Sunday, March 21, 2010

Casino News: How a pig farmer made billions in online gambling - 13th March 2010

From his beachfront villa in Antigua, Calvin Ayre epitomizes the carefree profile of a youthful, retired millionaire.

Drink in hand, beautiful girl on his arm, the 48-year-old Ayre has made great efforts to cultivate his image as a womanizing bachelor who loves to party. Ayre is also probably the most successful and charismatic Canadian entrepreneur that you've never heard about.

Ayre made his fortune from a business that U.S. officials consider illegal -- Internet gambling. In Canada, wagering online is also against the law unless the gaming websites are run by the provinces. But that hasn't stopped millions of bettors from visiting the sites of intrepid Canadians like Ayre, leading the industry to a current estimated value of 16 billion dollars a year.

In 1994, Ayre began his Internet gaming site, Bodog. It quickly grew into a gambling and entertainment empire, becoming one of the most popular websites to offer betting on sports and games of chance like poker and slots. At its height in 2006, Bodog handled seven billion dollars in bets. That year, Forbes Magazine put Ayre on the cover of their annual billionaire issue.

From pigs to player

Not bad for the son of a Lloydminster, Saskatchewan pig farmer.

"My Dad wanted to teach me to be a businessman, so he gave me my own little pigs and then I had to raise them up and then sell (them). So I was running a miniature little pig farm inside the bigger one," Ayre told W5.

Ayre went on to university in Ontario, obtaining a Bachelor of Sciences degree from the University of Waterloo. In 1989, he was awarded an MBA in Management Finance from City University in Seattle, Washington. After a failed attempt at running a medical company that manufactured heart valves -- which also led Ayre to run afoul of the BC Securities Commission -- he staked everything he owned on Bodog and hit the jackpot.

"In my case, what happened is almost like a fairytale. I set an expectation and I eclipsed it so astronomically that even myself, sometimes I have to go – whoa, what happened?"

What happened is that Bodog, and other gambling sites like it, skirted American and Canadian laws by operating and processing bets from offshore havens like Antigua and Costa Rica. When Forbes' article about Ayre ran the headline, "Catch Me If You Can," some wondered if that was the message that Ayre and other Internet gambling operators were sending to U.S. authorities.

"I've never done any business in the U.S. All the business I've ever done has always been in countries where I have a licence," Ayre said.

But 95 per cent of Bodog's gambling business came from Americans, which soon attracted the attention of American lawmakers and American justice officials.

"It doesn't matter where your business is located, if your customers are here in the United States and you're communicating with them in the United States, then you're subject to the American restrictions," said Rod Rosenstein, a U.S. Attorney in Baltimore who prosecutes offshore online gambling operations.

In the last five years, U.S. authorities have started cracking down on offshore Internet gambling operators. In 2006, U.S. agents arrested David Carruthers, the CEO of BetOnSports, while he changed flights in Dallas. Carruthers was sentenced to 33 months for racketeering.

Later the same year, new laws passed by the U.S. Congress made it illegal for financial institutions to transfer funds to and from private gambling sites.

In 2008, Rosenstein spearheaded a campaign against Bodog, and seized $24 million from the company's payment processors. By then, Ayre had stopped travelling to the United States and had announced he would no longer operate online gaming sites.

"It just seemed like the right decision. The right business decision," said Ayre.

Rosenstein would neither confirm nor deny whether Ayre was under active investigation.

He said some people may feel they're operating in a location beyond the reach of American law, "but we've demonstrated that our memory is long and, in fact, once someone is charged with a federal law in the United States we have the ability to arrest them in many different places," he said.

But while Ayre retired from the day-to-day-operations of Bodog, he still profits by licensing the rights to the Bodog name and brand in several geographical jurisdictions. Bodog still takes in millions of dollars each year from U.S. customers. And the operator of the site they visit to place their bets just happens to be another Canadian – a former Olympic gold medalist, a Member of the Order of Canada, and a Mohawk who lives on the Kahnawake Reserve near Montreal.

Mohawk country

"I sold the business as it was to Alwyn Morris in Kahnawake, who's a Mohawk, and he thinks he's got some kind of right under his status as a Mohawk to offer gaming services into North America," explained Ayre.

Morris operates Bodog out of Kahnawake -- still one of the major online gaming sites on the Internet. And Bodog is not the only betting site hosted on the Mohawk reserve. Kahnawake has established itself as a major player in the global Internet gambling trade, with approximately 60 per cent of the world's gaming websites hosted on computer servers on the reserve. Kahnawake Mohawk Territory is the Las Vegas, Atlantic City and Monaco of the online gambling world, all combined.

Even though the Canadian Criminal Code clearly outlaws private online gambling sites, Kahnawake's leaders insist that its special First Nations status places it outside that law.

"Although the Criminal Code may say one thing, the Canadian constitution says quite another, and so does the Canadian Indian Act," explained Chuck Barnett, spokesperson for Mohawk Internet Technologies, or MIT, which runs the giant computer servers.

"It makes provisions which allow for band or Indian municipalities to assert authority and control over things from dog catching laws to gaming to sporting events."

While the Mohawks of Kahnawake assert their Canadian constitutional and territorial rights, American authorities maintain that what they are doing violates U.S. law.

"Whether that company is located here in America, or in Canada, or in Antigua, it's equally illegal. It doesn't matter where the company is based. If it's projecting that activity into the United States, it's in violation of American law," explained U.S. attorney Rod Rosenstein.

So far, neither the Canadian nor Quebec governments have done anything to challenge the Mohawks of Kahnawake.

"The Canadian government still, to this date, has not pointed their long, bony finger at us and told us, 'what you're doing is illegal, you must stop it'," said Barnett. "If it were to happen in a hypothetical situation, if that were ever to come, I'm certain there would be resistance. It could get ugly."

A veiled threat? The last time Canadian authorities tried to intervene in a territorial dispute on Mohawk land, over the intended expansion of a golf course in Oka, Quebec, in 1990, the result was a police officer killed and a nasty 78-day standoff that involved the Canadian military being deployed.

Mike Delisle, the Grand Chief of Kahnawake says it's hypocritical that some US states are operating sanctioned betting websites while American authorities call what he's doing illegal.

"To me, it's all about money," said Delisle. A lot of money -- which explains why Canadian provinces are now getting into the business.

British Columbia and the Atlantic Provinces have online gambling operations. Quebec recently announced its intention to launch websites this fall. Ontario's premier, Dalton McGuinty, recently announced the province would investigate whether to operate online gaming sites.

"Until Las Vegas, Atlantic City and Loto Quebec and everyone closes, we're in business," emphasized Delisle.

That's good news to Calvin Ayre. He insists that he's out of running online gaming but the Bodog brand he licenses is still highly regarded in the world of Internet casinos. And the success of that brand lets Ayre live the high-life in Antigua -- whose government approves of online gaming.

"That whole executive stuff has gone out of my life and that gives me more time to enjoy myself," said Ayre.

Unless U.S. authorities extend their reach to Kahnawake or can catch up with Calvin Ayre away from his safe haven, there will likely be a lot more for him to enjoy. (Credit: CTV)

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