Me If You Can, by Matthew Miller - 27th March
Calvin Ayre has gotten very rich
by taking illegal bets over the Internet.
a warm, bright morning just outside San José,
Costa Rica, Calvin Ayre, slightly hungover, was
lounging in his bathrobe at a poolside office
in his new $3.5 million, 10,000-square-foot compound.
Sipping coffee poured by one of his five servants,
the entrepreneur declared, paraphrasing Sun Tzu’s
The Art of War, “I’m going to win
this war without fighting battles. I’ve
put a lot of energy into finding ways not to fight
this tropical oasis, Ayre has dodged and taunted
those enemies, the main one being the U.S. Department
of Justice. His Bodog Entertainment Group is in
the not very kosher business of Web gambling.
It takes bets from 16 million customers, most
of them in the U.S. And that appears to violate
the law--Title 18, Section 1084 of the U.S. Code--which
forbids using telephones or other communication
devices “in interstate or foreign commerce”
in order to take bets. “Online gambling,
whether it is located offshore or not, is illegal
when it comes to the United States and its citizens,”
says a Justice Department official who works on
Internet gambling crimes.
Bodog has no physical presence in the U.S., Ayre
is not an American citizen, and the extraterritorial
reach of U.S. law is not clear. Ayre, at any rate,
has no assets in the U.S. for the G-men to seize.
year the privately held Bodog handled $7.3 billion
in online wagers, triple the volume of 2004. Ayre
says all this betting gave him sales of $210 million,
and that he took 26% of the revenue to the bottom
line. What’s his business worth? Two similar
ventures that are publicly traded (in Europe)
go for well over 18 times trailing earnings. At
that multiple, Bodog, along with other assets,
gives Ayre a net worth of at least $1 billion.
presumably has not just the vice squad but the
tax collectors in a huff. While 95% of his sales
come from the U.S., the 44-year-old doesn’t
pay a nickel in corporate or personal income tax
here. Is that legit? Foreigners are supposed to
pay federal tax on income derived from U.S. business
activities. The suckers are stateside, the electronic
roulette wheels and digitized sports pools in
Costa Rica. Where’s the action? It remains
to be seen whether irs agents could make Ayre
pay, assuming they could get their mitts on either
him or his money.
taunting analysis of the law: “We run a
business that can’t actually be described
as gambling in each country we operate in. But
when you add it all together, it’s Internet
are 2,400 Internet gaming sites, estimates tracker
Casino City, a few hundred of them operating in
Costa Rica’s tax and regulatory haven. According
to research company Christiansen Capital Advisors,
they pulled in revenue (vigorish, that is) of
$12 billion last year, double the volume on the
Las Vegas Strip. Ayre gets his share with a smorgasbord
of offerings (sports, poker and casino games),
a heavy dose of marketing and a lot of repeat
business. Bodog.com claims 145,000 regulars who
bet at least once a week. Their average wager:
$60 for sports, $13 for casino games.
is spending $80 million this year to nudge beyond
gaming into a kind of MySpace for adults. Most
of it is pretty cheesy entertainment, like his
recent hosting of the Lingerie Bowl, a raunchy
pay-per-view cable alternative to the Super Bowl
halftime show. Ayre is also supporting the careers
of a dozen lesser-known rock and hip-hop acts
(Bif Naked and Syndicated Villain among them)
and producing a poker show on cable TV with a
slew of C-list celebrities like Rob Mariano (a
contestant on CBS’ Survivor) and card shark
David Williams. Hardly any of these ventures makes
money, though Ayre insists they will one day.
But it probably lures customers to try their luck
on Bodog.com. Its 1.5 million unique visitors
per month, according to Internet tracker Hitwise,
rivals that of Sportsbook.com, which is owned
by London Stock Exchange-traded Sportingbet Group,
the world’s largest sports betting company.
likes to be seen--especially with attractive women.
He is unmarried and has no steady girlfriend (“It
would be unfair to the girl,” he says).
He has himself driven around in a black Hummer
by a chauffeur who was trained as a sniper in
the Canadian military and practiced in Somalia,
Bosnia, Afghanistan and Iraq. Why the heavy metal?
