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Bookies in Exile
August 17, 2003
By WILLIAM BERLIND
Costa Rica is highly prized by the world's backpackers and
sightseers for its unspoiled natural beauty, but it's easy to forget that
when arriving in its grimy capital, San Jose. The newly remodeled airport
is surrounded by chain hotels, freshly paved roads and shiny corporate
plazas. After that it goes rapidly downhill. A dusty highway heading
vaguely toward downtown takes you through the poorer suburbs of San Jose,
packed with families in corrugated-tin-roof shacks. Above them, on the
sides of the surrounding hills, Costa Rica's elite live behind high,
fortified walls. The entire valley is blanketed with smog from auto fumes,
brush fires and burned trash.
This Costa Rica doesn't make for
much of a postcard, but to a small group of men, Americans mostly, it is
alluring, enchanting and brimming with possibilities for adventure. The
men are bookmakers taking bets and dispensing winnings over the Internet,
and Costa Rica has exactly what they need -- a government that welcomes
new investment in almost whatever form it takes, a well-developed business
environment that makes it possible get phone lines hooked up and computer
equipment serviced and a sizable English-speaking population capable of
manning the phones and helping customers place their bets. Legal
prostitution, as well as a plethora of strip clubs, seedy casinos and bars
festooned with Budweiser signs, round out the atmosphere.
Betting
operations are now among San Jose's most lucrative and visible
enterprises, and their success has transformed the city. One prominent
suburban landmark is an office building occupied by an outfit called
BETonSPORTS.com. Throughout its nine floors, 1,500 Costa Ricans are
employed (in mostly clerical positions) and offered amenities like on-site
day care and classes to improve their English.
Most of the
bookmaking companies, though, are a good deal smaller and harder to see,
tucked away in strip malls and shadowy side streets. The American
proprietors are generally in their 30's and 40's, and for them, the
Internet provides not only the means to escape the reach of American law,
but also a chance to turn what had been the equivalent back home of small,
local shops -- sustained by personalized attention and all the headaches
that involves -- into booming, virtual superstores that can rake in action
from all over the world. The experiences of these men in Costa Rica, as
well as of those elsewhere in Central America and the Caribbean, started
out as thrilling adventures in what seemed to them like Las Vegas in the
1950's. But as betting operations multiplied, the offshore business has
become hotly competitive and complicated. Worse, in recent years lawmakers
and ambitious prosecutors back in the States have been mounting ever more
serious legal challenges. Returning home to a normal life now means facing
the possibility of going to prison. And so, many of the bookmakers who
started out so optimistically are finding themselves locked into an
isolated way of life that with each passing day seems a worse bet.
In the early 1990's, a young man in California known to his
associates as K.C. was trying to figure out a career for himself. He knew
one thing. He liked sports, and even more, he liked betting. While in
college, he gambled obsessively on dog racing and football, and after
graduating, he ran a sports handicapping service, which was a legal
enterprise, though it catered to an industry -- sports betting -- that is
illegal in every state but Nevada. Trying a clean break from the sports
and gambling world, he sold cellular phones door to door. But he couldn't
stop betting, and for a brief time after giving up the salesman life,
tried to make it as a full-time professional gambler. As his losses piled
up, he observed that his bookie was making out far better than he was, and
that this might be the best vocation for him too.
Suddenly, after
years of losing, K.C. was turning a profit and nurturing a growing
portfolio of clients. He ate in the best restaurants. He sat in the front
row at Lakers games. K.C. was the bookie you went to if you were a
somebody and you wanted to place a bet. He was plugged into that airy
society of bookmakers, gamblers, agents and team managers who live off
athletes. ''When I was really rocking and rolling, I loved it,'' he said.
''Every girl knew me. I felt like I was the man.''
