The inside story of two yankees who dodged the law, flew to Belize's Export Processing Zone, and flipped the switch on a get-rich-quick Internet casino. Too bad nobody mentioned the bugs.
Because of the murky legal status of offshore gambling, the US-based founders of Belize Computer Solutions - and several of their colleagues in the Central American country - agreed to tell their story on the condition that they remain anonymous. Jim, Nick, Mickey, and Neville the Fixer are pseudonyms. Actual names (Glenn Godfrey, Craig Williamson) are rendered in full.
Back when Jim and his old friend Nick first started researching possible locales for their new offshore gambling business, they took a weekend rafting trip in the Dominican Republic to relax and sort out their options. Unfortunately, they picked a polluted river, and water laced with human shit splashed in Nick's eye, touching off a nasty infection that wouldn't go away. By the time he reached the Puerto Plata airport, everything to his left was a blur.
Now, months later and a thousand miles west, Nick was operating at a serious disadvantage. He had to squeeze his left eye shut to get a focus on his laptop screen, where, at this moment, little men with guns were scrambling through a fog of green pixels. Nick squinted and hammered at his keyboard; on the other side of a makeshift worktable, Jim beat harder and faster on his own laptop, which was SCSIed to Nick's. For the first time in their 20-year friendship, four-eyed Jim had better vision.
Suddenly, a man with a knife popped out of the mist on Nick's screen, and his miniature, Kevlar-clad stand-in was down and leaking red. "Bitch," Jim snorted, "tape that eye shut. I'm tired of capping your ass." Thus ended the 100th game of Delta Force 2 in the short, shaky existence of Belize Computer Solutions.
Jim, 32, and Nick, 31, were living a get-rich-quick dream, but they had to be wondering when the rich and quick would start. They'd signed a lease for a flimsy barracks on the soggy, buggy plains outside Belize City, where they planned to launch an Internet casino. They'd passed on the Dominican Republic and three other island gambling havens to bet the $30,000 for a gaming license - and four times that in startup funds borrowed from friends and family - on one of the new mainland entries in the offshore business. The Central American backwater of Belize was inviting foreigners to set up Web and phone gambling firms behind the barbed wire of one of its free-trade enclaves, a half-finished complex just off the Northern Highway in the scrubby cow pastures near the airport. It was called the Export Processing Zone, and Jim and Nick figured to become the first Net-casino operators to make a killing there. So far all they'd done was kill each other a million times in Delta Force.
Not so long ago, Nick was a pen-stealing, clock-watching office temp in Washington, DC. A job was something he ditched to go windsurfing. He masked his wry smarts with knee-jerk dudespeak - every third sentence was "Right on!" or "No worries!" He was the sort of slacker who ran out on his utility bills.
Then his childhood buddy Jim floated a proposal. A preppy, dark-haired mechanical engineer, Jim had taught himself the basics of coding, and said he would write a Net gaming program complete with roulette, blackjack, craps, the works. He'd assemble six figures of backing and create an offshore corporation called Belize Computer Solutions. He'd rent space in the EPZ and beam his casino onto the Net via satellite. He'd build the virtual casino - all Nick had to do was stay in Belize and run it.
But they hadn't factored enough mañana into the equation. They'd flown down from DC in the first few days of May. By Wednesday the 10th, Jim, Nick, their lawyer Roger, and their hired-gun hardware whiz Roland had spent nearly a week perched in camp chairs on their bare concrete floor, stomping the spiders that crawled under the shoddy wooden office door, and waiting.
The skeeters buzzed, lizards ran in the brush, and three inches of rain leaked through the shoddy walls of their prison, and still their servers didn't arrive. They were held up in customs. The water and septic tank hadn't been connected. The plywood crate full of Nick's belongings, shipped from Miami via freighter, had disappeared down some bureaucratic black hole. There was no phone, and no link to the Net, though the transponder control room was only a few feet away. Jim in his prepwear, bald Nick in straw hat and sandals, they sat across from each other at the homemade table and listened to Roger snore away the afternoons.
