The Unabridged History of Winners and Losers

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VIRTUAL VEGAS - New technology and an anything-goes governing attitude make Costa Rica ''the Mecca of offshore wagering.'' By Glenn Garvin - [e-mail]

VIRTUAL VEGAS New technology and an anything-goes governing attitude make Costa Rica ''the Mecca of offshore wagering.''

SAN JOSE, Costa Rica -- This prim, orderly little country likes to think of itself as The Switzerland of Central America. But these days, if you listen carefully, you can almost hear the clatter of poker chips and roulette wheels zipping through the ether. What we really have here is The Virtual Las Vegas of Central America.

Powered by the Internet and new technology that allows them to import thousands of telephone lines by satellite, and enchanted by the anything-goes attitude of the Costa Rican government, bookies and hustlers are turning this country into what Bettor's World magazine calls ''the Mecca of offshore wagering.''

From your living room in Topeka, Kan., or Tucumcari, N.M., you can link your computer with one in Costa Rica, then match wits with a blackjack dealer or place a bet on Sunday's Dolphins game. You could wager on how much Madonna's new baby would weigh or on which bad-boy celebrity would be the first to be arrested for beating his wife.

''Porn may be the top business on the Internet, but gambling is No. 2,'' says Tom Somach, who covers the offshore industry for Rolling Good Times Online (www.rgtonline.com), a website for gamblers. ''And these days, when you talk about the Internet, you're talking about Costa Rica.''

Adds Anthony Cabot, a Las Vegas attorney and an expert in offshore gambling: ''There are lots of places that permit offshore gambling, but you go to Antigua and there's a $100,000 license you have to buy. You go to the United Kingdom and there's a very high gross revenue tax. In Costa Rica, there's nothing.''

Predictably and unfortunately, for some gambling addicts the permissive attitude has attracted more than a few con men, mobsters and sleazeballs, as many of the gambling executives themselves admit. ''Every Tom, Dick and Harry wants to put up a server in a room the size of a closet and call themselves a company,'' complains Tom Miller, the general manager of Millennium Sports, one of the largest operations in Costa Rica. ''Unfortunately, yeah, some of them are crooks, and that's what's putting a black eye on the industry.''

Complaints by bettors who've won tens of thousands of dollars, then been unable to collect, are routine. ''So many of these places, you can't even find out who owns them,'' says Fred Faust, managing editor of Rolling Good Times. ''Sometimes all you've got is a phone number, sometimes only an e-mail address.''

RAPID GROWTH

Between 50 and 100 gambling operations mostly owned by Americans have set up shop in San José over the past three years, with more showing up all the time. They range from boiler rooms where a lone bookie answers a couple of telephones to gleaming office towers studded with satellite dishes where small armies of cybertechies juggle thousands of customers scattered across the globe. CARIBBEAN CONNECTION: Through this website, with various gambling links, South Florida entrepreneur Nicholas Tanney Nolter maintains a strong presence in San José. Nolter owns Worldnet, an Internet bandwidth provider and online gaming enterprise.

At least one colorful South Florida entrepreneur -- Nicholas Tanney Nolter, owner of Worldnet, an Internet bandwidth provider and online gaming enterprise -- has a strong presence in San José.

The offices of Nolter's CasinoPirata.com (Pirate Casino), Queen of Lust Casino, Casino Bahamas Sportsbook and Ace in the Hole websites in an upscale Sabana Sur building are full of busy programmers from countries such as Cuba and India. His Pompano Beach offices handle credit card processing for the gambling enterprises, and sales to investors of virtual casinos he has designed.

Like new pirates of the Caribbean, the offshore gamblers skitter about just outside the reach of tax collectors and the FBI. And they collect booty -- lots of it. Because Costa Rica doesn't regulate them at all -- all they need is an ordinary business license that costs about $50 -- it's impossible to collect reliable statistics on the gambling shops. But there's no question that a lot of cyberdollars flow through them each day.

Internet gambling companies will make nearly $1.5 billion this year, according to a report issued by industry consultant River City Group, with that amount expected to double by 2002. Telephone sports-betting probably increases those numbers by half.