K.C. was more
than comfortable with the morality of his profession. In fact, in his view
and that of every bookmaker, the laws are vastly hypocritical -- in a
typical state lottery, as he is apt to remind you, the government skims a
third of the pot and offers each player an impossibly minuscule chance of
winning. Meanwhile, the law demonizes bookmakers, who take 10 percent of
the bet and give their clients a 50 percent chance of winning.
Still, it was a tough way to make a living. K.C. was forever
trying to evade the police. More troubling, he had
been raised by
traditional Orthodox Jewish parents in Chicago, and the fact that he was
now a criminal in the eyes of his family as well as of the law deeply
affected him. The guilt wasn't enough to make him quit bookmaking -- K.C.
was a gambler and a sports nut through and through -- but his feelings
gnawed at him, especially when he would come home for Thanksgiving and
have to sneak away from the dinner table to an upstairs phone to take bets
on a Dallas Cowboys game.
It was only when some of his fellow
California bookmakers started getting arrested that K.C. began to
seriously reconsider his career. His bookmaking business had grown so
prosperous that it seemed only a matter of time before he would be nabbed.
K.C. had a few friends in the business who had already moved to
Costa Rica, and he decided to join them. He took a position in
Skybook.com, a small, newly formed sports book. Life there certainly was
not like California. K.C. worked long hours and also drank too much.
''When I first went down there people robbed me all the time,'' he says.
''They hacked into my computer. I got ripped off on Internet bandwidth.
They just looked at me as a sucker. It was like the Wild West.''
K.C., with a new wife and infant daughter in tow, settled into a
small, dark apartment on the outskirts of San Jose.
They didn't have
many friends, and they had few opportunities for making new ones. There
was a growing population of bookmakers, but no community. Bookies are by
nature private and often paranoid people, and even the relaxed setting of
Costa Rica couldn't change that. For all the drawbacks, though, K.C. was
doing what he loved and, for once, doing it legally, or so it seemed at
the time. ''My parents came down to Costa Rica, and they were so proud of
me,'' he says. ''They said, 'You're finally a legitimate businessman.'''
Among the bookmakers K.C. encountered when he first moved down to
Costa Rica was L.R., at Cascadesportsbook.com, a
small operation formed
in 1996. L.R. is a stocky, soft-spoken man. Like many of the bookmakers,
he's fond of wearing athletic warmup gear, though he doesn't exercise much
or play ball. His life is about bookmaking.
Cascade's no-frills
offices reflect L.R.'s character. The firm is situated in a colorless,
two-story building on the side of a ravine some 20 minutes outside San
Jose. As you enter, a sleepy guard in a worn blue uniform points you up a
flight of stairs. There are two rooms with slatted windows looking out
across a cracked road on a stand of thin, dusty pine trees; fast-food
wrappings hang in the nettles. Occasionally a truck will rumble by spewing
diesel exhaust, but aside from that it's quiet.
Cascade's offices
consist of two rooms, a small back office and a larger room connected to
it. In the larger room there are 10 or so rows of long, straight desks
with computers on them, lending the place the air of a classroom. Behind
the computers local employees sit on mismatched office chairs fielding
calls from gamblers and tracking the bets being placed over the Internet,
which now accounts for 30 percent of Cascade's business. (The remaining
volume is still conducted over the phone.)
When I arrived one
Saturday afternoon at the end of the college basketball season, the office
was half full. L.R. was seated at the front of the large room on a
foot-high rise. Known as ''the stage,'' a feature common to nearly every
sports book, this is where the head oddsmaker monitors all the action.
There are seven large TV's suspended from the ceiling above the stage and
a few smaller ones on the desk tuned to games in progress or to ESPNews.
L.R. arrives at his office at 7 in the morning to enter his lines
for that day's games on his site. He has spent the previous night and the
early morning studying the games being played that day, speaking with the
sources and handicappers in the United States who help him decide how to
shade his lines. To do it right, he has to keep track of an impossible
number of details, things like whether Marquette's star guard has
recovered from his ankle sprain. Sites that expect to do significant
business have no choice but to offer a huge range of games, even obscure
college match-ups that would never be shown on national television. A
professional shop requires a minimum capital base of about $1 million to
cover overhead and keep the lights on during a losing streak.
