Online Sports Book Operators Face Prosecution in Wisconsin

5 December 2001

A three-year undercover and financial federal investigation came to a head on Monday when two U.S. men pleaded guilty to a host of gambling and tax charges.

The two men, owners and operators of Gold Medal Sports, an online sports book that operates out of Curacao in the Netherlands Antilles, face sentencing in February. The various charges could bring up to five years in prison and up to $500,000 in fines.

Duane Pede, 52, of Amherst Junction, Wisc., and Jeff D'Ambrosia, 42, of Henderson, Nev., agreed to pay more than $1.4 million in back taxes. Gold Medal Sports will forfeit $3.3 million in earnings.

"Those individuals that continue to target bettors in the United States to place wagers over the phone or Internet will be pursued to the fullest extent under the law."
-U.S. District Attorney Grant Johnson

According to the U.S. District Attorneys office in the western district of Wisconsin, Gold Medal Sports took in more than $400 million in bets over a four-year period. The company had an Internet site set up and also took bets over the telephone from players in the United States. As part of the investigation an undercover IRS Criminal Investigation Division (IRS-CID) agent placed a wager over the phone to Gold Medal Sports. The bet was for $1,000 on the Green Bay Packers to beat the Seattle Seahawks by more than five points on Monday Night Football on November 1, 1999. By accepting the bet Gold Medal was in violation of the Federal Wire Act of 1961, which makes it a felony to operate a gambling business and accept sports wagers over phone lines.

The duo faced additional charges of fraud for advertising handicapping services from experts who didn't exist. The company had four different betting experts, but two of the experts where fictitious people and amounted to nothing more than the picks of Pede and D'Ambrosia.

U.S. District Attorney Grant Johnson said the investigation showed that Gold Medal Sports handled phone and Internet sports bets from U.S. customers in excess of $33 million in 1996, $167 million in 1997, $119 million in 1998, $78 million 1999,and $5.7 million in the first quarter of 2000.

As part of the agreement Pede and D'Ambrosia pleaded guilty to violating the Federal Wire Act and filing a false federal income tax return because they failed to let the IRS know that they had foreign bank accounts. The corporation, which is owned by Pede and D'Ambrosia, also pleaded guilty to racketeering and criminal asset forfeiture. As part of the plea agreement, Gold Medal Sports agreed to publish a disclaimer in USA Today saying it has no inside information in its sports handicapping services.

In a statement released to the media regarding the plea agreement, Johnson said the actions of the two are troubling, especially considering they could have duped bettors into placing money on games based on the tips of the two fake experts.

"You don't know how much of that money was based on false statements," he said. "It's all illegal. Part of the indictments was them making false statements on the strength of their knowledge."

Johnson said authorities will continue investigating Gold Medal Sports with the hope of filing indictments against others involved in the business, although because Gold Medal is a foreign corporation, the government can do little to shut it down. The site is still up and running and taking bets on sporting events.

Michael Chertoff, Assistant Attorney General for the Criminal Division, United States Department of Justice, said the investigation reflects his department's aggressive desire to punish offshore sports books.

"This prosecution reflects the Justice Department's continued commitment to vigorously investigate and prosecute illegal offshore sports betting operations," he said. "Those individuals that continue to target bettors in the United States to place wagers over the phone or Internet will be pursued to the fullest extent under the law."

D'Ambrosia's attorney, Richard Wright of Las Vegas, said he couldn't comment on any of the particulars of the case. Stephen Morgan, a Madison, Wisc. attorney for Gold Medal Sports and Pede's attorney, Steve Hurley, didn't return messages left by IGN.

The plea agreement came before Johnson could bring the charges to a grand jury for an indictment. Through documents filed by Johnson's office though, the investigation found that Pede and D'Ambrosia solicited customers through false advertising to call one of their four handicapper services for guaranteed winning picks on sports events. Once someone called one of the handicapping services, sales representatives tried to sell weekly or monthly winning-pick packages to customers.

Two of the handicappers were fictitious and were actually Pede and D'Ambrosia, picking the outcomes of games. One of the handicapping services was called Dan Pastorini Sports, but the former National Football League quarterback did not handicap games and was paid only to pose for pictures and make radio appearances, according to court records.

According to authorities, the false advertising was from Pede and D'Ambrosia, who claimed that Pastorini and the two fictitious handicappers had "contacts at the stadium," "confirmed unpublished injury information" and "privileged team information" that guaranteed winning picks.

This marks the second time the former NFL QB has gotten into hot water with his handicapping service. Last year the NFL forced the former Oiler and Raider to publish a similar disclaimer after he touted to have such insider information.

The charges were the first Internet gambling charges ever brought before a judge in the western district of Wisconsin. Sentencing is scheduled for Feb. 26 at 1 p.m.