[h=4]The story of Pinnacle — pieced together from documents and interviews as part of The New York Times’s investigation of unregulated online gambling, in collaboration with the PBS series “Frontline” — is a case study of how more traditional, and far less public, offshore sports books operate and, at least for now, survive on American soil. Indeed, experts say illegal sports betting remains a considerably larger business than its legal cousin, fantasy sports.
Pinnacle Is Born[/h]Every successful sports book needs a Stanley Tomchin.
He is not shy about his analytic mind, his digital foresight or his role in the building of Pinnacle. Raised on Long Island but now living in Nevada, Mr. Tomchin, 70, acknowledges that he not only helped establish Pinnacle in Curaçao, he also handled one of its most important jobs.
“My role was the oddsmaker,” he said in written responses to questions from The Times. “My knowledge and experience allowed me to make better odds than N.Y., Las Vegas, anyone in the world.”
<figure id="media-100000003993092" class="media photo embedded has-adjacency layout-small-vertical media-100000003993092" data-media-action="modal" itemprop="associatedMedia" itemscope="" itemid="http://static01.nyt.com/images/2015/10/26/us/26GAMBLING8/26GAMBLING8-master180.jpg" itemtype="http://schema.org/ImageObject" role="group"> Photo
<figcaption class="caption" itemprop="caption description"> Stanley Tomchin, who helped establish Pinnacle in Curaçao. "My role was the oddsmaker," he said. </figcaption> </figure> Mr. Tomchin claims to have been one of the original members of the so-called Computer Group, credited in gamblers’ lore with bringing the first computer-based betting schemes to sports books. His reputation is such that he was featured in the book “Gambling Wizards: Conversations With the World’s Greatest Gamblers.”
“At 8 or 9 years old, I was walking around with $500 in my pocket,” the book quoted him as saying.
In the 1990s, Pinnacle Sports began operating in what was then the Dutch territory of Curaçao, one of the Caribbean islands where American bookmakers sought to escape the scrutiny of United States prosecutors even as they lured American gamblers. The government showed little interest in regulating bookmaking.
Mr. Tomchin, who says he has been with Pinnacle from the start, said the company established its headquarters on the second floor of the Holiday Beach Hotel and Casino after he spotted the building while on vacation.
Pinnacle initially ran a telephone-betting service aimed at the United States market, but quickly realized it could attract more customers if it reduced its “juice” — the bookmaker’s cut — by turning largely to computers.
<figure id="media-100000003993103" class="media photo embedded layout-small-vertical media-100000003993103" data-media-action="modal" itemprop="associatedMedia" itemscope="" itemid="http://static01.nyt.com/images/2015/10/26/us/26GAMBLING4/26GAMBLING4-master180.jpg" itemtype="http://schema.org/ImageObject" role="group"> Photo
<figcaption class="caption" itemprop="caption description"> Jessica Davis, a granddaughter of a former North Dakota governor, rose to chief executive of Pinnacle under the alias Paris Smith. </figcaption> </figure> At the same time, on Antigua, Jessica Davis, a granddaughter of former Gov. John E. Davis of North Dakota, was working at another sports book, Worldwide Telesports. Ms. Davis appeared in a Times article in 1998 under the headline: “With Technology, Island Bookies Skirt U.S. Law.” Customers in the United States could place their bets with Antiguan operators or on a relatively primitive website.
American law enforcement caught up with Ms. Davis; an indictment, unsealed in 2006, charged her with gambling-related offenses, for which she eventually received probation. Those charges, though, did not dissuade Pinnacle from hiring her and eventually elevating her to chief executive, though by then she had a new name — Paris Smith. (“Aliases are common in the industry,” Pinnacle said in its statement. “Ms. Davis has never hidden her use of an alias.”)
The company’s senior operatives included a flamboyant Californian, George Molsbarger, who lists himself as a Pinnacle co-founder.
Neither Mr. Molsbarger nor Mr. Tomchin has the profile of an old-time gambling boss. Mr. Tomchin is an active donor to a variety of liberal political causes. Mr. Molsbarger has also played the role of philanthropist, running a foundation for children in need, the Squid & Squash. One of its fund-raisers, at the Playboy mansion, featured “the sexiest go-go dancers strutting their skills on poles,” according to a company that provided entertainment.
