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The David Carruthers Saga Comes to an End with a Guilty Plea...By Hartley Henderson

One of the more interesting sagas began to wrap up last week when David Carruthers, the CEO of BetonSports (BoS), pleaded guilty to racketeering charges. While Carruthers claimed innocence all along and vowed to fight the charges, it appears his attorneys determined the 33 month maximum penalty the U.S. Department of Justice proposed was better than anything he could expect in a trial and convinced him to plead guilty. As well, many expect Carruthers may be let go with time served. Others also suggested that Carruthers was just tired of having his life put on hold and wanted to move on with the sentence so that even if he served the full sentence, by 2012 he could get back to England and perhaps get back in the online gambling business. Whether anyone would hire him at that point is uncertain, but almost certainly Carruthers believes he would be an asset for some company.

David Carruthers started out at Ladbrokes in the mid 1970s where he worked as a bet manager. By all accounts his work at Ladbrokes was ok, but nothing special, and he certainly didn't rise through the ranks there. In 2000 Carruthers was lured to BoS by Gary Kapla (the owner of BoS), offering Carruthers the CEO position. BoS gained a reputation for their aggressive marketing and somewhat pushy sales techniques, but they were most noted for their large customer base. Love them or hate them, there is no disputing that BoS was a successful and profitable company. Kaplan wanted to take BoS public, but his storied past (which included illegal bookmaking charges in the U.S., along with his rough demeanour) made that difficult. According to one source, a friend of Kaplan told him that if he wanted to go public he would have to find someone else to be a front man. It was suggested to Kaplan that he appoint someone with a calmer personality and preferably a Brit who would be more attractive to both the Financial Services Authority as well as potential investors. So Kaplan hired David Carruthers and made him CEO, tasking him with the job of taking BoS public. By all accounts, while Carruthers had the title of CEO it carried little weight. A source who was with BoS from the beginning told me that Kaplan made it clear to Carruthers that he was only Gary's secretary and that Kaplan was to make all decisions about the daily operations of the company. This statement seemed to be coroborated in the book "The Rise and Fall of BetonSports," an e-book written by someone with the alias Hacksaw Hemingway. In that book Hemingway suggested that whenever he went to see Kaplan, Carruthers was always excused from any meetings. The book is clearly self hype and many refute a lot of the claims by Hemingway, but more than one source confirmed that on this point, Hemingway was definitely accurate. Carruthers may have believed he had power, but while Kaplan was there he was just a glorified secretary.

BoS made a first attempt at a public listing in 2002, but that failed thanks partly to a U.S. campaign that got the attention of both the U.S. Department of Justice and the Financial Services Authority in Britain. In that incident four men were charged with gambling violations at a Tampa Bay Buccaneers game after taking bets in a lavish motor home with BetonSports written on the paneling. The men parked the motor home across from Raymond James Stadium and set up a table with T-shirt giveaways and beer and encouraged people to open offshore credit accounts and bet on the game with BoS.

David Carruthers tried to diffuse the situation by stating they were marketing people and weren't supposed to be taking bets, but he made matters worse when he commented that in his opinion the government was wrong because BoS is not physically located on American soil, so any bets placed with the marketing company were legal. Not surprisingly, the Feds, who had never heard of David Carruthers or BoS, all of a sudden had them on their radar.

In 2004 Carruthers was successful at not only getting a listing on the AIM, but also securing many British investors. They in turn appointed new British directors of the company, keeping Carruthers on as CEO. The company gained almost $113 million from the public offering, but the new British directors decided to take the company in a new direction, and unlike Kaplan had great respect and expectations for Carruthers (at least at first). Kaplan maintained 13% of the shares and was kept on as a consultant, but it was evident that the new directors' vision for BoS looked nothing like its past when it was a successful entity. David Carruthers, with his new found power, started becoming more aggressive with his US facing marketing campaigning when most other offshore bookmakers were laying low. Without question most gambling establishments were hoping that there would be a change in attitude in the U.S. government towards online gambling in 2004 when John Kerry defeated George Bush. But of course Bush won his second term and those hopes dissipated. As well, with the win by the Republicans, the likes of John Kyl, Jim Leach and Robert Goodlatte became more aggressive with their campaign to pass an online gambling bill to ban the activity. At that point most sportsbooks decided it was better to stay hidden and cut back on marketing and public relations dramatically. BoS, however, was promoting itself as much as ever. But worse than that, Carruthers was making ridiculous decisions without consulting the rest of the board of directors, including throwing lavish parties and paying the likes of Tom Arnold to be a spokesman for the company. Also, Carruthers wouldn't cut back on his personal lifestyle when the company began losing money.

