By Chris Joseph
By Chris Joseph
By Allie Conti
By Chuck Strouse
By Chris Joseph
By Chris Joseph
By Allie Conti
By Kyle Swenson
Shabber, a 31-year-old businessman, arrives at his Boca Raton bachelor digs after a long day's work. He switches on the computer in his bedroom and then does something prosecutors insist is illegal. He brings up the home page of intercasino.com, which depicts the portico of an elegant Monte Carlo-style casino. He enters his user information and waits until a female voice sounds from his speakers: "Secure communication has been established," it assures him.
The doors to the cybercasino swing open and suddenly Shabber -- a sign-on name -- is surrounded by gaming tables. Jazzy lounge music sounds. He clicks on a list of games, including roulette, baccarat, craps, poker, and slots, then chooses blackjack. His screen shows a casino table shaped like a half-moon. Shabber clicks on "bet" and $10 of chips slides across the virtual green felt of the table. An advisory flashes: "You are playing for real money." He knows. Shabber clicks on "deal." Cards slide across the table. Shabber has 18 showing. He stands. The dealer's cards flip over. He has 12, draws a king, and busts with 22.
"Awright!" Shabber shouts as $10 is added to his account, which is shown in the corner of the screen. He could almost be at Caesars Palace with a martini in hand and Tony Bennett crooning in the next room. Instead he is surrounded by his unmade bed, piles of laundry, stacks of video games on the floor, and stray golf balls in a corner. A Budweiser cup is on a bookcase and crumpled dollar bills are on the desk. "First I started betting football on the Web," Shabber explains. "I used to gamble through a bookie, but it's almost impossible to get hold of him over the phone a half-hour before an NFL game. So I started betting games on the computer, which is much easier. I always get through. Then, after I won a bet on the Super Bowl, I started playing roulette and blackjack. I'm up almost $300 the last few months. It's cool. It's very cool."
Shabber is one of many South Floridians immersed in the new and controversial phenomenon of Internet gambling. The region is a mecca of sorts for the industry. A Boca Raton company is one of the world's largest suppliers of software. A North Miami Beach lawyer is a spokesman for the industry. And, in the first-ever federal bust of Web gaming, three north Miami-Dade men were among fourteen Website operators charged March 4 by the U.S. Justice Department.
Florida authorities are some of the most prominent opponents of the Internet gambling businesses, many of which are located in Caribbean and Central American countries. Attorney General Bob Butterworth convinced media outlets last December to stop accepting Internet gambling advertising. Butterworth also induced Western Union in Florida to stop transferring money to offshore sites for betting. And U.S. Sen. Bob Graham is a principal supporter of legislation that would outlaw most forms of computer wagering.
The ease and availability of Internet gambling --- anyone with a computer can play -- distresses lawmakers. The software was developed in 1994, and the first Websites were started in 1996. That year $60 million was bet over the Web by Americans like Shabber, industry experts say. This year about $600 million will be anteed up. Much of that money has flowed out of the United States to places like Antigua, Curacao, and Costa Rica, which have legalized net gambling. Investors from around the world have opened sophisticated Websites and compete intensely for customers. Some sites simulate casinos; others, called sportsbooks, accept bets primarily on sporting events. There are currently about 155 gambling Websites in the world, according to Rolling Good Times, a magazine published on the Net and consulted by about 45,000 people per month.
On a narrow rutted street in St. John's, Antigua, stands a three-story concrete building with tinted windows and a large satellite dish on the roof. It is located a block from the weathered, 150-year-old Cathedral of St. John the Divine, which sports an old metal weather vane on its roof. Other buildings nearby are timelessly Caribbean -- brightly painted wood with corrugated aluminum roofs and louvered shutters. Calypso music rolls down the street like the seasonal rains. A woman in a long, bright-red skirt passes with a sack balanced on her head, on her way to the seaside market.
