was indicted as well as the Kaplans, and why checked for him on the passenger lists, although it's not as if they weren't watching his movements already.
The VP of Costa Rica is now on record saying that they won't extradite Gary Kaplan on the current charges, which is an interesting development. At least they can keep Carruthers quiet until November at least, which is really their plan I think.
The Carruthers arrest though, is part of a more sinister trend because of the UK Extradition Act 2003 of which the NatWest Three are the poster children, but poor old Nigel Potter is far more representative.
http://en.wikipedia.org/wiki/David_Carruthers
Posted by: FreeDavid | Jul 24, 2006 5:18:14 PM
