playing cat and mouse for billions

Vancouver billionaire plays cat and mouse with authorities

Internet gaming king Calvin Ayre has made a fortune taking bets from U.S. citizens.

Last year, his Bodog.com took in $7.3 billion US in wagers, about 95 per cent from Americans. Enough has flowed to the bottom line to put him on Forbes's annual list of billionaires.

Bodog's betting business is located in Costa Rica, where Ayre lives in a mansion, complete with armed guards. But the company also has operations in the Vancouver area, where Ayre keeps a $6.2-million penthouse. Those operations include Riptown Media in downtown Vancouver, which employs close to 250 people in advertising and marketing support, and Triple Crown Customer Service in Burnaby, where another 200 people work.

By surrounding himself with "Bodog girls" and sports and entertainment celebrities, Ayre has built Bodog into a brand that is hugely profitable and highly respected in the online gaming industry.

But U.S. authorities are not impressed. Taking wagers over the Internet is illegal in the U.S. but prosecuting offenders, because they are located in foreign jurisdictions, has proved problematic.

Until recently, Ayre taunted U.S. authorities, playing a game of catch-me-if-you-can. They weren't able to, but in July they nabbed a British gaming executive in Texas while he was on a stopover to Costa Rica and threw him in jail on fraud and racketeering charges. The arrest sent shivers through the Internet gaming industry, and forced Ayre to cancel his Bodog online gaming marketing conference Las Vegas.

Since then, Ayre has not dared to set foot on U.S. soil, but his money-making machine continues to spin cash, and controversy.

Full story, Business BC, Section: H1

-30-

Vancouver's other billionaire: Calvin Ayre

King of Internet gambling won't set foot in U.S.

The Vancouver Sun
Fri Sep 22 2006
Page: H1 / Front
By David Baines

Vancouver Internet gambling czar Calvin Ayre likes to brag that he is the first person to make the cover of Forbes magazine and be named one of People magazine's 40 hottest bachelors in the same year, a summit he reached this year.

At first glance, it seems a curious boast, for it assumes that others were aspiring to this rather unlikely combination of media accolades. But for Ayre and his Bodog.com gambling empire, it is the logical culmination of a decade-long effort to achieve both mainstream business recognition and celebrity status.

In Ayre's world -- as in Hugh Hefner's or Richard Branson's -- work and play are complementary, even symbiotic. With his photogenic good looks, fetching Bodog girls and celebrity friends, Ayre has been able to build a marketing juggernaut that has propelled Bodog's online betting business into a multibillion-dollar operation and -- according to Forbes's calculation -- elevated him to one of the world's 794 billionaires.

The irony is that while Vancouver's other billionaire, Jim Pattison, has become a local icon, Ayre -- despite some very significant business and real estate interests in the Vancouver area -- is a relative unknown, and certainly an outsider in Vancouver mainstream social and business circles.

Worse, he and other Internet gambling operators are considered outlaws by the U.S. Department of Justice, who has turned up the heat so high that Ayre was forced to cancel his heavily promoted Bodog online gambling marketing conference in Las Vegas in July. And since the arrest of a high-ranking British gambling executive in Texas, he has not dared set foot on U.S. soil, even though he generates 95 per cent of his betting revenues from American citizens.

But this sort of cat-and-mouse game is not new to Ayre. When it comes to the law, he has always walked a fine line.

While he likes to describe his life story as "the personification of a new American dream," the early plot line, at least, had some rather unseemly twists and turns that raise questions about who Calvin Ayre is and whether he would qualify to run even a bingo parlour in B.C.

- - -

Gambling is a regulated activity under the Criminal Code, for good reason. Authorities want to make sure the operators are of good character, the games are fair, taxes are paid, and the gambling operation is not being used for illicit purposes such as money-laundering.

Online gambling has not been universally embraced by regulators. Britain and dozens of other countries have set up a system to license operators and regulate Internet betting. In Canada and the United States, running an online gambling business is illegal.

But online gambling operators have found a way around the rules. They beam in their service over the Internet from offshore countries, where they are beyond the purview of North American gambling authorities.

The host countries, such as Antigua and Costa Rica, licence these operators, but it is doubtful that they provide any sort of real screening process. Asked whether Costa Rica, where Bodog's gambling business is licensed, did a background check on him, Ayre told The Vancouver Sun: "I assume they did, but this is not like getting a gambling licence in Nevada."

At last count, Bodog employed about 150 bookers and customer service representatives in San Jose, the capital of Costa Rica.