Charles Simon, age 47, who wears his graying dreadlocks wrapped in a bright bandanna and makes money drawing caricatures for tourists, looks at the modern building and says he is unsure of its inhabitants' occupations. "I've heard something about gambling places here, but I don't know anything else, mon," he says. Most Antiguans don't. But the 109-square-mile island, with a population of about 66,000, has licensed 30 Internet gambling sites. That makes it the industry's capital in the hemisphere.
The office of the World Sports Exchange, one of the companies targeted by the Justice Department, is on the third floor. It manages the oldest Internet sports betting Website in Antigua and the one Shabber uses. The operation, which receives millions of dollars per year in bets, is run from one sterile, white, 20-by-40-foot room. It includes 15 computer screens on card tables, several phones, and a printer. Employees track sporting events on two TV sets. The walls are decorated with pennants from professional sports teams and a calendar featuring the smiling face of Lester Bird, Antigua's prime minister and a champion of Internet wagering. Bird's government has collected a $75,000 license fee from each sports betting site on the island and $100,000 from each virtual casino. This may explain his enthusiasm.
Steve Schillinger, age 45, is a partner in Sports Exchange and a fugitive from American justice. Rather than face criminal charges, he has decided to stay in Antigua and run the business. Co-owner Jay Cohen recently returned to New York to fight the government's accusations. Before coming to the island, Schillinger was a trader on the Pacific Stock Exchange in San Francisco. There he put on a tie each day. Now he is dressed in shorts, T-shirt, and flip-flops and wears his graying ponytail under a baseball cap. He used to scream out orders; now he works in relative quiet with only the clicking sound of computer keys.
Schillinger and his partner Cohen, another former stock trader and San Francisco sports fanatic, founded the Sports Exchange in October 1996. In less than two years, they have signed up 4000 players, 2000 of whom bet at least once per week, Schillinger says. Hundreds of people make daily wagers. The company has customers from the United States, including many from South Florida. Most wagers are between $10 and $100, although Schillinger accepts bets as high as $5000. Almost all bets are taken over the Net, though the company also has an 800 number.
It is early evening. The second game of the NBA finals and several Major League Baseball contests are about to begin. The odds have been posted on the Sports Exchange Website and bets are pouring in. All players have made deposits with the company via wire transfers or cashier's checks before game time. They can participate only as long as they keep money in their accounts. Each wager causes a computer to emit a sound, much like a piano note. A description of the wager, the amount, and the bettor's code name pop up on the screen. Sometimes so many e-mails arrive concurrently that the sound is like a piano riff. Schillinger says the business averages 15 to 20 bets per minute as tip-off and the first pitch approach. "You should hear this place a half-hour before NFL games start on Sunday," he says. "Then it gets really crazy."
Schillinger insists his legal problems are the result of prosecutors' hypocrisy. "This is the government going after us when the states themselves are ripping off people on lottery bets," he says. "You have no real chance of winning the lottery, whereas with us you have a decent chance. We pay back about 97 percent of all the money bet. So who's ripping off whom? Also, we don't go out breaking anybody's arm because they didn't pay. We're much less trouble than a bookie.
"Some people just like to bet," he says. "They always have and they always will. Trying to stop them won't do any good. It's better to regulate it and tax it. I'd gladly pay more taxes if I could operate in the States."
The three Miami-Dade men charged on the same day as Schillinger are David Budin, age 65, and his son Steven Budin, age 27, both of North Miami Beach; and Sandy Becher, age 30, of Aventura. They operated SDB Global, a Miami company that until recently advertised a sports betting Website registered in Costa Rica. None of the men would agree to be interviewed for this article. But public records reveal some details of their lifestyles.
David Budin is a businessman and gambler who was a director of two businesses that went bankrupt in the early '80s, public records show. A third business that he directed closed in 1995. Today Budin owns a 28th-floor penthouse at the posh Terraces of Turnberry. He drives a 1989 Mercedes 560 SEC.
