Las Vegas company pleads guilty in $2 million illegal sports betting case
28 November 2012
After a long and secretive investigation involving federal agencies and Nevada gaming regulators, a defunct Las Vegas company pleaded guilty last week to an illegal gambling charge related to offshore sports wagering.
Jacktrade LLC pleaded guilty Nov. 19 to interstate transmission of wagering information before U.S. District Court Judge Gloria Navarro. The company admitted to a 2007 violation of the federal Wire Act, which bans the transmission of illegal gambling information and commonly is used against unlicensed sports-betting operations and bookies.
The investigation of Jacktrade has been under way since at least 2006.
The case is unrelated to last month’s high-profile arrests of 25 people involved in an alleged sports gambling ring. Those arrests, orchestrated by the Queens, N.Y., district attorney, included a Cantor Gaming sports book director in Las Vegas.
Court records in the Jacktrade case show a pattern similar to that seen in the Queens case: Prosecutors in both say sports bets were illegally routed through offshore sites in the Caribbean and that Las Vegans played a big role in moving the money around before agents shut down their operations.
Sports betting insiders say that even in Nevada, where legal sports wagering is easy to find, gamblers frequently use illegal offshore sites for convenience or so they can find more favorable odds or rebates.
The U.S. attorney for Nevada, Daniel Bogden, on Tuesday suggested illegal gambling prosecutions will remain a priority.
''Because illegal bookmakers and unlawful online gaming operations are not regulated at the same level as traditional, land-based gaming operations with vigorous enforcement of laws, prohibiting illegal gaming is necessary to provide appropriate consumer protections for individuals engaged in gambling and to prevent money laundering, underage gambling and participation by residents of jurisdictions where it is deemed illegal," Bogden said in a statement. ''Such illegal gaming operations take business from legal gaming operations, preventing state and local governments from receiving important tax revenue, and serve as a major source of income for organized criminal groups, both in the United States and abroad.''
As part of a plea bargain, Jacktrade agreed to forfeit more than $2 million in cash and other assets seized by agents more than five years ago.
Details about Jacktrade and its sister company, International Racing Group (IRG), were made public in October 2007 when Los Angeles-area company Youbet.com revealed that federal agents had searched its office in a criminal probe headed by the U.S. Attorney’s Office in Las Vegas. Youbet.com provided Internet and other off-track betting services for horse racing as well as equipment and technology for processing tracks’ wagers and payouts.
Youbet.com had acquired IRG in June 2005 for $3 million and promised to pay up to another $9.7 million depending on IRG’s performance.
After its office was raided, Youbet.com shut down IRG. In June 2010, Youbet.com was acquired for $131 million by Churchill Downs Inc. of Louisville, Ky., where the Kentucky Derby is run.
After the 2007 raid on Youbet.com, little was heard about IRG or Jacktrade — both of which are out of business — until now. That’s in large part because federal judges, including now-Gov. Brian Sandoval, kept a government asset forfeiture suit locked down under "super seal" to protect grand jury information, wiretap information and cooperating witnesses. With the probe apparently winding down, the civil asset forfeiture case was finally unsealed with little attention in June.
IRG maintained that it was not a bookmaking operation and only facilitated wagering at horse and dog tracks. The company said bettors called in wagers, which were processed at an office on the island of Curacao in the Caribbean Sea off the coast of Venezuela.
But as early as 2000, Nevada gaming regulators were investigating whether the company was involved in violations of state and federal law.
"Patrons use telephones to place bets with the company in Curacao on horse and dog racing events occurring at various venues in North America," a 2001 memo from the Nevada Attorney General’s Office to Dennis Neilander, chairman of the state Gaming Control Board at the time, reads. "The bets are made against front money deposits with IRG in Nevada."
Prosecutors said IRG actually was accepting wagers. Officials also were concerned that IRG was involved in unlicensed and untaxed sports betting in Nevada.
Jacktrade was officially hit with criminal charges Oct. 24 in U.S. District Court in Las Vegas, but the case was sealed. It became public with the Nov. 19 guilty plea.
Jacktrade's president is Louis Tavano, and the company’s attorney is Richard Wright. Tavano also was one of three owners of IRG, along with Richard Tavano and James Scott, according to records. None of the individuals will face prosecution under the deal in which their company pleaded guilty.
The plea bargain describes IRG as "an offshore race book." After it was sold to Youbet.com, IRG’s owners had an incentive to maintain a high "handle" of wagering business because they stood to receive a higher price from Youbet.com, court documents say.
"In order to meet the target handle, in 2007, constituents of Jacktrade caused a bettor in Nevada to place a bet through IRG by an interstate and foreign telephone call to Curacao," in violation of the Wire Act and state law, the plea agreement says.
IRG also was known as a "rebate shop" because it enticed bettors with rebate offers on every dollar wagered.
Investigators honed in on IRG while investigating bookmaking brothers Jeffrey and Michael Jelinsky, who operated in Las Vegas and elsewhere and were sentenced to prison in 2009 after forfeiting nearly $5 million seized by investigators.
A court declaration said Michael Jelinsky recruited customers for IRG for a commission, and the brothers and their associates ran many of their bets through the Poker Palace in North Las Vegas and the Palms in Las Vegas. Between their offshore accounts and the casinos, the Jelinsky Group was estimated to wager millions of dollars every month.
An anonymous letter about the Jelinskys tipped off the state Gaming Control Board. A subsequent investigation confirmed they were taking bets from national clients and running them through offshore accounts and brick-and-mortar casinos in Southern Nevada.
In another twist, Michael Jelinsky allegedly set up IRG customer accounts using his own Social Security number.
"This allows Michael to claim gambling losses that were not his own and to create a tax windfall (generally in excess of $1 million) for himself at the end of each year," a court declaration says. "Additionally, this enables Michael’s customers to remain anonymous and avoid filing any IRS documents."
Louis Tavano's Las Vegas home was searched as part of the investigation. Records indicate he was running IRG from the house and taking bets from Nevadans.
That involved two possible violations of state law, a federal investigator said. Tavano was not licensed by the Nevada Gaming Commission to take part in gaming operations, and it’s illegal for Nevadans to participate in the type of offshore wagering in which IRG was involved.
IRG’s outgoing wire payments from one account to customers over a two-year period ending in March 2007 totaled $29.3 million. Almost 70 percent of that was sent to Nevadans, according to court records.
Tavano did not immediately respond to requests for comment.
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