Attempts by the founder of a former online betting site to avoid paying $36 million in delinquent taxes and penalties was shot down and rejected by a federal appeals court. The court dismissed his claims that his previous plea deal in a related criminal case precluded the government from pursuing the debt against him.
Gary Kaplan, the former head and founder of BetonSports.com (BoS), which was an online sports betting company functioning between 2002 and 2004, a company which registered wagers amounting up to nearly $4 billion in total, the majority of which, 98 percent, came from the United States.
It was once among the world’s biggest offshore sports gambling companies, and now its defunct due to illegalities. In the aftermath, this week a three-judge panel with the St. Louis-based 8th U.S. Circuit Court of Appeals outright rejected Gary Kaplan’s legal challenge that audited his taxes for 2004 and 2005 while he was affiliated with BetOnSports.
In 2006, Kaplan the company, along with all its chief executives and some main employees were indicted in St. Louis on federal charges accusing them of running an illegal gambling operation. State prosecutors claimed the business had handled more than $1 billion USD in bets a year through websites and phone lines. That’s not the illegal part.
The swindle was in the fact that prosecutors believe the company misled gamblers into thinking that money they transferred to BetOnSports was safe and always available to take out at any time. In reality, the money was used to expand their operations. So when BetOnSports went under, their members lost more than $16 million, the government claims.
Later on, in 2006 in a civil settlement, the firm agreed to stop taking U.S. bets. BetOnSports soon after was sentenced, slapped with a $28.2 million fine and some probation. Advocates on both sides assumed that the fine would never be paid. But they were evidently wrong.
Kaplan, the man who ran the outfit is a 56-year-old high-school dropout who started out as a New York bookie. 2 years later he plead guilty to conspiracy, racketeering conspiracy and violating the Wire Wager Act. For those crimes he was sentenced in 2009 to four years and three months in federal detention, alongside a court-order to forfeit $43.65 million of his assets. Since then, Kaplan was released from prison in December 2010.
Kaplan then went on to appeal the tax matter, insisting his plea deal barred the U.S. government from pursuing the back taxes equalling $25.5 million for 2004, and $11.2 million for 2005. His lawyers argued that the statute of limitations had run out on the government’s ability to collect.
But instead, the U.S. Tax Court ruled that Kaplan’s plea deal was unclear and unambiguous which left him open to civil tax proceedings, and so the 8th Circuit ruled against him on Wednesday.
