Report: Illegal bookmaking rings resemble corporations

Jay Cohen

Wednesday, July 9, 2003 | 9:46 a.m.

CHAPEL HILL, N.C. -- They have a corporate structure, incentive programs and a systematic way of setting prices for their customers. But they're not Fortune 500 companies or even regular businesses.

Instead, they're illegal sports bookmaking rings, according to an economics professor at the University of North Carolina at Chapel Hill who wrote a paper analyzing the rings.

"Pretty much if I just gave someone a spreadsheet of what these firms were doing, they wouldn't know it was an illegal enterprise," said Koleman S. Strumpf, the professor who wrote the 60-page paper.

Strumpf, 35, studied extensive files from six cases from 1995-2000 out of the Kings County District Attorney's office in Brooklyn, N.Y. He looked at more than $10 million in wagers.

"It's basically everything associated with running the organizations in other words," Strumpf said. "When these guys were arrested most of what was in the room I got access to. This would include computer tapes, bank statements and even address books."

A spokesman for the Kings County District Attorney's office said he was unfamiliar with the study. He said the office vigorously prosecutes gambling charges because they believe the profits are used in other criminal activities.

Strumpf got interested in the subject because of the size of the market. One national study estimated that people bet between $80 billion and $380 billion a year in illegal sports wagers, he said.

In New York, all illegal gambling amounts to about $15 billion, Strumpf said.

"I'm not sure I would say it's growing, but its sheer magnitude is amazing," he said.

What he found was the organizations use go-betweens to minimize the legal risks for the bookmaking leaders. Most of the bettors are in the neighborhood or same social group of their small-scale bookmaker.

Violence against bettors, even the ones with significant debt, is rare.

"People tend to think bookmakers are just middle men," Strumpf said. "They take commissions. It turns out they take very big positions on games. For example, the large bookmaker, if the New York Yankees win, he can lose $30,000 to $40,000 because so many people are betting on the Yankees. Conversely if the Yankees lose, he can win $50,000."

The issue of sports gambling isn't new in Chapel Hill. Former Tar Heel men's basketball coach Dean Smith testified before Congress in June 2000 about the dangers of legalized gambling on college athletics.

But banning gambling on college games won't work, Strumpf said.

"There's no way you're going to stop people from gambling," he said. "It's pretty much impossible. If you want to keep sports clean, you pay the players."