Read Fatal System Error Online
Authors: Joseph Menn
Tags: #Business & Economics, #General, #Computers, #Security, #Viruses & Malware, #Online Safety & Privacy, #Law, #Computer & Internet, #Social Science, #Criminology
Fatal System Error (8 page)
Sacco had grown too notorious to stay in the U.S. without constant surveillance and frequent jail time. But he figured out how to get customer-friendly 800 numbers to ring inside the Dominican Republic in the late 1980s, so he moved there and started the company that would become BetCRIS.
Things went well for Sacco in the Dominican, as the expats called it, largely because the corruption made business so much easier. Sacco soon had a mainframe computer and forty phone lines to handle calls from Las Vegas. Players respected his operation for paying out on even the largest bets. Employees in the U.S. collected wagers and dispensed winnings, while those in Central America got paid with the arrival of overnight packages of magazines that had $100 bills stapled inside. The math was easy. A good operation would collect a 10 percent fee on payouts. As long as he kept the point spread moving, so that bets were evenly balanced on both sides of a game, Sacco couldn’t lose.
Sacco was never convicted of mob charges, and his lawyers always denied that he was the mafia’s man. But Sacco processed more bets than anyone else in the U.S.—eventually some $100 million a month—and the FBI said his collection efforts in a dozen big American cities would have been impossible without mob backing. “Sacco was just a front man,” said Jim Moody, former head of the FBI’s organized crime squad. Overall, Moody said, gambling was the mafia’s largest single source of money.
Steve Budin said that in general, bookies immigrated to Latin America to avoid having to pay off the mob as well as to avoid the police. The mob would have real power over those in Costa Rica only if they still had homes in the U.S. or made in-person collections there. After it was pointed out that both criteria applied in Sacco’s case, Budin paused. “I wouldn’t argue” that mob connections were a prerequisite to reaching the heights that Sacco did, Budin said. He wasn’t just another guy in the business. “He was the original. He was like Christopher Columbus.”
After his business alliances, the biggest factor in Sacco’s success was his commitment to new technology. But experts assisting with Sacco’s upgrades repeatedly betrayed him. In the 1970s, the feds picked up one “phone man”—a specialist in making operations harder to trace through calling records—and the man squealed. A decade later, Sacco hired Fred Valis and Dan Hanks as technicians and cash runners. Unfortunately for him, Valis and Hanks were professional informants who had set up narcotics deals for the Drug Enforcement Agency, tapped Heidi Fleiss’s phone for a competitor, and sold a list of jurors in O. J. Simpson’s murder trial to the tabloids. They promptly went to the FBI and asked to double up with government salaries while they served as moles.
Sacco’s henchmen bragged to Hanks about double-crossers getting bludgeoned to death, and he came close to meeting the same fate. After a bitter ex-girlfriend ratted Hanks out, Sacco’s men fished around in Hanks’s home mailbox and found his phone bill. They dialed the 415 number they saw listed most often and reached the San Francisco office of the FBI. Fortunately, the thugs went to Valis with their accusations. “Prove it to me, and I’ll kill him myself,” Valis said. A Bay Area newspaper reporter helpfully published a fictional article about a body turning up, and Sacco thought Hanks dead until he showed up in court more than a year later.
The FBI brought an indictment and convinced the Dominican authorities that Sacco’s ring was violating their laws as well. More than a dozen employees were arrested in January 1992, and seized records gave the feds a good look inside the operation. But the ever-generous Sacco himself was not arrested. Instead, Sacco gave an interview to
60 Minutes,
describing Valis and Hanks as “two pieces of puke.” Asked directly, he also acknowledged fielding an offer to handle bets for John Gotti’s Gambinos. “I don’t want to talk about that,” he stammered. The media splash may have been too much for the U.S. and Dominican authorities to put up with. Later, Sacco would complain that the problem with the Dominican was that there was actually too much corruption. First one man wanted a payoff, then his brother would come, then still more relatives. In 1993, Dominican police finally arrested Sacco at a high-end resort. They put him on a plane to the closest U.S. territory, Puerto Rico, where marshals awaited. Sacco pleaded guilty in 1994 and did a five-year stint.