Bookmakers make their money by extracting a percentage out of
every bet being made, which is called the vigorish or ''the juice.'' That
means the gambler has lost 10 percent of his bet regardless of whether he
wins or loses. If the bookie can win 50 percent of the games (which if he
sets his lines right, he should be able to do), he'll break even on the
betting, clear the 10 percent for each one, and, after expenses, eke out a
profit of about 3 percent. With such a relatively small margin, the key to
the business is volume.
And that's why the Internet is so useful.
With the power to receive scores and other game information instantly,
on-line bookmakers can generate extra betting volume by offering a
tantalizing variety of propositions -- the total points scored in each
quarter of basketball and football games and in each inning of baseball
games. There are even lines offered for specific achievements, like, will
Allen Iverson score 30 points, or will Keyshawn Johnson be the first
person to score in the Super Bowl.
Around 11 a.m. gamblers back in
the United States start making their bets. Bookmakers use a point spread
to
equalize unevenly matched teams. Football, college and pro,
generates the greatest action. Basketball is also popular. Based on how
much betting action he receives for each team, the bookmaker then adjusts
his spread. For instance, if his bettors are heavily betting the favorite
team, he'll adjust his line to give more points to the underdog, in order
to attract betting on the underdog. His objective always is to maintain
approximately 50 percent of the gross betting action on either side of the
game. If he does this, then no matter the result of the game, he takes his
10 percent cut. While the gambler tries to figure out weaknesses in point
spreads -- games where the bookmaker may have misjudged the strengths of
the teams or is unaware of a critical injury -- the bookmaker's job is to
anticipate how the public is going to bet and adjust his line up or down
to split betting action on both sides of the line. (Once a bet is placed
at a particular spread, that number holds for that bettor, even if the
spread subsequently moves.)
Every sports book has its own
personality, formed by the number and type of gamblers it attracts and the
manner in which it moves its line. Cascade's gamblers range from
small-time guys making $50 bets to professional gamblers betting $10,000
on 10 different games -- the latter type attracted to Cascade, in part,
because L.R. is regarded as one of top bookmakers offshore.
As the
bets roll in, L.R. watches two things. One window on his computer is open
to Cascade's back-end software, which tracks all the bets and the gamblers
who make them. Each of Cascade's gamblers has a profile, with a betting
history and personal information, which flashes onscreen when the bettor
places a bet. Another window on L.R.'s screen is open to DonBest.com, a
subscription service that is like the Bloomberg of sports betting. On
DonBest.com, many of the prominent offshore sports books, including
Cascade, show their lines in real time. When a book changes its line, it
is immediately registered on DonBest.com. It's a way for bookies and
serious bettors to keep tabs on the lines that sports books are offering
for a particular game. While L.R. and I were talking, a bet came in to one
of the employees in the pen. ''Lafayette for five dimes,'' she shouted
out. L.R. quickly glances at the screen to see who was making the bet.
''Twelve point five,'' he said reflexively. ''And that's it.''
What had transpired was this: the University of New Orleans was
playing a basketball game against the University of Louisiana at Lafayette
that afternoon, and most of the books on DonBest.com, including Cascade,
had Lafayette favored by 12.5 points.
When to move a line is a
point of great philosophical debate among bookmakers. According to
traditional bookmaking practice, a bookmaker only moves his line on the
basis of a bet that has come in. After bookmakers receive a big bet, they
will typically adjust their line to try and draw action for the other side
of the game. By letting the betting determine the line, a bookie should,
theoretically, be able to maintain his 50/50 split and preserve his profit
margin. But frequently, bookies move their lines for other reasons- for
example, when a well-regarded sports book has moved its line on
DonBest.com, a practice known as ''moving off air.'' Or they might do it
because they have a particular bias or hunch about a game, in which case
they're essentially throwing their 3 percent margin out the window and
gambling with their own money.
