BoS Defendants Seek Dismissa

12 January 2007

The defendants in the criminal case against online sports betting firm BetonSports (BoS) have filed several pre-trial motions to dismiss the case on grounds ranging from ethnic discrimination to the U. S. government's lack of compliance with an international treaty.

Four corporations, BoS and Florida-based marketing companies DME Global Marketing & Fulfillment, Inc., Direct Mail Expertise, Inc. and Mobile Promotions, Inc., and 11 individuals were indicted in July 2006 on charges of conspiracy, racketeering and fraud in offering bets on professional and college sports to U.S. residents.

The following is a listing and explanation of the various motions.

Dismissing the RICO Charges

On behalf of all defendants named in the indictment, Neil Scott Kaplan, brother of BoS founder Gary Kaplan, filed on Dec. 18, 2006 a motion to dismiss count one of the indictment -- the racketeering conspiracy.

Under the Racketeering Influenced and Corrupt Organization (RICO) Act, Title 18 U.S.C, Sec. 1961-1968, a pattern of racketeering activity requires at least two acts of racketeering activity within 10 years of one another. A racketeering activity is described as any act or threat involving gambling, murder, kidnapping, arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in controlled substance or listed chemical, which is chargeable under state law and punishable by imprisonment for more than one year. It also includes any act which is indictable under Title 18 of the United States Code relating to bribery, theft, embezzlement, fraud, obscene matter, obstruction of justice, slavery, racketeering, gambling, money laundering and commission of murder-for-hire.

Kaplan's motion asks the court to dismiss the indictment on the grounds that it fails to allege an enterprise that is separate and distinct, or substantially different, from the acts which form the pattern of racketeering activity and that it fails to allege that the actions of the enterprise comprised two or more separate schemes, thus failing to allege a pattern of racketeering activity.

Kaplan's joint counsel, Atlanta attorney Brian Steel and St. Louis attorney Susan Kister, said in court documents that a RICO enterprise must be established by three elements: a common or shared purpose; some continuity of structure and personnel; and an ascertainable structure distinct from the conduct of a pattern of racketeering.

The indictment alleges the enterprise is the "Kaplan Gambling Enterprise," named for Gary Kaplan, and supposedly comprised of a group of entities and individuals, including the 11 people and four corporations named in the indictment. However, the three Florida-based marketing companies were separate entities that merely provided marketing and promotions services to BoS. The companies did not share personnel.

Kaplan's co-counsel said in court documents that the government also failed to allege that the actions of the enterprise comprised two or more separate schemes, thus failing to allege a pattern of racketeering activity.

The indictment alleges that the "Kaplan Gambling Enterprise" operated with the stated goal of making money for the enterprise by offering and advertising unlawful betting or gambling services. Furthermore it said the "Enterprise" maintained its operations by: "offering, facilitating and conducting betting and gambling; operating Web sites and telephone services for betting and gambling; creating and disseminating advertising to attract customers and evading payment of federal taxes." The government categorized the four activities as racketeering activities.

However, Kaplan's attorney's said that the four categories of offenses -- also know as predicate acts -- are one and the same as four methods used to maintain operations, not separate and distinct. Thus, if these activities were removed, the operations would cease to exist.

Finally, Kaplan moved to dismiss some of the predicate acts from the indictment because they are not considered racketeering activities under the RICO Act and are inapplicable to the defendants.

As stated in the definition of racketeering activity, it must be chargeable under state law and punishable by imprisonment for more than one year. However, Kaplan's attorney's allege that some of the predicate acts listed in the indictment do not fall under the definition of indictable crimes under certain states statutes.

Motion to Dismiss for Selective Prosecution

William Hernan Lenis, the owner of DME Global Marketing & Fulfillment, Inc., Direct Mail Expertise, Inc. and Mobile Promotions, Inc., on behalf of his daughter, Monica Lenis, his son, William Luis Lenis and his nephew, Manny Gustavo Lenis, filed a motion on Dec. 18, 2006 to dismiss the charges against them on the grounds that they are being unfairly discriminated against because of their Hispanic ethnicity.