And Budin, it seems, is a lucky bettor. On the last day of the horseracing season at Hialeah Race Track in March 1987, Budin picked eight of ten winners and raked in a jackpot, after taxes, of $173,167 on a $2 bet, according to the Miami Herald. And then something strange happened. Four stacks of cash totaling $20,000, part of Budin's winnings, disappeared from a counting room. Only Budin, a friend of his, and track officials were in the room, the Herald reported. Everyone denied taking the money. Budin left the track with the remaining $153,000 stuffed into a typewriter case. It is unclear how the dispute was resolved.
Steven Budin ran two music ventures that had closed by 1995. Despite that, he also lives well, records indicate. He owns a 1992 Mercedes 500 SC. In January 1993 he bought a $466,000 house on NE 207th Terrace.
Attorney Sandy Becher, the third defendant, served as a director in one of Steven Budin's music ventures. He later joined the father and son when they opened SDB Global, which advertised on the Internet and used an 888 number to accept bets.
All three men were charged as the result of a federal undercover operation based in New York City. FBI computer-crimes specialist Lisa Ference swore in a March 2 affidavit that agents discovered ads for SDB Global in several football magazines during 1997. "Bet any sport, anytime, anywhere," read one. "Account is private and secure, not open to inquiry by any government agency.... Virtually no limits."
Ference said the SDB site encouraged Web surfers to open an account of at least $500. The site offered a telephone number for bets, 888-BET-EASY. Unlike many other Websites, bets couldn't be made over the Net or through SDB.
In ads on SDB Global's Website, the company appeared to be run from outside the United States. But when another undercover agent looked at the Website in the spring of 1997 and asked for information, he received a packet postmarked New York City. On October 15, agents requested more information. Another envelope arrived from SDB, postmarked Miami. On November 19, the FBI set up a $600 account with SDB by wiring money to a bank "which appears to be in Switzerland," according to the criminal complaint.
Agents bet on NFL football games in November and December 1997. They won some bets and lost others. On December 3, an agent requested that $100 of the deposit be returned. Five days later the agent received a FedEx envelope that contained a $100 check. The return address on the FedEx envelope was SDB Global in North Miami Beach. The company logo included an 800 number registered to David Budin in Aventura.
David Budin recently pleaded guilty to violation of federal antigambling statutes and agreed to pay a $750,000 fine. He will also face as much as five years in prison when he appears for sentencing August 21. Steven Budin and Becher face maximum sentences of five years and $250,000 in fines.
Sam Rabin, the attorney who represents Becher, says the charges should be dropped. "All Mr. Becher did was work in the [SDB] office in Costa Rica," Rabin says. "He wasn't involved in the actual betting operation." But prosecutors contend Becher told an FBI agent he was a part-owner of the company.
"I imagine someone will challenge the law in this case," says Rabin. "I hope it won't be me."
Despite the indictment, some experts say the law on Internet gambling is murky. The defendants in the March 4 case were charged with violation of a 1961 statute called the Interstate Wire Act, which was designed to combat traditional betting. (Another seven people associated with offshore betting sites were charged later in March under the same statute.) That law prohibits the use of "a wire communication facility" for the placing or soliciting of bets on sporting events or other contests. In making their case against the Budins, Schillinger, and the others, the feds applied that 37-year-old law to the Net. Their reasoning: It operates over phone lines. "The Internet is not an electronic sanctuary for illegal betting," declared U.S. Attorney General Janet Reno.
The Florida Attorney General's Office agrees. "It's illegal. Period!" says special counsel Gary Betz. Betz spearheaded the Florida investigation into Internet gambling last year. He says the state targeted the industry just before the NFL season began because prosecutors had discovered numerous advertisements for offshore betting. Those ads stated the betting was "completely legal," says Betz. "Well, it isn't."
At Betz's insistence State Attorney General Bob Butterworth approached Western Union and persuaded the company to stop wiring money from Florida to offshore gambling sites. Butterworth also persuaded media, such as sports radio station WQAM-AM (560) in Hollywood, to stop accepting their advertising. Companies were told they were abetting a crime. "We continue to not accept that advertising," said WQAM sales manager Luanne Winick.