Another jurisdiction that acts like an offshore entity, with its own rules and regulations, is the Kahnawake native reserve in Quebec.

There, the Mohawk tribe has set up the Kahnawake Gaming Commission, which -- with no legislative authority and no government oversight -- licenses online gambling businesses and hosts banks of servers for numerous online operators, including Bodog.

So far, the Canadian government has not intervened, not because it believes that the Mohawks have legal authority to conduct this sort of business, but because it wants to avoid a confrontation with the Mohawks, who are notoriously territorial and militant.

Bodog's gambling-related operations are not confined to these "foreign" jurisdictions. In Vancouver, a sister company called Riptown Media provides advertising and marketing support. It occupies two floors at 333 Seymour St. and employs close to 250 people.

In Burnaby, another company, doing business as Triple Crown Customer Service, runs a customer call centre for Bodog customers who want to set up betting accounts or ask questions about their accounts.

The office, at 4190 Still Creek Drive, occupies 35,000 square feet and employs about 200 people. To get employees in the mood, the lobby has a giant mural of life-size football players and other athletes in action.

Despite its presence in Canada, or perhaps because of it, Bodog takes no bets from Canadians. Virtually all its betting revenues come from people in the United States, where it has no physical presence.

This fracturing of the business into different entities and jurisdictions appears to be part of Ayre's strategy: "We run a business that can't actually be described as gambling in each country we operate in," he told Forbes in its March issue. "But when you add it all together, it's Internet gambling."

Whatever the strategy, it is working. Last year, Bodog took in $7.3 billion US in wagers, triple the previous year's amount and enough to make it the seventh-largest online gambling operation in the world last year, according to London-based eGaming Review.

Enough flowed to the bottom line to make Ayre a billionaire, at least on paper. In March, Forbes ranked him the 746th richest person in the world, tied with 48 others who just made the $1-billion cut-off.

Ayre is not shy about spending the proceeds. In Costa Rica, he lives in a $3.5-million US, 10,000-square-foot custom-built mansion, complete with armed guards. In Vancouver, he bought two penthouses at 1199 Marinaside Crescent in Yaletown for a total of $6.2 million, and combined them into a single 5,000-square-foot unit. He also owns a smaller condo in the Yaletown area, and a 150-acre property in Langley where his father, Ken Ayre, resides.

(All these assets are owned by B.C. registered companies which, in turn, are owned by James Philip, a Vancouver chartered accountant who serves as Riptown's chief financial officer, and El Moro Finance Ltd., a mysterious British Virgin Island company that figured prominently in Bodog's early development.)

None of this amuses the U.S. Justice Department. Although most of its revenues come from the United States, Bodog -- because of the way it is structured -- doesn't pay a cent of U.S. tax, and so far American authorities say they haven't been able to do much about it.

"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," Forbes reported.

But in recent months, U.S. legislators have been tightening the screws on online gambling operators. They are implementing legislation to curb the e-commerce functions that underpin the industry.

Also, in a stunning development in July, FBI agents arrested David Carruthers, chief executive officer of BetonSports Plc, a publicly traded British company that owns several Internet sportsbooks and casinos.

He was apprehended at the Ft. Worth, Tex., airport when he was changing planes en route to Costa Rica, where BetonSports also has operations. He was unceremoniously handcuffed and jailed.

He was among 11 individuals and four companies that were indicted by a federal grand jury in the Eastern District of Missouri on 22 counts of racketeering, conspiracy and fraud.

The arrests threw a chill over the online gambling industry. Share prices of publicly traded gambling companies plunged. This did not affect Bodog, because its shares are not publicly listed. But because gambling executives -- including Ayre -- were fearful that they, too, would be arrested if they entered the United States, Bodog was forced to cancel its much-publicized Bodog online marketing conference in Las Vegas.

Ever since, Ayre has been effectively exiled from his principal market.

- - -

Bodog's business and Ayre's profile have grown so rapidly that people often wonder where they came from.

The answer is that Ayre, now 45, was born in Lloydminster, Sask., the son of a pig farmer. In Grade 6, he moved with his parents to Salmon Arm. Later, he enrolled at the University of Waterloo.

His official biography, published on the Bodog.com website, states that while on summer break after his first year of university, he bought an old five-ton truck, loaded it with fruit, and headed west from Ontario.

"Along the way, Mr. Ayre made numerous stops to sell his stock of apples, cherries and peaches by the roadside and in the neighbouring towns. By the time he reached Saskatchewan, Mr. Ayre had built his first business," the biography states.

