Calvin Ayre has gotten very rich by taking illegal bets over the Internet.

Forbes Magazine

Calvin Ayre has gotten very rich by taking illegal bets over the Internet.

On a warm, bright morning just outside San José, Costa Rica, Calvin
Ayre, slightly hungover, was lounging in his bathrobe at a poolside
office in his new $3.5 million, 10,000-square-foot compound. Sipping
coffee poured by one of his five servants, the entrepreneur declared,
paraphrasing Sun Tzu's The Art of War, "I'm going to win this war
without fighting battles. I've put a lot of energy into finding ways
not to fight my enemies."

From this tropical oasis, Ayre has dodged and taunted those enemies,
the main one being the U.S. Department of Justice. His Bodog
Entertainment Group is in the not very kosher business of Web gambling.
It takes bets from 16 million customers, most of them in the U.S. And
that appears to violate the law--Title 18, Section 1084 of the U.S.
Code--which forbids using telephones or other communication devices "in
interstate or foreign commerce" in order to take bets. "Online
gambling, whether it is located offshore or not, is illegal when it
comes to the United States and its citizens," says a Justice Department
official who works on Internet gambling crimes.

But 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.

Last year the privately held Bodog handled $7.3 billion in online
wagers, triple the volume of 2004. Ayre says all this betting gave him
sales of $210 million, and that he took 26% of the revenue to the
bottom line. What's his business worth? Two similar ventures that are
publicly traded (in Europe) go for well over 18 times trailing
earnings. At that multiple, Bodog, along with other assets, gives Ayre
a net worth of at least $1 billion.

Ayre presumably has not just the vice squad but the tax collectors in a
huff. While 95% of his sales come from the U.S., the 44-year-old
doesn't pay a nickel in corporate or personal income tax here. Is that
legit? Foreigners are supposed to pay federal tax on income derived
from U.S. business activities. The suckers are stateside, the
electronic roulette wheels and digitized sports pools in Costa Rica.
Where's the action? It remains to be seen whether irs agents could make
Ayre pay, assuming they could get their mitts on either him or his
money.

His taunting analysis of the law: "We run a business that can't
actually be described as gambling in each country we operate in. But
when you add it all together, it's Internet gambling."

There are 2,400 Internet gaming sites, estimates tracker Casino City, a
few hundred of them operating in Costa Rica's tax and regulatory haven.
According to research company Christiansen Capital Advisors, they
pulled in revenue (vigorish, that is) of $12 billion last year, double
the volume on the Las Vegas Strip. Ayre gets his share with a
smorgasbord of offerings (sports, poker and casino games), a heavy dose
of marketing and a lot of repeat business. Bodog.com claims 145,000
regulars who bet at least once a week. Their average wager: $60 for
sports, $13 for casino games.

Bodog is spending $80 million this year to nudge beyond gaming into a
kind of MySpace for adults. Most of it is pretty cheesy entertainment,
like his recent hosting of the Lingerie Bowl, a raunchy pay-per-view
cable alternative to the Super Bowl halftime show. Ayre is also
supporting the careers of a dozen lesser-known rock and hip-hop acts
(Bif Naked and Syndicated Villain among them) and producing a poker
show on cable TV with a slew of C-list celebrities like Rob Mariano (a
contestant on CBS' Survivor) and card shark David Williams. Hardly any
of these ventures makes money, though Ayre insists they will one day.
But it probably lures customers to try their luck on Bodog.com. Its 1.5
million unique visitors per month, according to Internet tracker
Hitwise, rivals that of Sportsbook.com, which is owned by London Stock
Exchange-traded Sportingbet Group, the world's largest sports betting
company.

Ayre likes to be seen--especially with attractive women. He is
unmarried and has no steady girlfriend ("It would be unfair to the
girl," he says). He has himself driven around in a black Hummer by a
chauffeur who was trained as a sniper in the Canadian military and
practiced in Somalia, Bosnia, Afghanistan and Iraq. Why the heavy
metal? Ayre says he and three friends were robbed at gunpoint on the
streets of San José a few years ago. His rivals say there's about as
much need for a bodyguard in Costa Rica as in Boca Raton.