According to my source, by 2005 Kaplan wanted nothing more to do with BoS as it went to a typical British corporate management system. Lines became much looser, holds became much higher, wiseguys were shut out and the clientele that Kaplan built up began looking for greener pastures. As well, Carruthers and his new staff used creative accounting to make BoS look much better than it was. The new management started buying other companies and dating the sales for a time when they could incorporate the purchased company's numbers into their own for the year, or quarter, that had just closed, while BoS had no growth in that period. The company paid $16.8 million to purchase MVP, Player Superbook and V Wager and those companies were making BoS look better on paper than it really was. The worst acquisition by far, however, was Easybets. BoS paid $20 million for the company, but then the finance director Craig Lapsley never actually closed the deal. And in the end the owner of Easybets walked away with $20 million and kept his company. Not long after that Lapsley left the company.

By the end of 2005 BoS was pretty much broke and its stock started slipping dramatically. The company, however, blamed the losses on "a bad string of winning favourites in football," and stated that it would return to profitability shortly, although most on the board of directors knew otherwise. Furthermore, in April 2006 Carruthers continued to make bad P.R. decisions by again attacking the U.S. government. When it was evident that Goodlatte and Kyl were going to do all they could to get the online gambling ban passed before the midterm elections, Carruthers made a public statement to the U.S. press saying that he considered a U.S. ban on gambling unlikely despite the push from Republican congressmen. "I would be very, very, very surprised if any of these bills get any longer lifeline than the month of July," Carruthers stated, and then added, "any such bill will inhibit growth, and it will be a shock to the system." Ironically, in July of that same year Carruthers was arrested at the Dallas airport while on his way to Costa Rica. And that arrest spelled the end of Bet on Sports as a viable entity. Just prior to his arrest BoS convinced Barclay's Bank in the UK to lend them enough money to get through the 2006 football season, but when Carruthers was arrested Barclay's immediately withdrew the offer. Shortly thereafter the board of directors fired Carruthers and soon after that the company stated it could not continue and shut down the website. Today BoS customers with money tied up in the company are hoping for a pittance of their money back if they filed claim with the company's appointed liquidators.

Carruthers did everything he could to clear his name since being arrested, including petitioning the EU to take up his cause. In fact the RGA, and most recently the EU, did just that, telling the U.S. they are in violation of a WTO agreement by arresting European gambling personnel who were catering to U.S. citizens prior to the UIGEA becoming law in October 2006. Carruthers was, of course, one of those operators that was arrested. But for some reason, while the EU is doing all it can to help the gambling operators, many of those same operators continue to settle with the DoJ, causing both the RGA and most in the gambling industry to shrug their shoulders. The two latest to plead guilty were Carruthers and Anurag Dikshitz who worked for Party Poker. Clearly the lawyers for those two men felt that the deals the U.S. were offering now were better than they would likely get if they went to trial. There is also belief that the last thing Carruthers wants is a trial where all the dirty laundry could come out, thereby killing any chance he has of finding a job in the industry after he is let out.

Talking to former employees of BoS (as well as companies it did advertising with), it is clear there won't be many tears shed for a man they feel took a profitable and well respected company and turned it into a failing entity. However, the ones who are least likely to feel remorse for Carruthers are those bettors who had accounts with the company and were unable to get out before the company became insolvent. Most lost all monies they had in their accounts, and for the few who were willing to file a claim with Vantisplc, the liquidators for BoS, the most they will see is 5 cents on the dollar. For that pittance of compensation they will likely also have their name flagged in an IRS database. Vantis has placed numerous ads asking customers to come forward but the response has been very poor. Vantis is perplexed, but of course many customers don't want to take the risk with the IRS, not to mention the fact that many of the "accounts" on the books of BoS could be phantom accounts given the company's past creative accounting methods. In the meantime Kaplan sits in a St. Louis jail awaiting a trial that could see him facing upwards of 83 years in prison after being arrested in the Dominican Republic.

Hartley Henderson

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