60 Minutes,
describing Valis and Hanks as “two pieces of puke.” Asked directly, he also acknowledged fielding an offer to handle bets for John Gotti’s Gambinos. “I don’t want to talk about that,” he stammered. The media splash may have been too much for the U.S. and Dominican authorities to put up with. Later, Sacco would complain that the problem with the Dominican was that there was actually too much corruption. First one man wanted a payoff, then his brother would come, then still more relatives. In 1993, Dominican police finally arrested Sacco at a high-end resort. They put him on a plane to the closest U.S. territory, Puerto Rico, where marshals awaited. Sacco pleaded guilty in 1994 and did a five-year stint.
Sacco’s operation moved to Costa Rica while he was in jail, and he joined it there on his release. The reunion was brief. On a trip back to the U.S. in 2000, Sacco was picked up for money laundering and gambling. He got out after twenty-one months, in January 2004, when BetCRIS paid his fine. Identifying him as a “consultant,” the company later told the court Sacco would return to Costa Rica to work at Darren’s Digital Gaming. Under the terms of his release, it was important that Sacco not be connected to BetCRIS. But he was still calling the shots there, at times even answering Mickey’s private phone number.
DESPITE THE MOUNTING EVIDENCE before him, Barrett was, like most Americans, oblivious to the ways in which the U.S. mob had bent the Internet to serve its own ends.
The Five Families had experimented with identity theft and Web fraud, but Internet betting was the easiest payoff. As the most powerful of the old-school mob men who came up through street bookmaking, Sacco was in prime position when cable television sent the poker game Texas Hold ’Em into millions of American living rooms. Some shows featured closely watched celebrities like Ben Affleck playing cards, while others helped create new celebrities: amateurs such as the improbably named Chris Moneymaker, who paid $39 to start playing in a tournament feeder game online at
PokerStars.com
and made it to the top in Las Vegas. Moneymaker’s $2.5 million win in the 2003 World Series of Poker drove millions to their computers to join in. Annual online poker revenue soared from $90 million in 2002 to $2.4 billion in 2005. With poker illegal outside of regulated casinos, organized crime just followed the money. BetCRIS and other outfits already handling sports bets overseas simply added poker software from the likes of Darren Rennick.
PokerStars.com
and made it to the top in Las Vegas. Moneymaker’s $2.5 million win in the 2003 World Series of Poker drove millions to their computers to join in. Annual online poker revenue soared from $90 million in 2002 to $2.4 billion in 2005. With poker illegal outside of regulated casinos, organized crime just followed the money. BetCRIS and other outfits already handling sports bets overseas simply added poker software from the likes of Darren Rennick.
A younger generation of fraudsters got to the same place after cutting their teeth on other tech-related cons. They moved to the Caribbean or Central America, skipped sports, and went straight to Web poker and other casino games. By far the biggest poker company would be PartyPoker, a runaway success that would take half the available market. While it would come to be valued in the billions of dollars, that company had leaders trained in mob scams or mass fraud.
One such training course was at the side of reputed Gambino soldier Richard Martino. His operation ran from the early 1990s until 2002, raking in $650 million with phone and Internet scams, the biggest haul in Gambino family history. The Martino racket went through several iterations as law enforcement cracked down on its techniques. It installed rogue “dialers” on home computers that called expensive overseas numbers. For a time, companies in the scheme also stuck consumers with unwarranted phone charges through 800 numbers. A later Web version of the scam was much simpler, an early system for credit card fraud. Internet visitors were asked to supply a credit card number proving they were eighteen in order to get free tours of membership porn sites—including
HighSociety.com
,
Cheri.com
, and
Playgirl.com
—owned by a company named Crescent Publishing Inc. Then they were charged as much as $90 a month by a revolving cast of businesses with names unrelated to the sites.
HighSociety.com
,
Cheri.com
, and
Playgirl.com
—owned by a company named Crescent Publishing Inc. Then they were charged as much as $90 a month by a revolving cast of businesses with names unrelated to the sites.
After hundreds of consumer protests, the Federal Trade Commission sued Crescent in August 2000. But the full extent of the scheme didn’t emerge until federal prosecutors brought criminal charges in 2003 and filed a more comprehensive indictment in 2005. The second indictment named Martino, alleged Gambino captain Salvatore LoCascio, and four Gambino associates. Facing insider testimony, all pleaded guilty.