"Ambitious and motivated by his achievements in the fruit business, Mr. Ayre learned early that hard work and humility are essential for personal and business success. In embracing those basic principles, Mr. Ayre discovered the foundation that would lead to greater successes down the road."

From there, the official biography leapfrogs to the early development of Bodog, skipping some interesting, but rather troubling interim events.

- - -

In September 1987, when Ayre was only 22, his father Ken Ayre and three other B.C. men were caught in a U.S. drug sting.

The other three were Bill Roberts, who had a common-law relationship with Calvin's sister, Anita; Bill's brother Patrick Roberts; and a friend, Frank Maddock.

According to Judge D.M. Dickson of the Court of Queen's Bench in New Brunswick, the four men "entered into an arrangement between themselves and with others" to import nearly 800 pounds of marijuana from the Caribbean to New Brunswick.

The judge recounted how Patrick Roberts, a licensed pilot, acquired a plane in the United States and arranged for a New Jersey company to install long-range fuel tanks, which would enable him to fly non-stop from Nassau to New Brunswick.

Unfortunately for the conspirators, the fuel-tank company was being run by U.S. undercover officers who were trying to catch cross-border drug smugglers.

Ken Ayre, Bill Roberts and Frank Maddock were to meet the plane when it landed in New Brunswick, but soon realized they were under surveillance and scampered back to B.C.

When Patrick Roberts landed with 771 pounds of marijuana on board, the only people to greet him were a heavily armed contingent of RCMP officers. The other three conspirators were later apprehended in B.C.

In February 1988, Patrick Roberts was sentenced to five years in prison. In June that year, Judge Dickson sentenced Bill Roberts and Ken Ayre to four years in prison, and Maddock to three and half years.

Although Calvin Ayre was never charged, the judge made several references to him as an unindicted co-conspirator:

"Patrick Roberts, I may say, was it seems through this period in Nassau, to have been in the company, if not all the time, certainly a lot of the time, with another gentleman [Calvin Ayre] who is the son of one of the present accused [Ken Ayre] and undoubtedly played a part in this whole scheme or was part of the whole arrangement, because that third party there had contact with the three accused and was making phone calls back and forth."

In a later reference, the judge stated: "As to the role of the present accused vis-a-vis Mr. Patrick Roberts and other people who were engaged, I can only take the view that they were as deeply involved as Mr. Patrick Roberts was. Perhaps there was somebody financing the operation over them. Certainly the operation of the other chap with Roberts [Calvin Ayre] in the Bahamas appears to have been an important one."

Calvin Ayre, because he was not charged in this matter, was not party to the trial and did not have a chance to refute the judge's remarks. The Vancouver Sun asked him about this matter earlier this week, but he declined to discuss it.

- - -

Although Ayre was not charged in the drug scheme, it precipitated a chain of events that left Ayre with a permanent securities record.

In 1989, while Patrick Roberts (the drug pilot) was serving time at the minimum security prison in Ferndale, he met another prisoner named named Erich Brunnhuber.

Five years earlier, Brunnhuber and his partner, Bert Roosen, had used manipulative trades and false news releases to pyramid the share prices of six Vancouver Stock Exchange companies to artificially high levels.

On Oct. 19, 1984 -- a day that would be forever known in VSE history as Black Friday -- the stocks crashed in tandem, exposing not only the fraud, but also the VSE's supervisory neglect.

Brunnhuber and Roosen were charged and, after a well publicized trial, convicted of fraud. In January 1987, they were each sentenced to seven years in jail, one of the harshest sentences in Canadian stock market history.

In 1989, Brunnhuber and Roberts met each other at the Ferndale facility and continued their relationship after they were were both paroled in 1990.

Shortly after his release, Roberts introduced Ayre to a VSE company called Bicer Medical Systems. Ayre, who had just obtained his MBA from City University in Seattle, was appointed Bicer's president.

Roberts also introduced Ayre to Brunnhuber. Notwithstanding Brunnhuber's serious criminal record, Ayre hired him as Bicer's marketing director.

In August 1990, VSE officials learned that Brunnhuber, a convicted stock felon, was involved in Bicer's affairs. Under pressure, Ayre signed an undertaking to sever all dealings with him.

However, a year later -- with Ayre still running the company -- VSE officials discovered that Brunnhuber was still involved. Trading was halted and the company disappeared.