For the first few days they laughed about it, and repeated, mockingly, the mantra of the Caribbean: "Soon come." They took showers and wasted the evenings in the tin-roofed blockhouse next door, the home of their new friend Mickey. Pink-faced and keg-bellied, Mickey was a middle-aged refugee from Key West. He'd been working for an offshore sports book in Venezuela when his boss decided the new presidente was a Commie and moved the company to Belize. Now Mickey was an overseer on the EPZ cyberplantation. His job was to watch the satellite links and the $30,000 machine that taped every call to the bookie's round-the-clock reps. Jim and Nick relied on Mickey for instant parties at odd hours, though Mickey had a bad habit of waving a loaded .38 when he got too stoked. He was especially manic after visits from Neville the Fixer, a Jheri-Curled local who could get anything for Zone expats - repo'd freezers, iron window bars, fuel for chemical vices.
As the days slipped by, Mickey's party room got tired and the jokes got bitter. Each morning Jim and Nick woke up on their air mattresses, put on some clothes, and looked out the window. In the distance, brush and garbage burned. In their front yard, workmen sat underneath the mango trees, knocking fruit from the branches, or listening to the radio, but not running cable from Jim's office to the satellite dish.
"I'm starting to see the world through crosshairs," muttered Jim.
"I'm becoming bwana," admitted Nick. "The man in the white suit with the whip." His neocolonial twinges troubled him, but trying to launch a fast business in a slow country was driving him nuts.
Jim and Nick had planned to get the site up by May 15. Now they wondered if they'd paid for a very expensive and very bad Caribbean vacation. The million-dollar-a-month blackjack gross they'd heard about was starting to seem further and further away.
Then, just before sunset on Friday, May 12, when the boys of Belize Computer Solutions were deciding where to go drinking, they heard a knock on the door. The water had been turned on. The crate stuffed with Nick's life had been pried loose from the docks. And Ernesto the Customs Broker and a posse of helpers appeared with three black Samsonites. The servers had arrived.
Jim and Nick pulled three beers from an increasingly gamy cooler and made a toast. "Finally," said Jim, clinking bottles with Ernesto.
"Soon come, mon," joked Nick, and tipped back his Belikin.
After Ernesto left, Jim inspected the contents of the Samsonites. There was a dent in one of the machines. A memory board had come loose. When he reattached it and fired up the server, the board didn't register. It was dead, and it was Friday. A $1,000 replacement would have to be FedExed from California - but it couldn't happen until Monday, which meant it wouldn't reach Belize until Wednesday, if then.
Jim started banging his forehead against the barracks wall - not too hard, lest the wall collapse. "Is my head flat yet?" he asked. "I've been doing this all week. Cap me. Somebody please cap me."
Web casinos come wrapped in high concepts, everything from ancient Egyptian themes to anime to PamelaAndersonCasino.com. Underneath the graphics, though, the sites don't differ much. The average homepage features an icon for a sports book on one side and gaming on the other, with "Open an Account" and "Download Now" blinking somewhere in between.
A first-time user makes a deposit with the site's offshore bank via wire, credit card, or check, and then downloads the gambling software. The user enters a virtual casino lobby plastered with icons for dozens of games from slots to Pai Gow poker.
With the Starnet software used by a quarter of all online casinos, clicking Blackjack fills the screen with a green felt tabletop. At the table's upper edge, two hands hold a deck of cards. At lower left, a button says Deal, and to the right sit stacks of chips. Click a chip, click Deal, and the hands sling cards on the felt.
Just to get started, it can take 20 minutes for this 5-Mbyte program and others like it to drip onto your hard drive, and days to set up the offshore bank account. Apparently, gamblers are patient people: According to Bear Stearns, 18 million of them have waited through enough downloads to make Net gaming worth $2.2 billion annually, a total projected to triple by 2002. In 1998, a Cook Islands-based Web site called Casinos of the South Pacific claimed to pull down $4 million within four days of its launch. The promise of easy, semi-licit money has led to the registration of about 1,000 gaming URLs, up from 40 just three years ago.
The money was what attracted Jim and Nick. They resented all the stock-option millionaires they knew - early-thirties peers who got rich in the northern Virginia silicon rush - and Jim was always hatching get-rich schemes that inevitably costarred passive, careerless Nick as his Beavis. This time was different, in that he'd followed through.