L.R. tends not to operate this way,
and in the case of New Orleans versus Louisiana Lafayette, he was simply
waiting for a solid bet before moving his line. And then it came. A guy
sitting behind a computer screen somewhere in the United States wanted to
put $5,000 on New Orleans and take the 12.5 points. L.R. accepted the bet
and changed his line to 12. He cut the guy off from making any more bets
on the old line. L.R. suspected it might be a professional gambler, so he
was being particularly careful.
The bookmaker and the professional
sports bettor, known in the business as a ''sharp,'' are engaged in a
constant game
of cat and mouse. Average bettors don't put much thought
into their bets, often betting on their alma mater or home team,
regardless of the spread. But sharp sports bettors make their living by
constantly trolling for weak lines. The sharp holds the advantage over the
bookie in this because his sources usually run deeper than the
bookmaker's, sometimes even into the inner sanctum of a professional or
collegiate team, like a team doctor or an assistant coach. More important,
the sharp can be selective. While the bookmaker has to put up a line on
every game -- on this Saturday there were more than 100 college basketball
games, along with a golf tournament and a tennis tournament -- the sharp
gambler carefully chooses the game he bets on. It takes just one nugget of
inside information on some obscure game between, say, Alabama A&M and
the University of Arkansas at Pine Bluff, to give a sharp the advantage he
needs. And while all sports books have limits on the amount of money a
single gambler can bet, usually between $3,000 to $10,000, depending on
the sport, the professional gambler can easily exceed these limits by
using a ''syndicate,'' or a crew of ''beards,'' who have accounts at
multiple offshore sports books and spread bets around for him.
Because of the high-risk nature of the business, and because of
the tremendous amounts of money the Internet
allows bookmakers to
traffic in, a herd mentality has developed among bookmakers. When one
sports book on DonBest.com changes his line, it doesn't take long for the
others to follow suit. And this is what happened after L.R. moved his line
on the New Orleans game to 12. Cascade's line for the game flashed red at
12 on DonBest.com. Immediately several other books on DonBest.com changed
their lines from 12.5 to 12.
L.R. and every other bookie in Costa
Rica go through rituals like this hundreds of times a day, microscopic
dramas that run morning to night. It's precision work, requiring a
superhuman ability to process reams of information all at once. By 10 or
11 at night -- when the West Coast games finally start -- the day's
betting is done and L.R. goes off into the night with hundreds of
thousands of dollars riding on a hundred college basketball games and the
19-year-old kids who play them.
There are many varieties of
gambling establishments in San Jose, ranging in size and reputation. In
terms of size, books like Cascade and Skybook fall somewhere in the middle
of the pack. They try to expand their business through word of mouth, and
they don't advertise that much. BETonSPORTS, meanwhile, advertises
vigorously and gives elaborate parties to reward its big spenders; last
year's celebration to mark the beginning of the football season featured
celebrity guests like the television star Ashton Kutcher, apple martinis
and a Carmen Electra burlesque act. Despite these glamorous trappings,
BETonSPORTS tries to keep out sharp bettors -- like other high-volume
books, it focuses on reeling in large numbers of ''squares,'' the industry
term for gamblers who make small, uninformed bets on sentimental
favorites. A subset of the square is ''the whale,'' a square who bets a
lot of money. Bookies love squares, but they really love whales and will
do anything to get their business.
The bookies come in different
shapes and sizes, too. L.R. is an example of the ''bookie's bookie,'' a
type that usually has some background as a gambler or bookmaker in the
United States. He tends to be a sports freak, the guy who in grade school
could name the only left-handers ever to play third base in the majors,
and grew up wondering how he would ever be able to parlay knowledge like
this into a career. A variation on this type is the ''numbers guy,'' a
bookie who, if some twist of fate or antisocial behavioral tic hadn't
landed him in the gambling trade, might be doing risk arbitrage on Wall
Street. The skill sets are fairly similar.