The B.C. Securities Commission launched an investigation and found a web of stock violations. In September 1996, Ayre settled the matter by admitting he had:

- Breached his undertaking not to deal with Brunnhuber.
- Misrepresented various aspects of the company's affairs.
- Caused Bicer to issue hundreds of thousands of shares to him, or a nominee, without paying for them first.
- Traded millions of shares without disclosing those trades on insider reports.
- Ignored a summons issued by commission investigators, and then lied to investigators.

For these offences, he agreed not to trade stock, or serve as an officer or director, or act in an investor relations capacity for any B.C. public company for 20 years. He also agreed to pay a $10,000 penalty.

In recent interviews, Ayre has provided an array of responses to reporters who have asked about this matter.

He told the Globe and Mail that he was young and naive: "It's the first thing I did out of university. I had no idea what was going on."

He told Forbes he knew what he was doing, but he did it to save the company: "I knew that I wasn't following all the rules. But I also knew I had to do it to keep the budget alive."

He told The Vancouver Sun there were no victims: "I clearly made some mistakes, but it was not a criminal issue and nobody got hurt from anything I did."

(This is not true. When regulators intervened and halted trading, the shares were rendered worthless and investors lost everything.)

In an interview with London-based eGaming Review, Ayre portrayed himself as a victim. He said he settled the matter on the advice of a lawyer "only because he didn't have the resources to fight it," a decision which he now regrets.

The article also said, "Ayre is currently appealing the settlement, and as such is unable to comment directly on the allegations."

(This is also not true. Ayre voluntarily settled the matter, which means there is no avenue of appeal, at least none that Ayre is pursuing.)

In nearly all cases, Ayre refers to his regulatory problems as old news. But the fact is, he is only half way through his 20-year suspension. Until it expires, he cannot legally trade a single share, or act as an officer or director, of any B.C. public company.

- - -

Ayre's official biography omits all these details. Instead it jumps from him selling fruit, to him selling all his earthly possessions and using the proceeds ($10,000) to start a software company.

Two years later (apparently in 1996), he got the bright idea of using the Internet for sports wagering.

"Mr. Ayre believed the Internet and an independently verifiable event, such as a sports bet, would be a natural fit," his biography states, effectively crediting him with inventing online gambling.

Ayre's efforts to develop an Internet gambling business were confined to private enterprises until 1999, when he popped up in Cyberoad.com Corp., which traded on the OTC Bulletin Board in the United States (where his stock market suspension does not apply).

According to disclosure documents, Cyberoad was based in Costa Rica, but had a confusing array of offshore subsidiaries and service agreements with offshore entities. It also had a large number of shares parked in offshore accounts, whose beneficial owners were not identified.

Ayre was described in disclosure documents as the company's "founder and visionary," and former employees say he was clearly the boss, but he wasn't listed as either an officer or a director. Rather he was listed as a "significant consultant."

Ayre split his time between Costa Rica, where the company operated its gambling software, and Vancouver, where the company maintained an e-commerce call centre.

Although the company was losing money, the stock rose sharply to nearly $7 US by May 1999. But by year end, it had dropped sharply and the treasury had run dry.

In December 1999, Cyberoad and several related companies negotiated a line of credit with El Moro Finance, the British Virgin Islands company that owns Ayre's Vancouver real estate assets.

What happened next is not clear, but it appears that Cyberoad defaulted on the loan and the gambling assets accrued to El Moro. The business, now private, morphed into Bodog, which Ayre named after a former pet dog.

In 2002, Ayre assumed the persona of a fictitious Indiana-Jones type character named Cole Turner, whose exploits were popularized by Gambling911, an online gambling publication run by Chris Costigan of Miami.

Costigan said in an interview this week that Ayre used the alias for about two years, apparently as a marketing gimmick. But he said there was also "some concern about him using his own name" because he was chasing the U.S. market and American authorities were hostile to online gambling.

In 2004, Ayre had Turner "killed" in a duel and he reverted to his real identity. Costigan speculates he had "gotten so big he had to use his real name to be perceived as 100-per-cent legitimate."

Ayre has since developed a marketing campaign with himself at the centre, always surrounded by a bevy of Bodog girls (who have no apparent role other than to look sexy) and a seemingly endless supply of sports and entertainment stars. The strategy has been instrumental in Ayre's business success and celebrity stature.

But if his life is like a Hollywood movie, it seems to be closely following the script of the Thomas Crown Affair, where a stylish art thief plays an extended game of cat and mouse with his pursuer.

The only question is how it will end.

-30-