For Jim, at least, the shadiness of gambling was also appealing. Despite - or perhaps because of - his years in Catholic and military schools, he liked the idea of slightly filthy lucre. "Vice makes the most money," he told Nick. He'd missed the online porn craze, so he latched on to gambling.
But Jim wasn't really cut out for shadiness. This was obvious as soon as he made his first friend in Belize, who simultaneously intrigued and unnerved him. Mickey seemed hyper but harmless, except for the time he dropped his gun and put a hollowpoint through his tape deck - and the time he'd served in prison for drug trafficking. Jim was a high-paid and geeky government consultant; Mickey had honed his computer chops as a pennies-an-hour clerk at Joliet.
Jim liked hanging out with the other three dozen expats in the EPZ, but they could tell he didn't fit in. The bookies who killed time at Mickey's still did business the way they'd done it in the States. They called their clients "suckers" and sent canned hams to the biggest suckers at Christmas; the only difference was that now the suckers emailed or phoned via satellite, and the bookies' cigars were Cuban. One bookie's girlfriend, big breasts straining at her T-shirt, took a single look at Jim, in his loafers and Dockers, and said, "Who's the stiff guy?"
When the Net gambling industry started in the mid-'90s, operators gravitated to island nations that already hosted old-school offshore 1-800 telephone bookies. Today, most gaming sites park their servers somewhere in the Caribbean basin. The island of Antigua got into the business in 1996 and is now the egambling capital. It's the official home of one in five sites, such as InterCasino, the world's most popular, which has 230,000 registered users and reportedly earns several million dollars a month. Antigua hosts twice as many gaming URLs as runner-up St. Kitts, a nearby micronation.
In the past three years, other jurisdictions have caught on. There are now 53 countries, including Britain and Australia, that either license or tolerate online gambling, and the industry has spread to the Central American mainland, where it's cheaper to do business than on an island. Belize licensed its first Web site, a virtual bingo hall, in the summer of 1999. Now there are three dozen gaming sites of all stripes whirring on machines in the EPZ.
Jim and Nick didn't choose the Zone because they preferred flat, humid Belize to equally humid DC. They went offshore because onshore wasn't an option. Though half of all Net gamblers live in the US, Net gambling is illegal there. At least, it seems to be forbidden. Online gambling is typical of cyberspace in that it combines exponential growth with a lack of clear legal precedent.
A few states have had success prosecuting Web gaming operations under pre-Internet gambling prohibitions. Minnesota sued an offshore sports book before it could launch in 1995, and three years later 37 states joined forces to shut down an Idaho-based online tribal lottery. In 1998, the state of New York ordered a casino in Antigua to stop taking online bets from New York residents. These states argue that the act of gambling takes place in both the casino's server and the customer's computer, and that even though the operator is based in another country, it has broken the state law against phone wagering.
But most states have yet to add cyberlanguage to their gaming laws, and the federal situation is murkier still. According to the Justice Department, the 1961 Interstate Wire Act - which prohibits making bets over a phone line - also applies to the Net. The government insists that online gambling operations - even if their servers sit offshore - cannot legally take wagers that originate inside the US. Unfortunately for the Feds, the Wire Act doesn't mention the Web by name, and they've had trouble making their interpretation stick.
The most famous Web gaming case to date emerged from a 1998 FBI sting of offshore sports books. A US attorney in Manhattan indicted 21 people working for six Web sites in Curaçao, Antigua, Costa Rica, and the Dominican Republic. The best-known business was World Sports Exchange, an enticingly URLed sports book, www.wsex.com, launched in 1996 by three former options traders. Two of them remain in Antigua, still taking bets on wsex.com. The third, Jay Cohen, returned to the States last February to fight the charges in court. He lost, and is currently appealing the verdict.
A year earlier, federal attorneys in Texas convicted two offshore bookies only to see the convictions tossed by an appeals judge who said no laws had been broken. Cohen has high hopes for his own appeal, and the US has yet to indict any Web casinos, because the Wire Act mentions only bets on sporting events. When the law was written, no one foresaw shooting craps over a phone line.
