SOURCE: Financial Times Ltd.

David Carruthers was sitting in a London restaurant overlooking the Thames, a clear view of the City financial district beckoning. He was hungry, impatient for service, troubled by a persistent cough, but otherwise in typically feisty, talkative mood.

The smartly attired 49-year-old BetonSports chief executive was keen to expand on the British company he had taken to market two years ago and the online gambling industry at large. He was clearly relishing the opportunities for growing the company further. Barely a week later, this Edinburgh-bred food fanatic, lover of fine wines and expert snooker player appeared in a Dallas court dressed in a prison-regulation orange jump suit, his hands and legs shackled to a chain-gang of other inmates.

His arrest, in the transit lounge of Dallas Fort Worth airport on Sunday night, en route from London to Costa Rica where he and the company are based, sent the young fast-growing online gambling industry, worth $12bn, into a state of shock. Carol, his wife, was travelling with him and, shaken by the experience, was allowed to continue the journey to Costa Rica. But Mr Carruthers spent the whole of Monday unable to make contact with the outside world, in the custody of the U.S. authorities. “Poor David, he has spent his career trying to up his profile and the moment he becomes front-page news he can’t talk to anybody,” said someone who knows him well.

In vain, the company tried to extract information from the U.S. authorities. The paralysis it felt spread across the industry. Worse was to follow. The indictment from the U.S. Department of Justice served against Mr Carruthers and the company the following day threatened to bring the curtain down on the industry as fast as its meteoric rise. The DoJ’s 26-page indictment charged BetonSports, Mr Carruthers, company founder Gary Kaplan and associates and suppliers on 22 counts of racketeering, conspiracy and fraud. With Mr Carruthers’ arrest, the DoJ was sending out an unambiguous message: online gambling in the U.S. is illegal and those who flouted the law would be prosecuted.

As investors took fright and the markets wiped more than $1bn from the sector, the plight of Mr Carruthers added to the tensions UK companies were feeling about the extradition from London last week of the NatWest Three on Enron-related charges. Chief executives in the sector and beyond acknowledged they were having second thoughts about U.S. travel plans. For the online gambling sector, the survival of whole companies was at stake. Was the DoJ indictment the first in a series of prosecutions aimed at wiping out the sector in the U.S. altogether?

Mr Carruthers was 19 when he became a shop manager at Ladbrokes, the leading UK bookmaker. He was a Ladbrokes loyalist, staying with the company for 20 years. But he was never marked out for stardom. He managed around 40 of the business’s then 1,900 high street betting shops, looking after the Midlands and south Wales territories on a middle manager’s salary of about £40,000. His profile never registered with members of the Ladbrokes board.

But the future of the betting industry lay in online gambling and, like several Ladbrokes colleagues, Mr Carruthers was lured by young thrusting entrepreneurs to run new ventures. The prospects of accessing far greater numbers of gamblers via the internet needed experienced betting hands such as Mr Carruthers. Armed with an MBA, he was hired via a recruitment trawl by Mr Kaplan, a stocky New Yorker who, according to the indictment, first came under the microscope of U.S. authorities in 1993 for running an illegal service taking telephone bets for sports and sporting events.

Mr Kaplan took his operation to Costa Rica to avoid U.S. jurisdiction. It evolved into BetonSports.com and, according to the indictment, advertised itself as “the largest online wagering service in the world”. Mr Kaplan, also known by the pseudonyms “Greg Champion” and “G” and usually surrounded by Uzi-carrying bodyguards, faced civil proceedings in New Jersey in 2001, but by 2003 had got 100,000 active players, placing 33m bets worth $1.6bn. Other fast-growing online gambling companies made millions of dollars from the U.S. but avoid sportsbooks and focus on online poker and casino games. SportingBet, which does operate sportsbooks, declines bets from the U.S.

Mr Carruthers was brought in to take BetonSports to market. “He developed the professional management of the business,” said one business associate. The archetypal business workaholic, he is well read in management literature. But there is also a relaxed, straightforward manner behind the hard business ethos. “He liked to talk, he’s an affable guy,” another associate said. “He tends to be fairly open. He is someone who is very passionate. He has spent a lot of time lobbying for regulation and he has got an opinion on everything.”

Whatever the perceived risks, Mr Carruthers was a regular visitor to the U.S., seeking influence in a debate joined by U.S. Congressional Republicans about strengthening existing but incoherent anti-gambling law. He appeared on network television news and wrote syndicated newspaper columns about the futility of shutting a multi-billion dollar industry whose popularity had attracted 8m Americans and counting. “Politicians who seek to prohibit online wagering in order to prevent underage gambling, excessive gambling and corruption could address these goals more effectively through regulation,” he wrote in one column earlier this year.

By last week, he was becoming more bullish about the direction of the debate, despite the passage of a House of Representatives bill to outlaw most forms of online gambling and prevent U.S. financial institutions from transferring money to online betting sites or payment services.

Mr Carruthers attracts no little sympathy in a still dazed industry. “David Carruthers doesn’t come across as somebody this way inclined,” said one industry expert who knows him from industry conferences. “The authorities can’t reach Gary Kaplan, he is a fugitive. They are using David Carruthers to try and get as much information as they can so that they can try and go after Gary Kaplan in other ways.”

Some believe Mr Carruthers will end up with a petty misdemeanour charge or a fine. Whatever his fate, his high stakes world of corporate power is over. “Online gambling is run by people who made more money than they ever dreamt about,” another banking adviser said.

Perhaps David Carruthers couldn’t believe his luck.