Feds cracking down on Internet gaming

Today I'm pleased to report that the federal government has finally decided to crack down on the giant scam known as Internet gaming. The federal crackdown on gambling Web sites became public through indictments issued in St. Louis, Mo., early this month against seven officers and employees of a Costa Rica-based online sports book.

The Justice Department charged BetOnSports.com personnel with racketeering and mail and wire fraud, alleging that they took billions of dollars in wagers from U.S. residents by phone and over the Internet without paying federal excise taxes. The Feds seek the forfeiture of $4.5 billion in ill-gotten gains along with assorted company computers and vehicles. All seven defendants pleaded not guilty and will go to trial later this year.

A guilty verdict in this case would serve as a warning to other Internet gaming site operators, and would protect the public against unscrupulous, foreign-based Web sites. The case against BetOnSports began in July when the Feds arrested company CEO David Carruthers at the Dallas-Ft. Worth Airport as he prepared to fly to Costa Rica. He was indicted in this case along with Gary Kaplan, a former New York area bookie now living in Costa Rica, and five others.

Many of these fly-by-night Web sites are based in Central America and on small Caribbean islands in order to avoid the long arm of the law. You toss your credit card number out there into cyberspace and the scammers take over from there. As I've written before, if you gamble online, you deserve what you get - which could well be a grand total of zero. Nothing. If you play online blackjack or poker, for example, you have no idea of whether the "house" is playing with a full deck because there simply isn't any enforcement mechanism.

And since none of these sites meets the exacting standards of Nevada's gaming control system (the subject of last Sunday's Appeal column), our licensees should be prohibited from doing business with them. I know that some Nevada licensees would like to get in on the Internet action but that's a bad idea any way you look at it.

In July, the House of Representatives passed a measure designed to choke off the flow of money to Internet gaming sites, which are illegal in the U.S. "There are hundreds and hundreds of these illegal, unregulated, untaxed offshore sites that are sucking billions of dollars out of the country," said Rep. Robert Goodlatte (R-Va.), one of the bill's principal sponsors. Revenue at Internet gaming sites has quadrupled worldwide since 2000 to more than $12 billion per year.

Similar bills have been introduced in Congress for the past 10 years but have been blocked by powerful special interest groups and lobbyists, including the now-disgraced Jack Abramoff, who represented an online lottery and campaigned vigorously against such measures. I was pleased when Abramoff associate Ralph Reed, a darling of the so-called Religious Right, was defeated last month in a bid to become the lieutenant governor of Georgia. Reed, a longtime casino gambling opponent and certified hypocrite, accepted millions of dollars from Abramoff's Indian gaming clients to gin-up "grassroots support" for anti-gambling initiatives that would have insulated the tribes from competition and increased their profits. Nice, especially if you're already not paying your fair share of federal, state and local taxes.

Tribal gaming is another virtually unregulated activity that Nevada licensees, like Station Casinos of Las Vegas, shouldn't be associated with. Station operates the huge Thunder Valley Indian Casino on I-80 east of Sacramento, which siphons off hundreds of thousands of potential Reno-Tahoe casino patrons from Northern California. I don't think that's in the best interests of the citizens of our state, as required by Nevada Gaming Commission regulations, and it's something our newly elected attorney general should take a close look at when he or she takes office next January.

Nationwide, Indian gaming revenue grew by 15.6 percent to nearly $23 billion last year with California's tribal casinos accounting for more than $7 billion worth of that total. If current trends continue, it won't be long before those nearby casinos gross as much as Nevada's annual gaming revenue of approximately $12 billion. The joke in all of this is that tribal casinos are allegedly regulated by the same U.S. Bureau of Indian Affairs that managed to "lose" millions of dollars worth of Indian trust funds. The BIA runs the grossly understaffed National Indian Gaming Commission, which has about 50 employees to supervise hundreds of tribal casinos throughout the nation. No way!

We learned much more about Indian gaming earlier this year when CBS investigative correspondent Armen Keteyian interviewed Wayne Smith, who was in charge of gaming regulation at the BIA before he resigned in disgust last year. Smith told Keteyian that he went to Washington full of hope that he could make a difference for his people, but soon learned how Indian gaming really operated.

"I had lobbyists ... tell me that it was (their) time to make money in the Indian gaming arena," Smith declared on national TV, adding that Abramoff and other lobbyists wanted "to make a killing inside the BIA," which they did by charging the tribes millions of dollars for insider access. "They have no respect whatsoever for Native Americans," Smith concluded. "They're there to make a lot of money for themselves." And so it is in the wonderful worlds of Internet and Indian gaming, where some Nevada licensees want a piece of the mostly unregulated action. I think that would be a mistake and urge our State Legislature and gaming control agencies to hold the line against further involvement of Nevada gamers in these shady enterprises.

• Guy W. Farmer, of Carson City, worked for the Nevada Gaming Commission and Gaming Control Board during the 1960s.