<figure id="media-100000003993095" class="media photo embedded has-adjacency layout-small-vertical media-100000003993095" data-media-action="modal" itemprop="associatedMedia" itemscope="" itemid="http://static01.nyt.com/images/2015/10/26/us/26GAMBLING7/26GAMBLING7-master180.jpg" itemtype="http://schema.org/ImageObject" role="group"> Photo
<figcaption class="caption" itemprop="caption description"> Pinnacle’s high rollers included a flamboyant Californian, George Molsbarger, who lists himself as a Pinnacle co-founder. </figcaption> </figure> Pinnacle donated more than $2 million to the foundation.
The gambling site could certainly spare the money. When times were good, it processed bets worth billions annually, records show. And it wired more than $4 million to a Canadian bank as payment, Mr. Tomchin said, to buy his Pinnacle stock.
But a crisis was brewing. Just months after prosecutors took down Ms. Davis’s $2.5 billion gambling ring in Antigua, signaling a more aggressive posture toward offshore sports books, Congress passed the 2006 Internet gambling law, barring the use of credit cards to place online bets.
Pinnacle responded by trying to look beyond the United States market, and by 2008 its annual intake had dropped to $5.7 billion from $12 billion, according to documents filed with regulators on the English Channel island of Alderney, where Pinnacle had sought a gambling license.
But with so many Americans eager to bet on sports, Pinnacle must have realized it could not abandon such a lucrative market — a fact that did not escape the Queens prosecutor.
“Confidential information came to us that a certain individual was engaged as an agent in organized sports betting,” Mr. Brave said. That individual led investigators to New Jersey, then Las Vegas, then Los Angeles and back to Queens.
Soon, investigators would begin wiretapping conversations of gamblers and their agents. When they passed sacks of cash, investigators were on hand to photograph them.
[h=4]Hiding Profits[/h]Because wiring money leaves a trail that can be easily detected, gambling money from offshore sports books often remains in the United States, creating the need for a shadow banking system where bettors settle up in person with the ring’s agents or money collectors.
Gamblers and agents in the field had to find ways to hide large sums of money, which must be reported under anti-money-laundering regulations. Some gamblers passed bulging envelopes in country club parking lots and from bar stool to bar stool. Others stuffed money into casino safe deposit boxes and used casino chips as currency to transfer funds.
To penetrate this system, the investigators relied on wiretaps to pinpoint the place and time of these cash transfers so they could take surveillance pictures.
In May 2012, undercover agents watched Mr. Molsbarger enter a California restaurant with a brown suitcase. It was heavy enough that he was pulling it on rollers, and no wonder: The suitcase held $1.5 million in cash. Mr. Molsbarger handed it to a man named Scott, who put it in the trunk of his car. Local deputies stopped the car in Pico Rivera and confiscated the cash.
<figure id="media-100000003993089" class="media photo embedded layout-large-horizontal media-100000003993089 ratio-tall" data-media-action="modal" itemprop="associatedMedia" itemscope="" itemid="http://static01.nyt.com/images/2015/10/26/us/26GAMBLING5/26GAMBLING5-articleLarge.jpg" itemtype="http://schema.org/ImageObject" role="group"> Photo
<figcaption class="caption" itemprop="caption description"> A suitcase stuffed with cash that Mr. Molsbarger carried into a California restaurant in May 2012 as undercover agents watched. He handed the bag to a man who put it in the trunk of a car. Local deputies stopped the car and confiscated the money. </figcaption> </figure> “Pinnacle stands by it, right?” bookies were heard asking on the wiretaps, according to court records. “What if this money goes missing?”
They need not have worried. Pinnacle replaced the money in less than a week, records show.
Suspecting that the police might be listening in, bookies and agents tried to disguise their business conversations. When agents, for example, needed to transfer $350,000 in June 2012, Mr. Tomchin arranged for his sister, Joy Tomchin, a New York real estate developer, to accept the money in a bag on Manhattan’s Fifth Avenue. Later he was recorded asking her if she received “three fifty worth of grapes,” and she answered affirmatively, court records show.