The law is not so clear as Betz makes it out to be, says Fletcher Baldwin, a law professor at the University of Florida and an expert in international financial crime. Baldwin says the 1961 wire law has been updated over the years to cover changes in technology, such as the cordless telephone. But charging someone with gambling over the Internet is a different matter. "It's a gray area," he says. "The law was written to deal with the telephone and your average bookie. Courts have not always been willing to expand on that." Baldwin believes any defendant willing to challenge the law could go free. "But it would take a long time and cost a lot of money," he says.
Congress may clamp down soon. The House of Representatives is considering a complex measure called the Internet Gambling Prohibition Act of 1998. Written by Sen. Jon Kyl of Arizona and supported by Florida's Senator Graham, the bill would outlaw Internet gambling except for state-authorized wagering and some Indian gaming. Justice Department attorneys recently attacked the bill as too broad and impossible to enforce.
"[If this passes,] the people running those offshore sites won't be able to beat the rap," says Baldwin. "The courts will have what they need."
For Betz the new federal law would come none too soon. A veteran organized-crime investigator, he believes the Internet gambling industry is corrupt. He expects it to worsen.
Some businesses that register in foreign countries are actually located in the United States, Betz says. Some 800 numbers accept calls offshore, then bounce them back to a phone in this country, which a bookie answers. In some cases, he says, operators may simply abscond with bettors' money.
"The chances of getting ripped off are tremendous," says Betz. "Who on Earth would send $20,000 offshore to some bookie he's never seen? It's crazy."
Authorities have other worries. "[Lawmakers'] main concern is international money-laundering," says Baldwin, the law professor. "[The industry presents] an easy way to launder money. You say you made so much in the Internet gambling business offshore when it really came from somewhere else. Or you say you lost so much doing business and you write it off." Organized crime groups in the United States, as well as Hong Kong's triads and Japan's yakuza, are salivating over the opportunity to take over, Baldwin believes.
But authorities have not connected any Mafia figures to Internet gambling. "We don't know that any [crime] families involved here are involved offshore," admits Sgt. Doug Reese of the Miami-Dade Police vice squad. "It's just a matter of time," says Betz.
The U.S. government can keep Internet gambling relatively honest if it makes the right decisions now, insists Albert Angel, a North Miami Beach advocate for Web betting.
Angel is general counsel of ICN Corp., which runs the National Raceline, a company offering horseracing results using 1-900 telephone numbers. His office in the NationsBank building in Delray Beach is decorated with oil paintings, bronzes of racehorses, and LeRoy Nieman basketball posters. A table in the reception area is strewn with copies of Blood Horse, a magazine about horse breeding. In one office an employee speaking in the distinct cadence of a horseracing announcer reads results into a tape recorder. Another registers results of a New York state lottery. ICN also provides a 1-900 number so Florida Lottery buyers can get results, at 77 cents per minute.
ICN wants to sell tickets for state lotteries all over the country on the Internet, if and when the government allows it, says Angel. Angel, age 44, was an assistant attorney general from 1979 to 1984, largely working in the antitrust division of the Justice Department. He helped break up Ma Bell. "Since then I've made my career in telecommunications," he says. Angel went to work for ICN after another business venture didn't pan out.
As vice chairman of the Interactive Gaming Council, a group made up largely of executives in the gambling business, Angel is leading the fight against the Kyl bill. His opposition is a motley antigambling crusade that includes professional sports leagues, the Christian Coalition, and Ralph Nader. "If the idea is to protect consumers, then regulation will work much better than prohibition," he grouses.
Outlawing Internet gambling will only drive bettors into the hands of criminals, Angel insists. Thugs with laptops will end up rich. The government will lose tax revenues.
"No matter what you feel about gambling from a moral standpoint, it is pervasive," Angel says. "Offerings by reputable companies will drive fly-by-night operators out and will be easier to regulate." The industry is addressing problems, and the government should help, he says. Website managers attempt to exclude crooks, ensure that minors don't bet, and prevent compulsive gamblers from ruining their lives. Some gambling sites already contain links to Gamblers Anonymous so users can click and get help, he points out.