Though only a tiny percentage of that money stays in Costa Rica, it's nonetheless brought the country several thousand well-paid jobs as well as an economic ripple effect as the computer shops gobble up office space and computer equipment.

A bettor who does learn the identity of the owner may not find the news all that comforting. One of the Costa Rican gambling shops targeted most frequently by complaints is Caribbean Sports, which takes sports bets over the phone.

Caribbean Sports has been accused by customers of failing to pay more than $100,000 in winnings over the past two years. MASTERANA Caribbean Sports is run by Frank Masterana, a bookie of unusual distinction: His is one of just 35 names in Nevada's so-called Black Book, a list of people the state has banned from entering casinos because of a ''notorious and unsavory reputation.'' Masterana has convictions on illegal gambling charges in Ohio, California, Georgia, Pennsylvania and Nevada, and the Nevada Gaming Commission calls him ''an organized crime associate.''

Pish-posh, says Masterana, who actually lives in the Dominican Republic, where he runs a walk-in sports betting shop. ''I'm in the Black Book for two reasons,'' he said. ''One, I'm Italian. Two, I was convicted of illegal bookmaking, which, to Nevada, is just a heinous crime.'' He shrugs off the complaints by winners who haven't been paid: ''You're always going to have disputes with everybody in this business.''

The 71-year-old Masterana intends to continue residing in the Dominican Republic, where he's fathered several children by a string of 20-something girlfriends. (''Thank God for Viagra!'' he says, often and with fervor.)

But the true paradise of offshore gambling, he said, is Costa Rica. ''They welcome you with open arms, and they don't require a license,'' Masterana says. ''All they want is for you to hire some local people and help out the economy. That's why Costa Rica is so much further advanced than the Dominican Republic.''

BRIEF HISTORY

The first offshore gambling operations turned up in Costa Rica in 1997. But a major migration began the next year, when the Dominican Republic -- for years a haven for the offshore shops -- began arresting owners on hazy charges in what many of the gamblers say was a shakedown operation.

In search of a safer home, some of the shops stumbled onto Costa Rica. They liked what they saw -- a large potential labor force of college students, bilingual and computer-literate -- and what they didn't see -- a licensing requirement.

The advantages offered by Costa Rica have permitted some of the shops to grow at rates that stagger even their owners. ''We needed a place big enough to hold us, and we've finally found it,'' says Gary Kaplan, the CEO of NASA International, which industry insiders say is the biggest offshore gambling company in the world.

After trying Aruba and then Antigua, NASA International settled in Costa Rica in 1998. The company occupies 60,000 square feet of a San José office tower and has already signed leases to add 40,000 more next year, not only to accommodate growth in its work force, which already numbers 500, but to add a health club, spa and smoke shop to entertain visiting high rollers.

NASA International has already spent more than $2 million on communications infrastructure that allows tens of thousands of wagers to flow into its telephones and computers every day. The company has 500 incoming phone lines and, as an indication of Kaplan's expectations, has purchased equipment to increase capacity to 2,400 lines.

''We've been here three years, and every single day we're still building,'' says Kaplan, 41, a former New York City neighborhood bookie.

The growth is funded by bettors from all over the world (NASA International's website can be accessed in 10 different languages) who link up by telephone or computer to wager on anything from British cricket to the weight of Madonna's new baby. Weird betting propositions are the company's specialty: most notoriously, it offered odds on whether a well-known singer would come out of the closet, and a pool on whether singer Bobby Brown, actor Jean-Claude Van Damme, or former basketball star Dennis Rodman would be the first arrested for beating his wife.

''I'm a believer in Rodman all the way, so the odds on him were short,'' recalls Kaplan. ''Bobby Brown, you think maybe Whitney (Houston, his singer wife) will keep him in check a little bit, so we put him down at the bottom.''

Even so, the wife-beating pool was not the weirdest NASA International betting line. It also offered odds on whether an experimental ion collider at Brookhaven National Laboratory would generate a black hole -- a line created after some of the Brookhaven scientists themselves called in and wanted to place bets.