Foes of Web gaming are trying to plug the gaps in the Wire Act. Brick-and-mortar gambling interests have pushed their political allies to squelch the online competition. An amended version of the Wire Act sponsored by US Senator Jon Kyl (R-Arizona) passed the Senate in 1998 but stalled in the House. Another version died last July. Eventually, some form of the Kyl Bill will probably pass, since a curb on Net gaming enjoys broad bipartisan support. "You can't hide online," Attorney General Janet Reno has warned, "and you can't hide offshore."
In the meantime, that's exactly what the gamblers are doing, with apparent success. The Web gaming industry has matured quickly. The original sites were built by hands-on entrepreneurs, people who wrote the code and programmed the servers. As the industry has spread around the world, spawning conventions and trade magazines, many of those pioneers have morphed into software suppliers, who sell turnkey products and also operate their own casinos and sports books under spin-off corporations. For these slick offerings, refined over the last few years, companies like Microgaming and CryptoLogic charge would-be casino operators as much as $300,000 up-front, plus 50 percent of the net.
Jim had no intention of paying such huge prices, but he did find them inspiring. "If they're charging that kind of criminal money and getting away with it," he reasoned, "then we want to be in the software business." Thus his get-rich plan had two parts. First he would set up and operate his own casino, making money as he debugged and refined his casino program. Then he would make a bigger bundle selling the software to others.
But Jim knew there were question marks. For one thing, he wasn't really sure how much money there might be in Web gaming, because by design offshore businesses don't divulge a wealth of verifiable earnings data. Some of the big firms are publicly held and issue annual reports, but most casinos are privately owned and trundle money through offshore banks. Jim and Nick had heard the claims - millions in profits for operators, millions more for the software developers. But they didn't actually know anyone who was in the business. Almost as soon as he arrived in Belize, Nick began to ask a troubling question.
"Is anybody," he wanted to know, "really making money at this?"
Tuesday night was Sun Server Eve. It called for drinking, because after the memory board was pulled out of the FedEx box, Belize Computer Solutions would be in lockdown. Jim and Roland would spend every waking hour for days linking the Oracle database - and its random number generator - to the Cold Fusion middleware to the Flash-based game software. This was their final chance to recreate.
Besides, it was Roger-the-lawyer's fortysomethingth birthday and his last night in Belize. So the boys decided to celebrate with a night at Raul's Rosegarden, a squat cement cantina/whorehouse on the Northern Highway, halfway between Belize City and the Zone. Jim told Roger: "Surrender your body to your friends."
Roger brightened. "That means I can't be held responsible for anything I do."
By 11, after some prelims, Jim's team was propped in white plastic chairs in front of Raul's waist-high stage. Above them, a mestizo girl, probably 17, probably imported from Guatemala, danced naked to 100 decibels of "Mambo No. 5" as a giant Bob Marley head watched from a mural. Ringing the stage and filling the back booths were smooth-cheeked Anglo soldiers little older than the stripper. Belize, a former UK colony, still hosted British army jungle training, and the bored Tommies appreciated the $2.50 cover at Raul's. When the strippers left the stage they became hookers, and now one of the Brits was trying to weasel $5 off the Guatemalan girl's already low price of $25.
"Look, he's haggling!" shouted Nick, incredulous.
"I wonder what kind of a cut the house gets," Jim mused.
Then Jim heard a thunk, and something wet splashed his khakis. To his right, Roger was slumped chin-to-chest in his plastic chair. He'd fallen asleep in the jet-engine noise of Raul's, and dropped a full Belikin. It wasn't even midnight.
Roger was trying to hang with computer nerds 10 years his junior because he'd run head-on into midlife. He was thinking about ditching DC to join the hordes of drinking, smoking, single American men who were scrounging a second chance out of Belize, enjoying the freedom, the right to drive with an open beer and without a seat belt.
Jim had enlisted Roger because he wanted to try, at least, to run offshore gambling legally. Some Zonesters had a damn-the-consequences attitude about the possibility of prosecution back in the US, but not Jim: The suburban dad inside him was too cautious for that. He preferred to be a law-abiding vice lord, so hiring a lawyer was the first item in his business plan.
Roger reviewed the relevant gaming laws state by state, and told Jim where the problems were. Jim decided to minimize the potential for indictment by building firewalls that would block users from states that had either prosecuted offshore operations - like Minnesota and New York - or looked like they might. He would also forgo a sports book. Though more lucrative than casinos, sports books drew heat from the Feds.