Another type of bookie
is ''the agnostic entrepreneur,'' for whom bookmaking is merely another
business opportunity.
He regards the core of the industry -- the
sports-obsessed bookies and gamblers that make it run -- with scorn. The
entrepreneur typically arrives in Costa Rica with an elaborate five-year
plan, in which he envisions setting up a business, promoting it like mad
and finally selling it off to a large company, preferably a large casino
conglomerate in the United States that has suddenly decided to get into
the offshore sports-betting market.
That dream, however, was
dependent on the United States government's giving at least tacit approval
to the offshore business, and that has not happened. In fact, the opposite
has occurred.
The first hard evidence that offshore betting would
not be tolerated by the feds came in 1997, when Jay Cohen, the outspoken
founder of World Sports Exchange (wsex.com), one of the first offshore
books, was charged along with 19 other bookmakers for violating the Wire
Act. Cohen decided to return to the United States and fight the charges.
He argued that he and his colleagues were innocent of any crime and
challenged the United States government to prove in a court of law that
what he was doing was illegal. Which, subsequently, they did; Cohen is now
serving the tail end of a 21-month sentence in a Las Vegas prison.
The whole episode shocked the bookmaking community. After the
verdict was announced, bookmakers throughout the
offshore world changed
their names and began placing their sports books in the names of local
citizens. Some packed up and left the business.
The assault by the
United States government has continued. Last year Eliot Spitzer, the
attorney general of New York, persuaded most of the major New York-based
banks that issue credit cards to stop accepting sports-betting
transactions, forcing sports books to find less convenient means of
extracting money from their gamblers. A bill by Representative Jim Leach,
a Republican from Iowa, proposes to further hobble Internet gambling by
making it illegal for American banks to transfer money to offshore betting
accounts. And that's why those guys in Costa Rica with their five-year
plans are now working on 10-year plans.
In San Jose, the
bookmakers' closest relationships outside the business tend to be with
their lawyers in the United States. Within the business, there is
considerable distrust. Bookmakers reveal their names to almost nobody, and
many have completely severed ties to their families and friends back home.
Because of all this, the bookmaker's life in Costa Rica is
severely circumscribed. Bookies hang out in small groups in strip clubs
and anonymous chain restaurants. They drink and smoke excessively. A few
marry local women, but these marriages typically don't last. The richer
bookies live in compounds in the hills around San Jose, while the
struggling ones rent apartments closer to downtown. Although some of the
bookmakers I met had been in the country for most of the last decade, not
one had learned Spanish.
Wherever bookies go, and no matter his
disposition, the games, and the stress that they provoke, are never far
away. Whether they are in the office or out at a bar, they talk about one
thing and one thing only -- gambling. Who got burned on that day's games?
Who beat a sharp out for $5,000? Who got beaten by a sharp for $10,000?
Mostly, though, bookies scrutinize the minutiae of the previous night's
games -- a blown call by a referee that made all the difference, a dropped
pass, a muffed extra point.
Bookmakers are constantly assaulted
from all sides -- by the prospect of the American government really going
after them; by the sharps with inside information; by gamblers whom they
allow to bet on credit but then don't pay; by the threat of local crime;
and by rival bookmakers stealing their client lists. But mostly they
suffer because their peace of mind is dependent on the essential
unpredictability of sports. The multitude of goofs, lucky shots and
officiating quirks that perplex, agitate and annoy regular fans can be, to
the bookmaker, life-altering events.
The lure of major money is
always a temptation, and the Internet, with its worldwide web of gamblers,
makes it all the more possible to get in big and deep. Betting lore is
rife with stories of bookies who tempted fate and lost. A spectacular
recent example is of the former owner of Aces Gold Casino, which until
last year was a well-regarded offshore sports book in Curacao. The
bookie's money troubles became apparent in late 2001 during the N.F.L.
playoffs, when he failed to pay a few high-stakes players on time. His
problems were the subject of forums on TheRx.com, an
offshore-sports-industry information and gossip site. Kenneth Weitzner is
the owner of TheRX.com and serves as a a kind of watchdog for the offshore
gambling world. Weitzner followed the Aces Gold incident from the
beginning. ''When people said he was going bad, no one believed it,'' he
said. ''He had a good reputation.''
