Bucking the Odds Antigua thinks it can keep the bad guys out of online gambling. It's a long shot

Picture a tiny Caribbean island with only seven working stoplights
announcing to the world that it will become the Las Vegas and
Atlantic City of Internet gambling. Gyneth McAllister, the woman
who boldly made that prediction for her native Antigua two years
ago, wishes she'd kept her mouth shut.

McAllister, 40, Antigua's cocksure director of offshore gaming,
told SI (Jan. 26, 1998) that her nation would also do something
U.S. authorities said couldn't be done: regulate the fledgling
online gaming industry. McAllister said Antigua could maintain
control "by keeping bad guys out and making sure players get
paid," while everyone--including her cash-strapped
government--took in lots of money.

McAllister made good on half of her boast: Antigua is now the hub
of Internet gaming. Some 850 Web gambling sites are based there
and an estimated 80% of all gaming URLs on the Web can be traced
back to servers on the 108-square-mile island.

McAllister, however, isn't crowing about it. Instead she and her
four children are in hiding near Washington, D.C. They fled
Antigua this summer after McAllister received what she says were
death threats linked to her efforts to "eliminate the
possibility of money-laundering and provide real regulation" in
her nation's online gambling industry. "I was told I'd be killed
if I continued," she says.

In February, McAllister proposed tough new regulations for
Antiguan sites. The move came after a U.S. Treasury Department
advisory warned bankers that Antigua's lax financial regulations
made it easy to launder money there. In response, Antiguan
officials tightened standards for banks. McAllister wanted
websites to follow suit. She proposed attaching audit
servers--"black boxes"--to sites to monitor bets and flag large
transactions, which often signal money laundering.

Several site owners balked and threatened to move their
shops--each of which pays Antigua an annual licensing fee of
$75,000--to nearby islands. Over the next couple of months
McAllister says she got two telephone death threats and that
someone broke into her house and rummaged through her files. "I
became afraid to leave my home," she says. "When someone calls
and says, 'I'm going to kill you,' it changes everything you do.
I had to get out." Before fleeing, she reported the incidents to
police, who investigated but came up with no leads.

U.S. officials say the threats are no surprise. "We predicted
they'd have problems with people who have interests in that
business," says Jonathan Winer, a former State Department deputy
assistant secretary for international narcotics and law
enforcement affairs.

Site operators in Antigua, however, dismiss McAllister's claim
that she was threatened by one of their own. "I don't believe
it," says Bill Scott, founder of World Wide TeleSports, the
island's largest sports betting firm. "We know everyone in the
industry. There are no tough guys, just nice people doing
business."

Site owners say they welcome Antiguan government oversight,
because it provides a seal of integrity. They say they wouldn't
mind having transactions audited, but that the black boxes would
be too invasive, enabling the government to obtain customer lists
and other proprietary information. Fearful of losing sites,
Antigua scrapped the black-box idea after McAllister's departure.

Prime minister Lester Bird disputes the suggestion that his
nation isn't scrutinizing gaming sites--and operators--closely
enough. "Our goal is to have the highest regulation in the
world," he says. "We only want good people here and won't allow
anyone who has a criminal record to have a license."

Antigua has let former illegal bookmakers from the U.S.,
including Scott, set up sites, on the grounds that bookmaking is
not a crime in Antigua. It has also overlooked at least one drug
conviction; Bob Eremian, managing director of the Sports Off
Shore site, served 24 months in jail in Connecticut in the late
1970s for possession of marijuana with intent to distribute.
Only when SI told Bird's chief of staff, Asot Michaels, in
August of Eremian's record did Antigua expel Eremian, who's now
in Massachusetts fighting a 1995 bookmaking charge.

The threats against McAllister left one Justice Department source
wondering if any nation can effectively regulate online betting.
"When the person who was trying to do just that has to leave her
own country, doesn't that make you wonder who you're dealing
with?" he says. "If what's happening in Antigua doesn't make
gamblers nervous, they obviously haven't read the early history
of Las Vegas. We know how long it took to get Las Vegas under
control and weed out those elements."

COLOR PHOTO: WALTER P. CALAHAN

McAllister says she got death threats linked to her efforts to
regulate Internet betting sites.