Also under scrutiny was Michael Colbert, a risk manager for sports books at eight casinos in Las Vegas, where betting is legal. According to a later indictment, Mr. Colbert, who worked for the gaming unit of Cantor Fitzgerald, the Wall Street trading firm, allowed so-called runners to place bets for out-of-state customers at Las Vegas casinos, which is illegal.
The Queens district attorney made his move in the fall of 2012, charging 25 people in connection with offshore sports books, particularly Pinnacle. The company was not charged, and asserts that none of those charged were employees.
“There were thousands of accounts,” said Mr. Brave, the rackets bureau chief. “There were scores of agents. We had 25 people, but we could have charged 125 people.”
Mr. Colbert pleaded guilty to a felony charge of conspiracy related to illegal gambling. He no longer works for Cantor, which was fined $5.5 million by the Nevada Gaming Commission, the largest fine in its history.
Mr. Tomchin forfeited $1.7 million and pleaded guilty to a misdemeanor conspiracy charge. Despite the coded language with his sister on the sacks of cash, Mr. Tomchin said he believed the money had come from legal betting.
“I would never have knowingly involved my sister in this if I had the slightest indication it might be illegal,” Mr. Tomchin said. His sister, who was not charged but eventually surrendered $450,000, did not respond to requests for comment.
Mr. Molsbarger’s case is sealed; one of his lawyers said Mr. Molsbarger had pleaded guilty to the equivalent of a disorderly conduct charge and did not contest the seizure of the $1.5 million.
Soon after charges were filed, Pinnacle surrendered the gaming license it had recently won in Alderney, “as a consequence of legal advice,” the company said. (Pinnacle says it is licensed in Curaçao but also in Malta.) An investigator for the Alderney gambling commission also visited Mr. Brave, carrying documents that showed numerous American accounts. The investigator said he had stopped counting at 1,700, but there may have been thousands more, according to Gerard McNally, a New York City detective, now retired, who worked on the case.
Pinnacle had come up with a handy, not terribly high-tech way of hiding action in the United States, the Alderney investigators found: Simply list the accounts as originating in a foreign country. One account listed as Canadian originated in Pompano Beach, Fla., a spreadsheet from the investigation showed. Another account, logged as Vietnamese, came from Garden Grove, Calif. One from Singapore actually belonged to a bettor in Poughkeepsie, N.Y.
Pinnacle Is Born[/h]Every successful sports book needs a Stanley Tomchin.
He is not shy about his analytic mind, his digital foresight or his role in the building of Pinnacle. Raised on Long Island but now living in Nevada, Mr. Tomchin, 70, acknowledges that he not only helped establish Pinnacle in Curaçao, he also handled one of its most important jobs.
“My role was the oddsmaker,” he said in written responses to questions from The Times. “My knowledge and experience allowed me to make better odds than N.Y., Las Vegas, anyone in the world.”
<figure id="media-100000003993092" class="media photo embedded has-adjacency layout-small-vertical media-100000003993092" data-media-action="modal" itemprop="associatedMedia" itemscope="" itemid="http://static01.nyt.com/images/2015/10/26/us/26GAMBLING8/26GAMBLING8-master180.jpg" itemtype="http://schema.org/ImageObject" role="group"> Photo
<figcaption class="caption" itemprop="caption description"> Stanley Tomchin, who helped establish Pinnacle in Curaçao. "My role was the oddsmaker," he said. </figcaption> </figure> Mr. Tomchin claims to have been one of the original members of the so-called Computer Group, credited in gamblers’ lore with bringing the first computer-based betting schemes to sports books. His reputation is such that he was featured in the book “Gambling Wizards: Conversations With the World’s Greatest Gamblers.”
“At 8 or 9 years old, I was walking around with $500 in my pocket,” the book quoted him as saying.
In the 1990s, Pinnacle Sports began operating in what was then the Dutch territory of Curaçao, one of the Caribbean islands where American bookmakers sought to escape the scrutiny of United States prosecutors even as they lured American gamblers. The government showed little interest in regulating bookmaking.
Mr. Tomchin, who says he has been with Pinnacle from the start, said the company established its headquarters on the second floor of the Holiday Beach Hotel and Casino after he spotted the building while on vacation.