Though he was not named in the court filings, Yishai Habari, a major traffic broker to porn websites, almost certainly was involved in the fraud. Along with the indicted Harvest Advertising, Habari’s WebMedia Interactive Inc. sought to bring Web surfers to Crescent websites, according to officials, employees, and porn publishers. Habari directed projects at the Martino operation, employees said, and his company and Harvest were based on the same floor of the same building in New York. “It was my feeling that they were one and the same,” said the FTC’s lead attorney on the case. A Crescent employee from before the FTC case said Habari was a significant part of the operation at least as far back as 1999. She asked not to be named out of concern for her physical safety. In late 2000, San Francisco businessman Gary Kremen and attorney Charles Carreon flew to meet Habari and negotiate whether he would steer visitors to Kremen’s
Sex.com
. After a sushi lunch, Habari took them to meet with Martino, and Carreon said it was clear that Martino was in charge of their business.
Sex.com
. After a sushi lunch, Habari took them to meet with Martino, and Carreon said it was clear that Martino was in charge of their business.
Because the FTC suit didn’t extend much beyond Crescent, Martino and Habari continued to operate with relative freedom for some time. Investigators who worked on the case said they were most concerned about working upward and arresting the full-fledged Gambino mobsters collecting money from the scam. All the same, Habari left the country as the probe accelerated.
While he might have had reason to worry about the law, Habari had no reason to worry about money. He could deliver Web surfers to the sites that were willing to pay. For that reason, he had been popular in the world of Internet porn, and some of his friends and associates were now moving from porn to poker, where their sites also needed high-volume traffic.
AMONG THE CONVERTS WAS Habari’s old friend Ruth Parasol, who was on her way to becoming the richest self-made American woman. More than anyone else’s, Parasol’s path to epic riches illustrates the Internet’s windfall potential for a post-Sacco generation unconcerned with moral issues.
In high school, even her friends called her Ruthie Ruthless. Her prep school in Marin County, the wealthy, wooded enclave just across the Golden Gate Bridge from San Francisco, was filled with characters. There were plenty of richer kids, several teens from famous families, and some close to the raven-haired Parasol’s league in great looks. But the laid-back style in most of the cliques at Marin Academy was to play down one’s natural intelligence and camouflage material ambition.
Not Ruthie Ruthless. One of the most polarizing figures there, she didn’t give a damn who knew she was on the make or what they thought of her. She proved it in the way she designed her page for the 1984 senior yearbook. Others chose casual pictures of themselves cavorting with friends, listing all the great memories they would carry forward from high school. Parasol picked a single photo of herself in jewelry, furs, and full makeup, offering a pout just short of a sneer. Underneath, she wrote her caption: “Diamonds are a girl’s best friend.”
Parasol got her brash attitude, as she would her start in business, from her flamboyant father, Rick. A heavyset Holocaust survivor, Rick developed federally subsidized housing for the poor but preferred the ostentatious good life for himself. He rode around San Francisco Bay in a noisy speedboat named “Rude,” joined by topless women he found on the Internet, irritating the more circumspect members of the upper class. All the while, he was married to an understanding Swedish housewife. Family life “was like an Ingmar Bergman movie and a Woody Allen movie at the same time, with a little Hugh Hefner thrown in,” said Ruth Parasol’s youngest sister, Ricarda, who went on to front a goth-rock band.
Rick Parasol’s serious money came from phone sex lines. Ruth followed him into the family business, joining a variety of allied phone scammers who, like Mickey Richardson and Ron Sacco, were second-generation hustlers. After graduating from the University of San Francisco and arming herself with a law degree from Western State University, Parasol and her father teamed up in the 1990s with Ian Eisenberg, a Seattle king of the phone-sex business. The FTC sued Eisenberg in 2000 for running a fake “rebate” check scam in which tiny print on a $3.50 check said that by cashing the check, the recipients agreed to make Eisenberg’s company their Internet service provider for as much as $29.95 a month. Ruth Parasol advised Ian Eisenberg and his companies, which took in $27 million before the FTC stopped the scam. Then Parasol funded an associate turned rival of his, Seth Warshavsky.
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