''It took five of us sitting around to even figure out what they were talking about,'' says company counsel Ellen Zindler. ''And setting the odds was tough. But once we figured out that the creation of a black hole would swallow the Earth and cancel a payoff, we were OK with it.''

WHOLE NEW LOOK

With its vast plains of computer terminals and cadres of smartly dressed secretaries, NASA International seems light-years removed from the flaky backroom world of bookies and flimflam artists. But the company has seen its share of the weird scrapes that come with the offshore territory.

It pulled several photos of rockets and astronauts off its website after lawyers from the space agency NASA rather testily warned Kaplan that their client was getting tired of complaints about the propriety of a U.S. government agency running a gambling operation. And last year, Lloyd's of London forced NASA International to stop boasting that the British company was insuring bettor's money.

NASA International also has been in a long-running dispute that has created a noisy buzz in gambling circles: It has refused to pay off nearly half a million dollars in winning football bets by a Southern California man. The company says the man is a professional gambler who was placing bets under a phony name because NASA International wouldn't have accepted them under his real name.

''We always demand proof of identity before paying off a winning bet,'' says Zindler. ''Let him show up with some proof, and we'll pay him.''

But NASA International is on thin ice when it comes to phony names. Kaplan always introduces himself -- including to a Herald reporter -- under the name Greg Champion. Employees are instructed to call him simply G to avoid a slip-up in front of visitors.

Kaplan seems to feel he has some dangerous enemies; he's always accompanied by a phalanx of bodyguards, and often practices target-shooting in a firing range inside NASA International's offices. Associates say that one of his main worries is the FBI, which takes a dim view of offshore gambling.

THROUGH A LOOPHOLE

A 1961 federal law makes it illegal to use phone lines or wires to place bets on sports across state lines or international borders. But the law contains a loophole to use phones to ''assist'' in placing bets in a jurisdiction where gambling is legal. TAKING BETS, WORLDWIDE: On an upper floor of the San Pedro Mall in a suburb of San José, Costa Rica, a small army of cybertechies working for NASA Sports International juggle thousands of gambling customers scattered across the globe.

Offshore gamblers generally keep their money in a different country than the one where they operate their phones lines and computers (Antigua is a favorite banking location for many of the companies). These gamblers argue that when someone calls Costa Rica to put down $100 on Sunday's Dolphins game, that person is merely ''assisting'' the telephone operator there, who will actually place the bet at a bank somewhere else. Like new pirates of the Caribbean, the offshore gamblers skitter about just outside the reach of tax collectors and the FBI.

But federal prosecutors rejected that argument pretty emphatically in 1998, when they charged 21 offshore operators with violating the law on betting by telephone. Twelve of the defendants agreed to go out of business and either paid a fine or had the charges dismissed. (Though some of the fines were stunningly high: 67-year-old North Miami Beach businessman David Budin, who was running a telephone sports betting operation in San José, was assessed $750,000.)

CONVICTION THIS YEAR

The only defendant who went to trial and offered the ''assisting'' defense, a former stockbroker named Jay Cohen who was running a phone operation in Antigua, was convicted this year and sentenced to 21 months in prison. The case is under appeal.

The news sent chills through the offshore gambling industry, and Las Vegas attorney Cabot says it should have: ''They're clearly in harm's way.'' Congress nearly passed a law earlier this year that would have made the ban even more explicit and extended it to other forms of Internet gambling as well.

In an attempt to evade prosecution, many of the offshore gamblers have thrown up protective screens of foreign corporations. Millennium Sports is owned by a Panamanian corporation, known around the world for their secrecy, and general manager Miller blandly says he doesn't know who the stockholders are. NASA International's operations in San José are done through a local corporation whose officers all appear to be Costa Ricans.

Kaplan says he's not worried: ''They haven't charged anyone else since 1998, and I don't think they will,'' he says. But so far, NASA International's website isn't offering to bet on it.

Herald reporter Paul Brinkley-Rogers contributed to this report.