Pinnacle initially ran a telephone-betting service aimed at the United States market, but quickly realized it could attract more customers if it reduced its “juice” — the bookmaker’s cut — by turning largely to computers.
<figure id="media-100000003993103" class="media photo embedded layout-small-vertical media-100000003993103" data-media-action="modal" itemprop="associatedMedia" itemscope="" itemid="http://static01.nyt.com/images/2015/10/26/us/26GAMBLING4/26GAMBLING4-master180.jpg" itemtype="http://schema.org/ImageObject" role="group"> Photo
<figcaption class="caption" itemprop="caption description"> Jessica Davis, a granddaughter of a former North Dakota governor, rose to chief executive of Pinnacle under the alias Paris Smith. </figcaption> </figure> At the same time, on Antigua, Jessica Davis, a granddaughter of former Gov. John E. Davis of North Dakota, was working at another sports book, Worldwide Telesports. Ms. Davis appeared in a Times article in 1998 under the headline: “With Technology, Island Bookies Skirt U.S. Law.” Customers in the United States could place their bets with Antiguan operators or on a relatively primitive website.
American law enforcement caught up with Ms. Davis; an indictment, unsealed in 2006, charged her with gambling-related offenses, for which she eventually received probation. Those charges, though, did not dissuade Pinnacle from hiring her and eventually elevating her to chief executive, though by then she had a new name — Paris Smith. (“Aliases are common in the industry,” Pinnacle said in its statement. “Ms. Davis has never hidden her use of an alias.”)
The company’s senior operatives included a flamboyant Californian, George Molsbarger, who lists himself as a Pinnacle co-founder.
Neither Mr. Molsbarger nor Mr. Tomchin has the profile of an old-time gambling boss. Mr. Tomchin is an active donor to a variety of liberal political causes. Mr. Molsbarger has also played the role of philanthropist, running a foundation for children in need, the Squid & Squash. One of its fund-raisers, at the Playboy mansion, featured “the sexiest go-go dancers strutting their skills on poles,” according to a company that provided entertainment.
<figure id="media-100000003993095" class="media photo embedded has-adjacency layout-small-vertical media-100000003993095" data-media-action="modal" itemprop="associatedMedia" itemscope="" itemid="http://static01.nyt.com/images/2015/10/26/us/26GAMBLING7/26GAMBLING7-master180.jpg" itemtype="http://schema.org/ImageObject" role="group"> Photo
<figcaption class="caption" itemprop="caption description"> Pinnacle’s high rollers included a flamboyant Californian, George Molsbarger, who lists himself as a Pinnacle co-founder. </figcaption> </figure> Pinnacle donated more than $2 million to the foundation.
The gambling site could certainly spare the money. When times were good, it processed bets worth billions annually, records show. And it wired more than $4 million to a Canadian bank as payment, Mr. Tomchin said, to buy his Pinnacle stock.
But a crisis was brewing. Just months after prosecutors took down Ms. Davis’s $2.5 billion gambling ring in Antigua, signaling a more aggressive posture toward offshore sports books, Congress passed the 2006 Internet gambling law, barring the use of credit cards to place online bets.
Pinnacle responded by trying to look beyond the United States market, and by 2008 its annual intake had dropped to $5.7 billion from $12 billion, according to documents filed with regulators on the English Channel island of Alderney, where Pinnacle had sought a gambling license.
But with so many Americans eager to bet on sports, Pinnacle must have realized it could not abandon such a lucrative market — a fact that did not escape the Queens prosecutor.
“Confidential information came to us that a certain individual was engaged as an agent in organized sports betting,” Mr. Brave said. That individual led investigators to New Jersey, then Las Vegas, then Los Angeles and back to Queens.
Soon, investigators would begin wiretapping conversations of gamblers and their agents. When they passed sacks of cash, investigators were on hand to photograph them.
[h=4]Hiding Profits[/h]Because wiring money leaves a trail that can be easily detected, gambling money from offshore sports books often remains in the United States, creating the need for a shadow banking system where bettors settle up in person with the ring’s agents or money collectors.
Gamblers and agents in the field had to find ways to hide large sums of money, which must be reported under anti-money-laundering regulations. Some gamblers passed bulging envelopes in country club parking lots and from bar stool to bar stool. Others stuffed money into casino safe deposit boxes and used casino chips as currency to transfer funds.