Roger then devised a kosher means of bringing the profits back to the US. Jim lived in northern Virginia, and to his relief, Roger read Virginia law as being favorable to offshore Net gaming. Virginia's statute, though untested, seemed to consider the act of gambling to lie in the casino server alone, and not in the bettor's computer. Roger advised Jim that he could funnel money from offshore gambling into a specially formed Virginia corporation, as long as he paid taxes.
Reassured, Jim started coding. He programmed the whole casino on his own, with help from some DC geeks. He built the database, which ran the games; the middleware, which linked the gambler to the database; and the graphic interface, the spinning roulette wheel and rolling dice that would entice players into opening an account. The end result was workable but fairly generic, a casino with conservative graphics and the usual range of games. Its only personality came from a few quasi-Monte Carlo touches, like a banner reading CASINO SUR LA MER.
Next, Jim and Nick went to Network Solutions to get a domain name, but any remotely plausible name had been snapped up: Astrobet, Joyluckcasino, Sexino, Aceinthehole. Desperate, they experimented with pornographic typos - casinosluts, instead of casinoslots - and still struck out. Finally, unhappily, they settled for 33 Black, which at least was the name of a roulette number.
To figure out where 33 Black's servers should come to rest, Jim and Nick read stacks of brochures from prospective host nations and reams of news reports. They ruled out the first-world comforts of Britain and Australia, because those countries were far away and heavily taxed. They performed visual trace routing, using a computer program to draw a line from server to satellite to server until they found the home ISPs of their favorite Web casinos. Many of them turned out to originate from the Leeward Islands of Antigua, Dominica, and St. Kitts, and from the Dominican Republic.
Jim and Nick had heard bad things about the Leewards - hurricanes, $100,000 gaming licenses - so they flew to the Dominican Republic. Their first prospecting trip was a bust. Nick liked the windsurfing, but the country didn't sanction Internet gambling. The government didn't interfere, usually, but it didn't give explicit permission. Unlike some of the other offshore cowboys, Jim needed a piece of paper saying his casino was legit, and that need, plus the low cost of living, the relatively low cost of the gaming license, positive word of mouth, and great scuba diving, led 33 Black to Belize.
On March 2, Jim, Nick, and Roger found themselves on Barrack Road in Belize City, in an office lined with law books, ready to buy bandwidth and sign a lease. Across from them at a conference table sat a handsome, black-haired, jocular man of indeterminate ethnicity and age: Glenn Godfrey, Belize's former attorney general. Godfrey, a Stanford grad, was one of the richest and most powerful men in a country with only 250,000 residents, a pillar of the People's United Party, and the father of the EPZ.
Godfrey started by telling the boys that he'd decided to court offshore bookies and casinos when he saw how they'd been mishandled in other Caribbean countries. "They were being treated like poor relatives," he smiled. "Poor relatives with money."
For starters, the more established host nations couldn't keep their hands off the golden goose's neck. Some officials didn't quite understand what cyberspace was, Godfrey said, or that if you squeezed Net entrepreneurs too hard for graft or taxes, they could throw their servers in a Samsonite and fly away. "They didn't realize the potential of the industry," he said. "They were always with their hands out."
Godfrey gave examples. "Antigua tried to impose a 2 percent tax. People said, 'You do that, we'll leave.' There was also a recent proposal in Antigua that you would have to send all your communications through a central government server." Jim, Nick, and Roger looked suitably shocked.
"In Costa Rica," Godfrey continued, "they don't give you a license. The local municipality will give you a license to do data processing, but the federal government doesn't recognize it, so they'll visit you from time to time." Another grin. "On Margarita Island [Venezuela], they decided that any sites had to be affiliated with a hotel of more than 300 rooms. The only hotel with more than 300 rooms," he paused, "belonged to a friend of the president."
Godfrey believed the biggest shortcoming in the English-speaking casino centers, like Antigua and St. Kitts, was the expense and inefficiency of Cable & Wireless, the regional phone monopoly. In the summer of 1999, he convinced his friends in government to make Web casinos legal in the EPZ, and then grant him a concession that would lure clients away from the traditional gaming nations. Tenants would pay no import duties or taxes, standard for free trade zones, but they would also buy their bandwidth directly from Godfrey, instead of from Belize Telecommunications Limited, the leading local bandwidth provider. Godfrey summed up his pitch: "One, we have licensing. Two, we have a tax-free environment. Three, we have affordable, reliable bandwidth."