In a claim of selective prosecution, a defendant essentially argues that whether he is guilty of violating a law is irrelevant because the prosecution is based on illegal reasons, discrimination in this case.

The Lenis family operated the three Florida-based direct mail marketing companies listed in the July 2006 indictment. The Lenis's and eight other individuals, including then-BoS CEO David Carruthers, were indicted on charges of conspiracy, racketeering and fraud.

The motion states that the Lenis family has been in the direct mail advertising and promotional business for nearly 30 years and has in no way ever been involved in the gambling business, especially online gambling.

To support the claim, the Lenis family entered a "Request for Discovery in Support of Selective Prosecution Claim and Memorandum of Law in Support." Attached was an appendix of exhibits which included 26 printed materials from other direct mail marketing company in the U.S. that printed and distributed materials for online gambling companies. Their intention is to prove that not one of these companies is run by Hispanics and, therefore, is not being prosecuted for participating in illegal activities.

The government responded to the defendants' request to see the evidence by saying that they are not entitled to that information, according to the court documents.

Counsel for the defense said in court documents that their request is simply to find out whether or not the U.S. has ever prosecuted anyone for marketing Internet gambling sites.

Motion to Dismiss for Violation of United States Treaty

In the third, and perhaps the least viable, effort, the defendants filed a motion to dismiss the case based on the U.S. violation of the World Trade Organization (WTO) treaty and its decisions and appeals.

The island nation of Antigua, which hosts several online gaming companies, filed a complaint against the U.S. with the WTO in 2003, claiming the United States had destabilized its lucrative online gambling industry.

In April 2005, the WTO's Dispute Settlement Body adopted the report of its Appellate Body, which ruled that the United States' prohibitive approach to foreign gambling services violates international trade agreements. Because the United States permits some domestic betting companies (horse race wagering companies for example) to offer gambling services over the Internet to United States citizens while prohibiting foreign companies from doing the same, the Appellate Body ruled that the United States gives preferential treatment to U.S.-based companies, which it cannot do under the terms of the General Agreement On Trade in Services (GATS). The report, therefore, recommended that the United States alter its gambling laws in order to satisfy those obligations. However, the United States has yet to abide by the ruling.

Larry Walters, a First Amendment lawyer with the firm Weston, Garrou, De Witt and Walters, spoke to the defense's various approaches to getting the charges dismissed.

"When defending clients facing serious criminal charges based on novel theories of liability, lawyers must often think outside the box and assert unique and untested defenses," Walters said. "Thus far, the government has never successfully convicted anybody of racketeering based on Internet gambling activities. Since this is a new approach for the government, the defense is entitled to assert novel defenses. The WTO Treaty violation defense has not been addressed by any court, so nobody knows how a court will interpret it. The Government cannot deny that it committed certain WTO Treaty violations, and those violations have not been cured by the United States through any change in policy or legislation. The question is whether violating an international treaty can ever result in anything more than trade sanctions, or whether such bad faith activity should constitute a defense for a private criminal defendant. Ruling in favor of BOS on this issue would send an appropriate message to the United States that it must take its trade agreements seriously, instead of ignoring those agreements that do not suit its desires on a given day."

The likelihood that any of these motions will be fruitful is unknown, but as the March trial date draws near, it appears the defendants will pull out all the stops not to have their day in court.

The government has thus far not responded to the motions.

None of the attorneys for the defense could be reached for comment.

The office of the U.S. Attorney of the Eastern District of Missouri had no comment on any of the motions.

Click here to view a copy of the Motion to Dismiss the Bill of Indictment as to Count One - RICO Conspiracy, or Parts Thereof.

Click here to view a copy of the Motion to Dismiss for Selective Prosecution.

Click here to view a copy of the Motion to Dismiss for Violation of United States Treaty.

Emily Swoboda is the senior staff writer at IGamingNews. She lives in St. Louis, Mo.