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An Off Shore Bet

With its advanced technical infrastructure, loose laws and beautiful women, Costa Rica has become a haven for hundreds of American sports-betting
Michael Kaplan
From the Print Edition:
Tyson vs. King, Jan/Feb 04

It's about 12:30 p.m. Eastern standard time. At football stadiums from Detroit to Miami, kickoffs loom and excitement builds. But even in cities where the home team must win to ensure a playoff berth, the intensity level is nothing compared to what's going on in San José, Costa Rica -- a place where 10 years ago football could have only meant soccer.

From one end of the city to the other, in shiny office buildings and low-slung suburban developments, telephones ring incessantly. Digital pipelines overload with information. Computer screens grind through many megs of mathematical computations. All of this takes place within the walls of operations bearing names such as BoDog, Cascade, NASA and Hollywood, online sports books that take massive numbers of wagers from gamblers across the United States.

A guard holding an enormous rifle, its barrel poking up toward the overcast sky, stands outside the building owned by an enterprise called CRIS (Costa Rican International Sports). Inside, a fluorescent-lit, airy white-walled room is crowded with about 200 telephone clerks handling the incoming wagers. But many more bets arrive invisibly, via the Internet. A gray-haired, slender line-maker (the person who decides how many points each team should give up or receive) introduces himself as "Mac, just Mac, from southern California," before marveling at the flow of action. "If not for the Internet, we'd never be able to handle nearly this much," he says, keeping both eyes glued to a computer monitor that allows him to track the incoming wagers and manipulate his lines so that he doesn't get stuck with too much of a liability on one side of a game or the other. "If everything came in over the phone, there could be a thousand clerks in here and it wouldn't be enough."

Mac is one of hundreds of American sports-betting professionals (i.e. bookies, marketers, money movers and line-makers) who've found refuge in Costa Rica, the reigning world capital of sports betting. While there are gambling operations scattered around the Caribbean, Costa Rica currently ranks as the hub, housing anywhere from 200 to 300 sports books (depending on whom you ask) that combined generate at least tens of billions of dollars in wagers each year. It's no accident that hundreds of American bookies have settled in Costa Rica. This Central American nation boasts a good technical infrastructure, a reasonably friendly government (only in the last year have Costa Rican officials begun pressing the betting operations to buy licenses for $45,000 to $90,000), loose laws, close proximity to offshore banks (gambling money is not allowed to pass through Costa Rica, so the books do their banking in places like Curaçao, the Dominican Republic and Antigua), and so many beautiful, available women that one happily married sports-book manager comments, "If I didn't have a wife, I would lose my mind here." Another American, pointing out that cocaine is dirt cheap and plentiful, adds, "I've lost good guys to women and to coke. They get too involved with one or the other and stop coming to work."

Back at CRIS, with only 15 minutes until game time, the phone action escalates. Digital chirps ring out with the mounting intensity of a symphony reaching its crescendo. Sitting behind a raised dais-style table called the stage, Mac continually yells out changes to the lines, answers clerks who want to know whether or not particular gamblers can exceed their limits, and keeps an especially close eye on what he calls Wise Guy Row. It's a single table occupied by a small cadre of elite phone clerks who facilitate the bets of professional gamblers: players who are capable of moving lines at the last minute, then catching the other side of a wager and essentially risking no money while hoping that the final score will fall inside the point spread and result in a risk-free payday. Or else they simply are so smart about sports-betting that they're far more likely to win than they are to lose.

Told that a lot of his competitors eschew the wise guys, Mac says, "I happily take their action. Sharp players bring a lot of volume. Then we nudge the line to generate action on the other side."

He looks at his monitor and grimaces. "Right now I'd like to have a little more money on Cincinnati," he says, acknowledging an imbalance of $90,000 weighted toward the opposing team. Then, as chaos swirls around him, he calmly adds, "But I'd rather book an extra bet than give away a number I don't want to give away."

CRIS, founded by Ron "Cigar" Sacco, the godfather of offshore gambling, is run like an old-school operation. Bereft of gimmicks, technologically low-key, not at all caught up in marketing gambits, CRIS is philosophically similar to the small, independent sports books that once dotted the Vegas Strip. Just across the parking lot, however, resides BoDog, a successful operation that is CRIS's antithesis. Where CRIS is stripped down, BoDog is a flashy, swaggering beast of a company, taking 90 percent of its action over the Internet (as compared to 70 percent for CRIS) and even featuring its own mascot: a tooth-baring canine that looks ready to pounce. CRIS's name is obvious to the point of sounding generic; BoDog's was devised as strategically as a soft-drink's: it had to sound aggressive, bear fewer than six letters (a preference for Web surfers) and be available as a URL.