Godfrey said he didn't care what casino operators in Belize did with their profits. The cash would pass through an offshore bank that sits right under his office, and which he owns, but it wasn't his problem if not everyone was as Boy Scoutish as Jim about paying the IRS. Belize only extradites for what the ex-attorney general called "crimes against humanity."
"If a man doesn't want to pay his taxes," he said, "that's not a crime against humanity. That's between him and his government."
In the months following the March 2 meeting, Roger and Godfrey faxed each other until they agreed on lease terms for an office in the EPZ. The rate was not what one usually pays for 1,000 square feet on the first floor with a field full of Brahma cattle next door. "It's on par with what you'd pay for downtown space in a major American city," grimaced Jim, declining to give a figure. "Not Manhattan, but Atlanta." Jim also agreed to pay Godfrey's company, Data Pro, $3,500 a month for 256K of bandwidth, comparable to what he'd been quoted in the Dominican Republic.
With Nick, Roger, and Roland in tow, Jim flew back to Belize in May to set up shop in the Zone. He was already into 33 Black for a hundred grand, and he'd just applied for a home equity loan, but he expected to be earning a 65 percent net return within a year. And he hoped that soon after that he'd be ready for phase two - selling his software. Everything was on track. According to the current rules of Net gaming, however - rules he would learn soon enough - he'd done nearly everything wrong.
Jim had promised a young woman at the FedEx office on Barrack Road a pint of Häagen-Dazs if the memory board came in late on Wednesday and she stuck around until he retrieved it. She was supposed to call him on his BTL cell phone, which usually worked, but the afternoon was fading and he hadn't heard a ring.
While he waited, he and Nick lolled on the wooden deck of the EPZ's cloudy swimming pool, across the highway from their own more humble digs. Nick was bumming smokes from Hugh, a Canadian with a shaved head who was taking a break from his office next to the pool. Hugh was a sales rep for GamingTech, the casino software division of Calgary-based Chartwell Technology. GamingTech had been based in the EPZ since December, and a dozen of its clients were launched and taking bets around the region, including three in Belize.
The door to the GamingTech office opened. Out strode Hugh's boss, Richard - his head nearly as hairless as Hugh's, a tiny stud in his left earlobe. He had a fresh fax in his hand, and it wasn't work-related.
"Hey, Nick," he deadpanned, "my mom just sent me my baby picture." He passed the paper to Nick. It was a doctored photo of an infant with a very grown-up penis. Locker-room giggles all around.
Then Jim asked Hugh what he'd been up to pre-Chartwell, and a curtain came down. "I was pursuing other projects," he purred in circumspect offshorespeak, dragging on a menthol. He sized up Jim, still in khakis and black loafers, and returned serve. "You're from northern Virginia? Isn't that where the CIA is based?"
33 Black had been assigned to the smaller, dowdier, southern half of the EPZ. Construction trash filled the yard of a three-building, tile-roofed complex they shared with an open-air snack bar, a minivan-load of old-school bookies, and Mickey. Jim et al. had barely blown up their air mattresses before they decided the grass was greener on the other side of the EPZ. And it was, literally.
Across the highway, EPZ North had a manicured lawn, as well as a security guard, a metal gate with the Zone's name in gold letters, and three big haciendoid houses. Before Godfrey came along, the spread had been a time-share, but when no one wanted condos an hour from the nearest beach, it went into receivership.
Almost all the other gaming outfits, like Chartwell, were lodged on the north side. That fact, and the swimming pool, drew Jim, Nick, and the boys across the street again and again. They asked for and received advice on where to buy something to eat besides deep-fried Chinese chicken, and how to Get Things Done in Belize. But while the other cyberexpats were casino operators like themselves, that's where the similarities ended.
It wasn't just that the North Siders were wary; it was that, in a sense, they were in a different business altogether. Along with Jim and Nick, there was one other set of gaming novices on the EPZ grounds, a Midwestern duo named Brent and Melissa who were running a casino using GamingTech/Chartwell software. Otherwise, the expats were offshore veterans, refugees from the Leewards who'd moved beyond the stage of operating mere mom-and-pop gaming sites.
