Gary Kaplan of BetOnSportsMust Pay $36 Million in Taxes or Face More Prison Time
Gary Kaplan, the founder of BetOnSports, was told by an appeals court in St. Louis today that he would be required to pay $36 million in back taxes and penalties. Kaplan, who was sentenced to 51 months in prison back in 2009, had hoped to avoid paying the remainder of a $43.65 million claim by the US government. In the original case, the U.S. District Court in St. Louis had told him he must pay the $43.65 milion amount.
Those taxes are owed for the years 2004 and 2005, during the Poker Boom in the United States. Kaplan owed $25 million for 2004 and another $11 million for 2005. Gary Kaplan’s lawyers had argued in the appeals process that their tax liability has exceeded the statute of limiations. They also argued that Kaplan’s plea agreement in his original criminal charge had barred the tax claim.
Two Appeals Were Rejected
In his original appeals case, the U.S. Tax Court had rejected the BetOnSports operator’s appeal. The Tax Court had said at the time Kaplan’s plea agreement was unambiguous.
On Wednesday, a three-judge panel from the 8th US Court of Appeals agreed with the original Tax Court assessment. The decision by the 8th Court of Appeals said that Gary Kaplan has operated the illegal sportsbetting operator: BetOnSports. After founding the company in New York City, he had moved the operation’s headquarters around the Caribbean Sea throughout the 1990s. By the late-90s, Kaplan had moved to Costa Rica, where he lived safely away from U.S. authorities.
BetOnSports Goes Public
When the World Series of Poker Main Event was broadcast in 2003, the Poker Boom hit in the United States. With it, many people became online gambling millionaires. BetOnSports was well-placed to expand throughout the global online gambling community, so the company went public on the London Stock Exchange.
Prior to the initial public offering, Gary Kaplan engaged in stock transfers which resulted in $98 million being placed in “Bird Trusts” off the coast of France. The Kaplan family were the beneficiaires of these two trusts, while Gary Kaplan was the sole grantor. Kaplan was responsible for the taxes on those trusts, but the taxes were never paid.
2009 Plea Bargain Transcript
In 2006, the United States government brought charges against Gary Kaplan for running an illegal sports betting operation. By 2009, Kaplan had been arrested and faced those charges. At the time, he made a plea bargain in the case. He stood before a judge, who made clear to him what the plea bargain meant. A transcript of that proceeding was recorded by the US 8th Appeals Court on Wednesday.
The judge in that case said, “Do you understand, Mr. Kaplan, that there is a difference between a criminal tax proceeding and a civil tax proceeding?”
Standing before the judge, Kaplan said, “Yes, I do, Your Honor.”
The judge continued, “And in this document, the U.S. Attorney’s Office has agreed it will not bring any criminal tax proceeding against you; however, that doesn’t preclude the initiation of any civil tax proceeding or administrative action against you.”
Kaplan’s replay was, “I understand that. And we’ve–we’ve agreed to that.”
This is the part of the case that the three-judge panel this week stated was “unambiguous”. Gary Kaplan said he knew the federal government could not bring a tax case against him or collect on the income he made through BetOnSports, but they could collect back taxes on the trusts (and other such income).
Lingering Tax Liabilities
As everyone from PokerStars to FIFA have learned, when the United States federal government gets on your tail, you usually are not going to get away. Gary Kaplan has a massive $36 million debt burden to consider.
With such a whopping tax burden, one has to wonder if Gary Kaplan might not take the same path several famous musicians (Chuck Berry, Fat Joe, and Lauryn Hill) have taken over the years. Chuck Berry settled his tax evasion troubles with 4 months in prison in 1979. Fat Joe was sentenced on tax charges in 2012 and served four months of prison time in 2013. Lauryn Hill, best known for her work in The Fugees, was convicted and served three months in prison in 2013 for the same crime.