To penetrate this system, the investigators relied on wiretaps to pinpoint the place and time of these cash transfers so they could take surveillance pictures.
In May 2012, undercover agents watched Mr. Molsbarger enter a California restaurant with a brown suitcase. It was heavy enough that he was pulling it on rollers, and no wonder: The suitcase held $1.5 million in cash. Mr. Molsbarger handed it to a man named Scott, who put it in the trunk of his car. Local deputies stopped the car in Pico Rivera and confiscated the cash.
<figure id="media-100000003993089" class="media photo embedded layout-large-horizontal media-100000003993089 ratio-tall" data-media-action="modal" itemprop="associatedMedia" itemscope="" itemid="http://static01.nyt.com/images/2015/10/26/us/26GAMBLING5/26GAMBLING5-articleLarge.jpg" itemtype="http://schema.org/ImageObject" role="group"> Photo
<figcaption class="caption" itemprop="caption description"> A suitcase stuffed with cash that Mr. Molsbarger carried into a California restaurant in May 2012 as undercover agents watched. He handed the bag to a man who put it in the trunk of a car. Local deputies stopped the car and confiscated the money. </figcaption> </figure> “Pinnacle stands by it, right?” bookies were heard asking on the wiretaps, according to court records. “What if this money goes missing?”
They need not have worried. Pinnacle replaced the money in less than a week, records show.
Suspecting that the police might be listening in, bookies and agents tried to disguise their business conversations. When agents, for example, needed to transfer $350,000 in June 2012, Mr. Tomchin arranged for his sister, Joy Tomchin, a New York real estate developer, to accept the money in a bag on Manhattan’s Fifth Avenue. Later he was recorded asking her if she received “three fifty worth of grapes,” and she answered affirmatively, court records show.
Also under scrutiny was Michael Colbert, a risk manager for sports books at eight casinos in Las Vegas, where betting is legal. According to a later indictment, Mr. Colbert, who worked for the gaming unit of Cantor Fitzgerald, the Wall Street trading firm, allowed so-called runners to place bets for out-of-state customers at Las Vegas casinos, which is illegal.
The Queens district attorney made his move in the fall of 2012, charging 25 people in connection with offshore sports books, particularly Pinnacle. The company was not charged, and asserts that none of those charged were employees.
“There were thousands of accounts,” said Mr. Brave, the rackets bureau chief. “There were scores of agents. We had 25 people, but we could have charged 125 people.”
Mr. Colbert pleaded guilty to a felony charge of conspiracy related to illegal gambling. He no longer works for Cantor, which was fined $5.5 million by the Nevada Gaming Commission, the largest fine in its history.
Mr. Tomchin forfeited $1.7 million and pleaded guilty to a misdemeanor conspiracy charge. Despite the coded language with his sister on the sacks of cash, Mr. Tomchin said he believed the money had come from legal betting.
“I would never have knowingly involved my sister in this if I had the slightest indication it might be illegal,” Mr. Tomchin said. His sister, who was not charged but eventually surrendered $450,000, did not respond to requests for comment.
Mr. Molsbarger’s case is sealed; one of his lawyers said Mr. Molsbarger had pleaded guilty to the equivalent of a disorderly conduct charge and did not contest the seizure of the $1.5 million.
Soon after charges were filed, Pinnacle surrendered the gaming license it had recently won in Alderney, “as a consequence of legal advice,” the company said. (Pinnacle says it is licensed in Curaçao but also in Malta.) An investigator for the Alderney gambling commission also visited Mr. Brave, carrying documents that showed numerous American accounts. The investigator said he had stopped counting at 1,700, but there may have been thousands more, according to Gerard McNally, a New York City detective, now retired, who worked on the case.
Pinnacle had come up with a handy, not terribly high-tech way of hiding action in the United States, the Alderney investigators found: Simply list the accounts as originating in a foreign country. One account listed as Canadian originated in Pompano Beach, Fla., a spreadsheet from the investigation showed. Another account, logged as Vietnamese, came from Garden Grove, Calif. One from Singapore actually belonged to a bettor in Poughkeepsie, N.Y.