Ayre says he and three friends were robbed at
gunpoint on the streets of San José a few
years ago. His rivals say there’s about
as much need for a bodyguard in Costa Rica as
in Boca Raton.
in Lloydminster, Sask., Calvin Edward Ayre (pronounced
“air”) is the son of grain and pig
farmers. He placed his first bet during his teens,
playing blackjack for pennies with his mates on
long hockey trips across the Canadian tundra.
By the time he attended the University of Waterloo,
Ayre was betting on sports (for beers, he says),
and developing a taste for business. Over the
summer he bought a five-ton truck, loaded it with
cherries and peaches he’d picked and sold
the fruit to motorists on the side of the road.
He also organized trips to Florida and Cuba for
his party-going classmates.
didn’t take him long to land in trouble.
With an M.B.A. from City University in Seattle,
Ayre took a job in June 1990 as president of Bicer
Medical Systems, a Vancouver, B.C. heart-valve
maker. The company was underfinanced, he says.
According to British Columbia Securities Commission
documents, Ayre sold 300,000 Bicer shares without
releasing a prospectus. He also moved millions
of shares between several accounts, including
his own, without filing insider trading reports.
“I knew that I wasn’t following all
the rules,” he says. “But I also knew
I had to do it to keep the budget alive.”
Though he was never charged, Ayre settled in 1996
for a $10,000 fine and a 20-year prohibition from
running a company listed on the Vancouver Exchange.
Ayre borrowed Cisco (nasdaq: CSCO - news - people
) training manuals and taught himself network
design, then tried launching several Web-based
ventures, including a voice-over-IP company. All
of them flopped. Then he read a newspaper story
about Ronald (the Cigar) Sacco, a U.S. bookie
who had set up an offshore phone-in betting operation
in the Dominican Republic to elude felony charges
in the States. “There was a loud bang in
my head and the whole universe came together,”
Ayre recalls. (Sacco pleaded guilty in 1994 to
money-laundering charges and went to prison a
year later. His operation later moved to Costa
Rica.) Ayre invested $10,000 to build a Web-based
system for betting online, providing software
to offshore bookmakers.
1996 he was in Costa Rica, helping to launch some
of the first online casinos, like WinSports and
GrandPrix, for other bookmakers. Internet gambling
was basically unheard-of, and there was a strong
disconnect between the kid and the old coots taking
the bets. Ayre not only wanted to encourage smaller
bets to generate more predictable revenue and
profits, he also wanted to settle accounts with
online checks, instead of suitcases of cash. “I
was pioneering a new industry,” he says.
That’s half true. Sportsbook.com was championing
a similar model, taking bets from customers using
credit cards issued by European banks.
launched his own site in April 2000, starting
with sports betting. There were options to pay
with credit cards and online checks (wired from
U.S. accounts to Bodog’s London accounts),
a $5,000 maximum and plenty of pictures of pretty
girls. Later he added online poker and casino
games. In the event that you are a winner, you
collect via wire transfer. Presumably, you declare
your winnings on your 1040, but Ayre does not
file reports with the IRS.
create some attention, Ayre begat the fictitious
“Cole Turner” as the public face of
Bodog. He convinced Christopher Costigan, owner
of Gambling911, an online tabloid promoting Web
gambling, to post stories of Turner, an Indiana
Jones-like character. In 2003, for example, Ayre
turned his vacation to Thailand into a Cole Turner
Internet adventure. Using a digital camera, a
machete, fake blood and a cast of taxi drivers
and massage-parlor girls, Ayre spun the tale of
Turner leading an expedition into Cambodia to
fight a cell of Buddhist terrorists. Along the
way Turner was captured by the Cambodian army,
double-crossed by opium warlords in a lost ancient
city and wounded in a knife duel while escaping
the country. Ayre wrote the eight-story series
on the plane back to Costa Rica. It was released
during the college bowl season.
series got noticed. Disgusted bookies at rival
companies posted notes on Internet forums saying
Turner was a terrible businessman because he was
off on an adventure rather than at his desk during
one of the busiest betting times of the year.