Raised in Lloydminster, Sask., Calvin Edward Ayre (pronounced "air") is
the son of grain and pig farmers. He placed his first bet during his
teens, playing blackjack for pennies with his mates on long hockey
trips across the Canadian tundra. By the time he attended the
University of Waterloo, Ayre was betting on sports (for beers, he
says), and developing a taste for business. Over the summer he bought a
five-ton truck, loaded it with cherries and peaches he'd picked and
sold the fruit to motorists on the side of the road. He also organized
trips to Florida and Cuba for his party-going classmates.

It didn't take him long to land in trouble. With an M.B.A. from City
University in Seattle, Ayre took a job in June 1990 as president of
Bicer Medical Systems, a Vancouver, B.C. heart-valve maker. The company
was underfinanced, he says. According to British Columbia Securities
Commission documents, Ayre sold 300,000 Bicer shares without releasing
a prospectus. He also moved millions of shares between several
accounts, including his own, without filing insider trading reports. "I
knew that I wasn't following all the rules," he says. "But I also knew
I had to do it to keep the budget alive." Though he was never charged,
Ayre settled in 1996 for a $10,000 fine and a 20-year prohibition from
running a company listed on the Vancouver Exchange.

Meantime Ayre borrowed Cisco training manuals and taught himself
network design, then tried launching several Web-based ventures,
including a voice-over-IP company. All of them flopped. Then he read a
newspaper story about Ronald (the Cigar) Sacco, a U.S. bookie who had
set up an offshore phone-in betting operation in the Dominican Republic
to elude felony charges in the States. "There was a loud bang in my
head and the whole universe came together," Ayre recalls. (Sacco
pleaded guilty in 1994 to money-laundering charges and went to prison a
year later. His operation later moved to Costa Rica.) Ayre invested
$10,000 to build a Web-based system for betting online, providing
software to offshore bookmakers.

By 1996 he was in Costa Rica, helping to launch some of the first
online casinos, like WinSports and GrandPrix, for other bookmakers.
Internet gambling was basically unheard-of, and there was a strong
disconnect between the kid and the old coots taking the bets. Ayre not
only wanted to encourage smaller bets to generate more predictable
revenue and profits, he also wanted to settle accounts with online
checks, instead of suitcases of cash. "I was pioneering a new
industry," he says. That's half true. Sportsbook.com was championing a
similar model, taking bets from customers using credit cards issued by
European banks.

Ayre launched his own site in April 2000, starting with sports betting.
There were options to pay with credit cards and online checks (wired
from U.S. accounts to Bodog's London accounts), a $5,000 maximum and
plenty of pictures of pretty girls. Later he added online poker and
casino games. In the event that you are a winner, you collect via wire
transfer. Presumably, you declare your winnings on your 1040, but Ayre
does not file reports with the IRS.
To create same attention, Ayre begat the fictitious "Cole Turner" as
the public face of Bodog. He convinced Christopher Costigan, owner of
Gambling911, an online tabloid promoting Web gambling, to post stories
of Turner, an Indiana Jones-like character. In 2003, for example, Ayre
turned his vacation to Thailand into a Cole Turner Internet adventure.
Using a digital camera, a machete, fake blood and a cast of taxi
drivers and massage-parlor girls, Ayre spun the tale of Turner leading
an expedition into Cambodia to fight a cell of Buddhist terrorists.
Along the way Turner was captured by the Cambodian army, double-crossed
by opium warlords in a lost ancient city and wounded in a knife duel
while escaping the country. Ayre wrote the eight-story series on the
plane back to Costa Rica. It was released during the college bowl
season.

The series got noticed. Disgusted bookies at rival companies posted
notes on Internet forums saying Turner was a terrible businessman
because he was off on an adventure rather than at his desk during one
of the busiest betting times of the year. One gambler called Bodog and
said he wouldn't place another bet until he knew if Turner was alive.