The bookie had found himself
in a position a lot of gamblers recognize. He lost some money, and then,
instead
of trying to catch up gradually, he started putting out risky
lines, abandoning the bookmaker's conservative credo of 50/50. He tilted
his lines heavily to one team or another, hoping that the game would be
decided in his favor
so he could make up his mounting losses in one go.
But through the N.F.L. playoffs, he kept losing, arriving at the
Super Bowl -- the most heavily wagered American event -- owing his clients
more than a million dollars. So he went for the Hail Mary. Before the 2002
Super Bowl, the standard line offered by nearly every bookie favored the
St. Louis Rams over the New England Patriots by 14 points. Aces Gold
offered those betting on the Patriots 14.5 points. Predictably, the book
received huge action on the Patriots but made no effort to cover the other
side of the line by moving down to 14.
The bookie was probably
packing his bags at halftime. Not only did the Rams not cover the spread,
they lost the game
in a stunning upset. Aces Gold owed gamblers more
than $3 million, money that they would never see. The bookie is now
rumored to be living somewhere in Texas. There are a number of very irate
bettors who would pay good money to know exactly where.
The
internet made earning real money on bookmaking possible by sharply
increasing the volume of gamblers a bookie could handle, but it also made
the average gambler, ''the square,'' somewhat smarter too. Web sites like
TheRx.com and ESPN.com have educated the amateur bettor. Valuable
information now appears instantaneously on the Internet, and it takes only
a tiny bit of it to start a bookmaker on his downward spiral. They just
can't keep up with it. ''The biggest change in this industry is that the
average bettor has gotten smarter,'' K.C. said. ''It's tougher to be a
bookie than it was when I started.''
Strangely, the Internet,
which seemed like such a boon for K.C. in the beginning, had come to make
his life worse than it ever was before he moved offshore. And the
legitimacy that K.C. and many of his colleagues sought offshore never
materialized.
So after thousands of nail-biting games, countless
headaches, delirious highs and nauseating lows, missed free throws and
botched extra points, K.C. decided to get out of the bookmaking business
for good. ''You get so stressed out from being in that cage all day and
only dealing with gamblers trying to take your eyeballs out all day and
being in a country where it rains all day,'' he says. ''There's a lot of
drinking. The lifestyle is completely unhealthy. I don't know any guys who
take care of themselves physically. They're eating fast food all day. No
movies. No music. No culture. You're always having to worry about your
family being kidnapped.''
In the world of Costa Rican bookies,
K.C. is an exception.
For a certain strain of bookmakers, the low-grade
manic lifestyle is part of the allure. They revel in the very things that
began to drive K.C. nuts. The godlike ability to control betting lines can
be a terrific high, and the fugitive nature of the life only makes that
feeling more intense. A lot of the guys could never imagine doing anything
else. L.R. would probably book bets from a Siberian gulag as long as he
had a server and DirecTV.
K.C. is different. He was the only
bookmaker I met who had kids of his own and who was trying to hold
together a
family. Ultimately, K.C. probably lacked that extra notch of
hardness that insulates other bookmakers from offshore
life.
''I never thought of myself like Henry Hill,'' K.C. says,
referring to the mobster on whom the film ''Goodfellas'' is based and who
now finds life in the witness-protection program unbearable. ''I never
looked at regular guys as schleps. Actually, I was always a little jealous
of them.''
William Berlind last wrote for the
magazine about the
baseball player Mike Piazza.
http://www.nytimes.com/2003/08/17/magazine/17GAMBLING.html?ex=1062149419&ei=1&en=cf07b5ae5526d35f
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