One gambler called Bodog and said he wouldn’t
place another bet until he knew if Turner was
the joke got old. After being quoted in a 2004
Cigar Aficionado magazine story as Cole Turner,
Ayre got tired of explaining to reporters that
Turner was just a marketing trick. Still Ayre
hasn’t lost his crude touch: He sometimes
hands out thong underwear as business cards. For
an April Fool’s gag last year he released
a statement apologizing to customers for losing
Bodog to Virgin’s Richard Branson in a drunken
is based in Costa Rica, where 150 bookmakers and
customer service reps guide the action. The government
doesn’t charge businesses on money earned
from other countries, and since Ayre doesn’t
take bets from Costa Ricans, all Bodog revenues
come from foreign lands. He pays no personal income
taxes in Costa Rica since all his assets--cash,
cars, houses and other properties--are in Bodog’s
name, not Ayre’s. He says he has $25 million
invested in Costa Rican and Canadian real estate
and $40 million in Swiss banks.
Vancouver, 200 graphic designers and computer
programmers work at Riptown Media, whose only
client is Bodog. But producing advertising copy
is not a crime and Bodog itself doesn’t
keep an office in Canada, which has legal restrictions
against online gambling similar to those in the
U.S. Ayre says his citizenship isn’t a reason
for not setting up operations in Canada, though
he still carries that insider trading settlement
on his record and admits he doesn’t want
to “tempt fate.”
U.S. Justice Department hasn’t had much
luck prosecuting online gambling operators. Jay
Cohen, an American who co-owned World Sports Exchange
in Antigua, is the only known proprietor ever
put on trial. Found guilty of accepting bets from
America over the Internet in August 2000, he was
sentenced to 21 months. But some American offshore
operators haven’t been touched, even though
they sometimes return to the States. Among them:
Ruth Parasol and J. Russell DeLeon, a married
couple who, along with Indian partner Anurag Dikshit,
got very rich when they took PartyGaming, a Gibraltar
company, public in London last June. Dikshit is
worth $3.3 billion, Parasol and DeLeon $1.8 billion
Sam has found ways to make those who help Web
casinos sweat. In 2003 Ebay’s PayPal operation
paid the U.S. $10 million to settle charges of
enabling online betting with money transfers.
In January the tabloid Sporting News surrendered
$7.2 million to the government, money it earned
advertising gambling sites. Ayre has a clever
work-around. Most broadcasters in the U.S. don’t
want to pay fines for running Bodog.com ads but
happily take money for advertising Bodog.net,
a free “educational” site that looks
almost identical to the Bodog.com money machine.
is some risk that Congress will give the DOJ more
weapons with which to attack offshore gamers.
Senator Jon Kyl (R--Ariz.) has introduced a handful
of bills to stop online gambling. One made it
to the floor and was voted down in November 1999;
Kyl’s handler blames “shadowy forces.”
Rep. James Leach (R--Iowa) introduced similar
legislation last November. “Internet gambling
has dangerous implications for families and society,”
Leach says. “It’s also a front for
money laundering and terrorism,” though
he has only anecdotal evidence.
paradoxically, might also be in trouble if Congress
went the other way and legalized online gambling.
That, he says, would encourage the likes of Google
(nasdaq: GOOG - news - people ), Microsoft (nasdaq:
MSFT - news - people ) and Ebay to open sites.
But other powers disagree. “Do you think
the Internet or gambling is going to disappear
in the next ten years?” asks Nigel Payne,
Sportingbet’s chief, who spends much of
his time lobbying for regulation. (His largest
stockholders include Fidelity Investments and
Merrill Lynch (nyse: MER - news - people ).) “The
U.S. needs to regulate it, license it and tax
it.” Payne says the U.S. government could
have reaped $900 million from online gambling
taxes last year. He has a strong ally in Terri
Lanni, chief executive of MGM Mirage, which owns
the Bellagio and MGM Grand in Las Vegas. Washington
is “making a major mistake by not legalizing
this type of gambling, considering that almost
all wagers going to offshore sites come from the
United States,” he says.
happens, Ayre will try to make sport of it. “One
of the things that drives me is the excitement
that I could fail,” he says. “What
better buzz can you get?”
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