Court Denies Appeal by BetOnSports Founder

A federal appeals court has rejected the plea of BetOnSports founder Gary Kaplan to avoid paying $36 million in delinquent taxes and penalties. The court dismissed Kaplan’s claim that his plea deal in a related criminal case precluded the government from pursuing the debt.

A three-judge panel with the St. Louis-based 8th U.S. Circuit Court of Appeals has denied BetOnSports founder Gary Kaplan’s legal challenge to back taxes owed from 2004 and 2005 during his affiliation with the company.

Kaplan and several other BetOnSports executive were indicted in 2006 for running an illegal gambling operation. Prosecutors said the business handled more than $1 billion in wagers a year through websites and phone lines, according to the Associated Press.

The company was accused of misleading gamblers into believing that money deposited with the company was safe and available to withdraw at any time when, in fact, the money was used to expand operations. When BetOnSports folded, customers lost more than $16 million, the government said.

As part of a 2006 civil settlement, the company agreed to stop taking U.S. bets. BetOnSports later was sentenced to probation and a $28.2 million fine, according to the AP.

Kaplan pleaded guilty in 2008 to conspiracy, racketeering conspiracy and violating the Wire Wager Act and was sentenced to four years and three months in federal prison, along with court-ordered forfeiture of $43.65 million. He was released in 2010.

In his appeal, Kaplan said his plea deal barred the U.S. government from pursuing the back taxes—$25.5 million for 2004, $11.2 million for 2005—and that the statute of limitations had run out on the government’s ability to collect.

A U.S. Tax Court ruled that Kaplan’s plea deal did leave him open to civil tax proceedings, and the 8th Circuit confirmed that ruling.