Suitability enquiries preceded BoS launch

With the spotlight firmly on BetonSports group this week, it was perhaps inevitable that journalists would start digging into its past, and that of the colourful founder and still 15 percent stock holder Gary Kaplan, who is at present being sought by the FBI on a 22 count federal indictment.

The Times published an article which claimed that the broker that supervised the BoS IPO in 2004 was "closely questioned" by stock exchange regulators before the listing was permitted.

The Times piece says that Evolution Securities, the stockbroker that advised BetOnSports on its flotation on the Alternative Investment Market, was closely questioned by AIM regulators about the online betting company’s suitability as a public company,

A spokesman for Evolution confirmed that it had been questioned on BetOnSports’s AIM listing by the regulators. “They had full and open discussions with AIM and they seemed happy with the details provided,” he said.

The Times reported that the stockbroker, formerly known as Evolution Beeson Gregory, rejected suggestions that it should have disclosed the chequered past of its fugitive American founder, Gary Kaplan, in the share offer prospectus because he was not a director of BetOnSports but merely a consultant and 44 percent shareholder.

The spokesman added: “Did Evolution fulfil their obligations in terms of disclosure? Absolutely.”

The prospectus made clear the regulatory risks of running an internet and telephone betting business that targets Americans, a practice that it admitted was “in violation of US federal laws”. But the only reference to Mr Kaplan was his appointment as a consultant to BetOnSports’s Antiguan subsidiary for an annual fee of $150 000 (GBP 80 000). It did not mention that Boulder Overseas Corporation, the Panama-registered firm floating BetOnSports, is controlled by Mr Kaplan.

The London Stock Exchange confirmed that it was up to a company’s nominated adviser to decide on the level of disclosure beyond the basic listing requirements, and AIM regulators would become involved only if they had particular concerns. The adviser would then be asked to make extra checks to ensure proper disclosure.

The Times has learnt that at least one other investment bank declined to become involved with BetOnSports’s flotation, because of concerns over Mr Kaplan’s background and the fears that, even after the flotation, he might exert undue influence on the way the company was run.

The US indictment also says that Mr Kaplan, who was first arrested for his gambling activities in 1993, failed to pay excise taxes on more than $3.3 billion of bets.

The Times reports that Evolution is known for being accident-prone. In November 2004 it was fined GBP 500 000 by the FSA for market abuse after short-selling shares in a quoted shell company, Room Service Group. Last year the broker achieved notoriety with its involvement in Regal Petroleum, a client, for which it raised GBP 44.8 million in a placing just three weeks before the shares collapsed.

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