Instead of fighting Internet gambling, governments should embrace it, Angel insists. Through ICN's Website, for example, state governments and even churches could make money. "The states could sell a lot more lottery tickets," he says. "And the little old lady who can't get to the church to play bingo or just doesn't want to see the other old ladies could play from home."
Angel also insists there are few Web gambling rip-offs. "Word travels very quickly on the Internet," he says. "The moment some site doesn't pay off, the news will spread and no one will bet on that site." The cost of establishing such a Website -- hundreds of thousands of dollars for software and licensing fees to the countries from which they operate -- makes the risk very high for a short term rip-off, he contends.
Richard Iamuno, president and CEO of Atlantic International Entertainment in Boca Raton, agrees. Iamuno says his company is the largest provider of interactive betting software in the world. From 1996 to 1997 AIE's revenues rose from $454,000 to $4.4 million. The company lost $376,000 in 1996 but earned a $1.1 million profit last year. Its principal products are Internet gambling software programs. Their biggest markets are in South Africa and Australia, Iamuno says.
The big question for Iamuno and others in his industry is the one Shabber poses. "Who knows if it's honest?" he asks. "I mean, it's software. They can make it do anything."
Iamuno insists bettors needn't worry if they stick to established operators. Software that allows gambling on the Internet was first developed by companies including Cryptologic of Canada, Microgaming of South Africa, and Atlantic International, he says.
Iamuno's firm uses Microsoft technology to create "random number" patterns that mirror the odds in real casinos. For example, in craps Iamuno's software rolls the number seven with the same probability as at Caesars Palace. Card games, roulette, blackjack, and other games also echo casino probabilities, he says. The key is source codes, programming formulas Atlantic International uses to set odds.
"The numbers are random, so the odds are true," he says. "There is no fixing. I can't say it would never happen, but, in order to alter the software, an operator would need the source codes, and we don't give them out."
Iamuno's software costs from about $200,000 to more than $1 million. He employs programmers, artists, and writers to customize the software. One place his program is used is the Australian province of Queensland, which legalized Internet betting in March. Today the provincial government takes bets from around the world. A portion of winnings is taxed by the bettor's local government.
Iamuno's software is also used in Antigua. Gyneth McAllister, age 37, the Antigua government liaison to the offshore betting industry, insists that her government closely monitors software used by the Sports Exchange and other gambling sites. All prospective operators must give the government a copy of their software as well as the programmer's name. Regulators test the software periodically to ensure it has not been altered, McAllister notes. All prospective Website owners are also vetted by Interpol, she says.
Antigua has been wracked by political and criminal scandals in recent years, including U.S. charges that Antiguan officials helped secure arms for Colombian drug dealers. But Baldwin, the Gainesville professor, says Caribbean countries are attempting to keep their industry honest. "They could use more help from countries like the United States and the United Kingdom," he says, "but they are trying."
Accusations of corruption rile McAllister. "The United States has always pictured the people of the islands as poor, and they imply that hand in hand with poverty goes corruption," she complains. "That isn't so. More money is laundered in Miami in a single day than we could ever launder here. We would rather have good relations with the United States. If they want a piece in tax like the Australians, we can give them their cut."
Propped in a chair before his computer in Boca Raton, Shabber hopes Internet gambling remains available. He's trying a new game on the Web called Planet Poker that allows people from around the world to gamble and chat. Several players are gathered around the virtual table. All use nicknames. They include Johnny from San Antonio, Ismos from Istanbul, El Cid from Philadelphia, and Kingduey from Pembroke Pines. Shabber has also discovered that some virtual casinos now offer "comps," as in Las Vegas: Subscribers are awarded points that can be cashed in at a virtual mall for gifts.
"This is incredible," Shabber says. "This is changing every day. I don't see how they are going to control it. It's cool, it's very cool," he says, pushing another $10 into cyberspace.