But the joke got old. After being quoted in a 2004 Cigar Aficionado
magazine story as Cole Turner, Ayre got tired of explaining to
reporters that Turner was just a marketing trick. Still Ayre hasn't
lost his crude touch: He sometimes hands out thong underwear as
business cards. For an April Fool's gag last year he released a
statement apologizing to customers for losing Bodog to Virgin's Richard
Branson in a drunken poker match.

Bodog is based in Costa Rica, where 150 bookmakers and customer service
reps guide the action. The government doesn't charge businesses on
money earned from other countries, and since Ayre doesn't take bets
from Costa Ricans, all Bodog revenues come from foreign lands. He pays
no personal income taxes in Costa Rica since all his assets--cash,
cars, houses and other properties--are in Bodog's name, not Ayre's. He
says he has $25 million invested in Costa Rican and Canadian real
estate and $40 million in Swiss banks.

In Vancouver, 200 graphic designers and computer programmers work at
Riptown Media, whose only client is Bodog. But producing advertising
copy is not a crime and Bodog itself doesn't keep an office in Canada,
which has legal restrictions against online gambling similar to those
in the U.S. Ayre says his citizenship isn't a reason for not setting up
operations in Canada, though he still carries that insider trading
settlement on his record and admits he doesn't want to "tempt fate."

The U.S. Justice Department hasn't had much luck prosecuting online
gambling operators. Jay Cohen, an American who co-owned World Sports
Exchange in Antigua, is the only known proprietor ever put on trial.
Found guilty of accepting bets from America over the Internet in August
2000, he was sentenced to 21 months. But some American offshore
operators haven't been touched, even though they sometimes return to
the States. Among them: Ruth Parasol and J. Russell DeLeon, a married
couple who, along with Indian partner Anurag Dik, got very rich
when they took PartyGaming, a Gibraltar company, public in London last
June. Dik is worth $3.3 billion, Parasol and DeLeon $1.8 billion
each.

Uncle Sam has found ways to make those who help Web casinos sweat. In
2003 Ebay's PayPal operation paid the U.S. $10 million to settle
charges of enabling online betting with money transfers. In January the
tabloid Sporting News surrendered $7.2 million to the government, money
it earned advertising gambling sites. Ayre has a clever work-around.
Most broadcasters in the U.S. don't want to pay fines for running
Bodog.com ads but happily take money for advertising Bodog.net, a free
"educational" site that looks almost identical to the Bodog.com money
machine.

There is some risk that Congress will give the DOJ more weapons with
which to attack offshore gamers. Senator Jon Kyl (R--Ariz.) has
introduced a handful of bills to stop online gambling. One made it to
the floor and was voted down in November 1999; Kyl's handler blames
"shadowy forces." Rep. James Leach (R--Iowa) introduced similar
legislation last November. "Internet gambling has dangerous
implications for families and society," Leach says. "It's also a front
for money laundering and terrorism," though he has only anecdotal
evidence.

Ayre, paradoxically, might also be in trouble if Congress went the
other way and legalized online gambling. That, he says, would encourage
the likes of Google, Microsoft and Ebay to open sites. But other powers
disagree. "Do you think the Internet or gambling is going to disappear
in the next ten years?" asks Nigel Payne, Sportingbet's chief, who
spends much of his time lobbying for regulation. (His largest
stockholders include Fidelity Investments and Merrill Lynch.) "The U.S.
needs to regulate it, license it and tax it." Payne says the U.S.
government could have reaped $900 million from online gambling taxes
last year. He has a strong ally in Terri Lanni, chief executive of MGM
Mirage, which owns the Bellagio and MGM Grand in Las Vegas. Washington
is "making a major mistake by not legalizing this type of gambling,
considering that almost all wagers going to offshore sites come from
the United States," he says.

Whatever happens, Ayre will try to make sport of it. "One of the things
that drives me is the excitement that I could fail," he says. "What
better buzz can you get?"