Top Stories of 2009: BetonSports turns over $50 million to the feds

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With the sentencing of David Carruthers, a former BetonSports CEO, on Jan. 8, the federal government will wrap up an eight-year investigation and prosecution of BetonSports, a giant offshore gambling company first charged by Missouri prosecutors in 2006.

But the case may never be truly over. Two defendants, Norman Steinberg and Gregory James Haggard, remain at large.

Steinberg, a former partner of BetonSports founder Gary Kaplan, is likely in Costa Rica and may have obtained Costa Rican citizenship, said Steve Holtshouser, one of three assistant U.S. attorneys who traveled the world to take down BetonSports. Haggard, a company associate, hasn’t been found.

But Holtshouser and his colleagues, assistant U.S. attorney Steven Muchnick and special assistant U.S. attorney Charles Birmingham, used 2009 to wrap up most of the legwork on the case. Most significantly, they struck a plea deal with Kaplan.

“We made sure by pleading the case we guaranteed the recovery of a substantial amount of money and saved the government a lot of resources,” Holtshouser said. “Companies who choose to do offshore gambling now know they’re not untouchable.”

As part of the deal, Kaplan forked over $43.65 million to the federal government, the largest single asset forfeiture for the Eastern District of Missouri.

By year’s end, funds recovered from BetonSports accounts and other defendants upped the total to $50 million.

A portion of that total will be paid to governments in Switzerland and the Isle of Jersey, which assisted the office in its prosecution of the company. A major break in the case against Kaplan came in February 2008 when the Swiss government agreed to freeze Kaplan’s Swiss bank accounts.

The U.S. Department of Justice hasn’t determined how much each foreign government will receive, but Holtshouser said historically as much as 40 percent of a recovery could be shared. Switzerland will receive the lion’s share of funds, he said.

“Had the Swiss not frozen the contents of the Swiss bank accounts, there probably wouldn’t be much money to seize,” Holtshouser said.

On Dec. 1, U.S. District Judge Carol Jackson sentenced BetonSports – as a public company – to five years’ probation and fined the company $28.2 million. Holtshouser said the government isn’t convinced about the company’s ability to pay the fine.

An English financial company is liquidating BetonSports’ assets, but that process may not turn up much money, Holtshouser said. A lot of other companies and individuals owe money to BetonSports, he said, and “they’re having great difficulty collecting.”

“If they collected everything owed to them, [BetonSports] would be in a better position to pay a fine,” Holtshouser said.