Unlike CRIS, BoDog discourages wise guys -- going so far as to have two separate point spreads, one for the wise guys and one for the squares or recreational bettors that it aggressively courts. The site gets mass-marketed as if it's trying to compete with Amazon or Orbitz. "We only market on the Internet -- not in print or broadcast -- and in two seasons we've become the dominant brand on the Web," maintains Cole Turner, BoDog's Chief Executive Officer and founder. "Companies here in Costa Rica are run by one of two types of people: a bookmaker who somehow managed to educate himself on e-commerce and technology, or a technology person, like myself, who came in from the other direction. I believe that the most powerful person is the one who's strong in technology. You can dominate this industry with an average bookmaker if your technology and marketing are world-class. But you will never dominate this industry with a world-class bookmaker and average technology. Make mistakes on the marketing side and you get lost in the chaff of the industry. Nobody will even know that you exist."

It's a headstrong sentiment that generates controversy among the hardworking bookies here. But, judging by the late-game activity in BoDog's phone room, the approach seems to work. Clerks are busy, line-makers frantically massage the numbers being offered to their square customers, and Cole Turner stands on the edge of the stage with a self-satisfied look as a second round of kickoffs nears.

Turner entered the offshore sports-betting business after being accused of insider trading in Canada and carving out a niche for himself as a provider of e-commerce software. He shrugs off his crime as a youthful indiscretion, acknowledges that he changed his name and insists that he did nothing more than sign the wrong papers. Whatever the case, he is not alone in coming to Costa Rica after having a slightly sketchy situation up north.

If, as Casino author Nicholas Pileggi once wrote, Las Vegas is a morality car wash, then Costa Rica is the morality car wash of the morality car wash. One successful sports book owner here abandoned a similar operation in Vegas after he was robbed of millions and supposedly stiffed his winning gamblers for the dough; he's generally regarded as a great guy among his fellow expats. A highly esteemed oddsmaker got busted for money laundering, imprisoned and deported from the United States; he relocated to Costa Rica where he's since been embraced as an upstanding citizen. And even the guys who did nothing blatantly illegal inevitably turn squirrelly when questioned about their old lives in the States.

For all of that, the Costa Rican operations appear stunningly well run and efficient. Telephone rooms, with their long tables of bilingual clerks, are as antiseptically comfortable as any telemarketing setup in the United States. The businesses (which are run by men whose ambitions rarely exceeded 20 clerks in a little broom closet of a bookmaking office operating on the down-low) are solid enough that one was sold for $14 million and another supposedly went for $30 million, plus some $270 million in stock options. Both were purchased by the British company sportingbets.com. Hearing those amounts, though, and finding out that one bought-out company had the particularly enviable URL of sportsbook.com, I wonder if it was purchased partly for its online handle. Reggie Reggoni, who runs a mid-level sports book called Blue Marlin and was among the first half-dozen bookies to begin working down here, looks at me with some disbelief. "No," he says. "They bought it because they wanted the company's 80,000 American gamblers."

With deals like those, it's clear that bookies' lives in Costa Rica are as legit as it gets in this world. Undoubtedly, they're out of the shadows, perfectly legal and part of society. Collectively employing tens of thousands of young Costa Ricans, they pay better than average salaries, employ bodyguards (especially if they like to wear their diamond-encrusted Rolexes while swanning around town) and occasionally own the buildings that they occupy. Bet-On-Sports, one of San José's more successful books (it takes 1.6 billion bets per year), boasts an Olympic-sized swimming pool, a private club for its premier players and a free daycare center for the children of its employees. "The idea," says Bet-On-Sports' CEO David Carruthers, "is for our customers to realize that we are a substantial operation."

While CRIS's Mac goes so far as to say that the sports books have created a middle class in San José (a somewhat dubious assertion, as many Costa Ricans believe that the books are a corrupting influence on the good Catholic kids who work there), his boss, Mickey Richardson, gives the impression that being a bookie here has become too much of a real job. "It was more fun before," admits Richardson. "It used to be a party atmosphere. What used to be considered a racket is now a real business and we're dealing with things we couldn't even have imagined 10 years ago.

The watershed moment for all of this can be traced to the evening of December 13, 1992. That's when Steve Kroft of "60 Minutes" interviewed Ron "Cigar" Sacco, the lifelong bookmaker, who looked cocky with his shock of red hair, shirt pocket crammed with pens, and a signature Cohiba jammed between his teeth. Speaking from the Dominican Republic, to which he had relocated and set up dozens of toll-free phone lines, Sacco told Kroft that he was doing nothing illegal. Sacco insisted that he felt comfortable taking bets from U.S. customers in the Dominican Republic, where sports wagering had long been legal.

Sacco's message was a seductive one for bookies across the United States. "Seeing that interview changed me," remembers Richardson. "Suddenly, bookmaking seemed like something that could be done outside of the United States. It immediately appeared to be the ticket." In no time, the Dominican Republic was home to more than 200 expatriated American bookies, plying their trades beyond the reach of stateside authorities.

Within a couple years, however, the Dominican Republic ceased to be a gambler's Eden. "The government got greedy," says Reggoni. "You'd pay one general $50,000 and the next week his brother would show up demanding another $50,000." Following a false start in Antigua, Sacco moved his operation to Costa Rica; he was the first one in the industry and, once again, other bookies followed. Then, in the late 1990s, the Internet blew wide open. With easy access to information, the ability to place bets hassle-free, and an opportunity to monitor ever fluctuating lines (via services such as Don Best), the Web seems to have been custom-made for sports betting -- and it has ignited the multibillion dollar explosion in wagering.

However, all is not perfect in paradise. On the consumer end, gamblers run the risk of getting ripped off. It can happen surreptitiously or blatantly (in a well-publicized event, one of the major books in town stiffed a professional from Las Vegas for nearly half a million dollars, claiming that it simply didn't want wise-guy action, maintaining that the Vegas gambler knew this and bet anyway). "Some of these places get set up specifically for the purpose of not paying people," says one bookie, who did not want to be named. "They attract a lot of post-ups [the betting bankroll that you deposit up front] and then disappear, only to reopen under a whole other name." And it's not only the gamblers who face financial risk. "Sport Bucks [which worked as a bank for local sports books] recently went out of business, owing the books a total of $1.5 million," remembers Reggoni, adding that Sport Bucks got into trouble after its owners got hooked on betting games with money they were supposed to be minding. "We lost $30,000 on that one and felt lucky."

Even worse is the constant vulnerability to high-tech terrorists who cripple computer systems by flooding them with calls and demanding payments of $30,000 be sent to Saint Petersburg, Russia, or else the site will remain unusable. "We could have paid those guys who were putting out the denial of service attacks or stood up to them," says Will Gatten, a goateed hipster from Texas who does marketing for a respected sports book called Hollywood. "We did the latter and paid way more than $30,000 to upgrade our system" -- and make the attacks impossible -- "but it was the right thing to do."

Beyond that, the competition among Costa Rican sports books is cutthroat, with outfits competing by offering impossibly large sign-up bonuses that go as high as 20 percent of the money that new customers put on account. Though it sounds good, such largesse can also be a sign that the sports book will not be around long enough to pay off its winners. "My rule of thumb is that if anybody is giving a 20 percent bonus, don't sign up with them," says Gatten, explaining that it's too high of a perk to allow the company to survive. "Chances are the place wants your post-up money and will then go broke. Ten percent is really the norm."

Questions loom as to whether Costa Rica will be the gambler's refuge for much longer. In light of the recently activated licensing fees, those in the industry fear that politicos in their adopted homeland will get as greedy as the Dominicans had once been. And while few bookies are currently prepared to say hasta la vista, baby, they are looking at alternatives to Costa Rica. "Right now Panama is a front-runner," says one sports-book manager who recently returned from a trip to Panama City. "The place is completely modern. It's got a skyline that rivals those in many American cities, and it's cheaper than San José. From what I understand, the government is looking to bring in 10 big sports books." The manager's cell phone rings, he deals with some business involving a line move for an NBA game, then he softly adds, "One problem, though, is that Panama has a closer relationship with the United States than Costa Rica does."

And therein lies the rub. Never mind that it's legal to book bets in Costa Rica, the true lawfulness of what the offshore books are doing remains fuzzy. Consider this: if an American citizen opens a sports-betting business in a place such as Costa Rica and takes bets from customers in the United States, is he breaking the law? Maybe. Since hardly anyone in America has ever been busted for placing a bet (only for taking them) and taking bets is legal in Costa Rica, you have an area so gray that even attorneys who specialize in representing gaming-related cases can't provide a straight answer.

What's indisputable is that Ron Sacco -- who supposedly became a massive FBI target after showboating on "60 Minutes" -- was recently arrested while trying to go from Costa Rica to Nicaragua. The Costa Rican government maintained that his passport was not in order, and, rather than take his chances waiting for slow justice in Central America, Sacco turned himself in to U.S. authorities where an old bookmaking warrant led to his receiving a nearly two-year prison sentence.

Sacco's arrest had a chilling effect on Costa Rica's sports-book community and has led to much speculation about the future of online gambling as a big public enterprise. Already the U.S. attorney general has advised publications such as Maxim and radio programs such as the "Howard Stern Show" (both beneficiaries of advertising dollars from Costa Rican sports books) that running ads for offshore gambling may put them in the position of aiding an illegal activity. "Right now the American government is the biggest threat to the future of online gambling," says one bookmaker who believes that the business will be forced to return to its underground roots. "Supposedly the NBA and NFL are at least partially behind it. But the really ridiculous thing is that sports betting helps keep basketball and football and everything else going. Without having a little something riding on the game, how many people do you think would really bother to watch?"

Michael Kaplan is Cigar Aficionado's gambling columnist.

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