The sales pitch on GamingTech's corporate Web site explained what was actually happening in the Zone. "We can put you in contact with several third parties," it told potential casino operators, "who can provide you with the following services: Host location for server ... customer support ... bandwidth ... gaming license ... banking." The "third parties" were Chartwell's neighbor companies in the Zone - Windnsea (a company represented by an earringed Californian named Craig Williamson) and Jungle Management (two more Californians, named Adam and Ross). Chartwell was a software supplier, but Jungle and Windnsea were repackagers, selling a wider menu of services. Their services allowed Chartwell's clients to become owners of Zone casinos without suffering through a tenth of Jim's chores. In fact, their clients didn't even need to come to Belize.
Windnsea and Jungle would take their clients' money and buy servers, bandwidth, licenses, and idiotproof software. For an additional fee, the companies would run the sites, answer questions, bill losers, and send money to winners. The nominal owners could stay home, monitor their sites via mirrored servers, if they liked, or pay no attention at all. The only work these passive "owners" had to do was sign their names. In effect, they were taking a cut of gaming proceeds from Windnsea and Jungle in return for assuming legal and financial risk.
Williamson was running 27 servers out of the plushest hacienda, nearly all of them for absentee owners. When he first got into offshore gaming, however, there was nothing passive about it. In early 1998, he'd left a San Diego defense industry firm to start a bingo site in Antigua, back when offshore still meant do-it-yourself.
"We had to 'find a way' for everything," he recalled. "Find a way to ship the servers, find a way to get them through customs, find someone with a pickup truck to carry a 1,200-pound server rack up the hill to the Cable & Wireless building, dragging the rear bumper on the dirt road the whole way."
Meanwhile, reliable bandwidth, and lots of it, had become increasingly crucial - the growing use of Java, Shockwave, and Flash meant more burden on the uplink. After a year and two months, Williamson gave up on Antigua and called Glenn Godfrey.
When he moved to Belize, Williamson dumped his original bingo software and decided to package other people's products, concentrating on third-party business. Most of his servers are now in Belize, but he's kept a couple in Antigua, and has already set up a few in Net gaming's next frontier territory: Nicaragua. (All his customer service staff, though, is in Belize.) Williamson was doing everything from hands-off "colocating," à la the St. Kitts deal, to full-service management for absentees.
He changed his approach because he sensed a shift in the industry. At a 1999 Internet gaming convention in Vancouver, British Columbia, he kept meeting a certain kind of greenhorn. "You could tell they weren't people who could strap servers to their backs and go down to a third-world country and launch a site themselves. But they had capital and they wanted to own a casino."
Jim's DIY ethic, by contrast, seemed quaint. It was San Jose garage mentality circa 1980. He'd written his own code when he could've written a check. He was making 33 Black more of a bushwhacking adventure than it probably needed to be. But that wasn't the only thing he'd done wrong.
First, by forsaking a sports book, he'd shut off 45 percent of his potential revenue. There are twice as many casinos as bookmakers, but most ebets are still sports bets, with an emphasis on football. Bookmaking also helps a casino operator build trust with customers. The average sucker can't hack a blackjack program to see if it's crooked, but he knows whether he covered a spread. An honest sports book is a good promo for any linked casino.
But 33 Black's biggest problem was its lack of investment capital. In the past (which in online gaming means 1996), carving out a home in the market was cheaper. "In the early days," says Web gaming analyst Sebastian Sinclair of Christiansen Capital Advisors, "you could spend $80,000 on marketing and do $4 million the first year." The annual cost of doing business was as low as $240,000, most of it spent trolling for customers. Now, says Sinclair, "the market isn't growing fast enough to support the number of startups." Gone is the era in which a site could earn millions within months, so name recognition has become crucial. Marketing is more important, and more expensive, than ever.
Sue Schneider of the Interactive Gaming Council, the industry's trade group, estimates that a fledgling casino needs to spend $50,000 per month to attract a viable level of traffic. Sinclair and fellow analyst Marc Falcone of Bear Stearns set the bar much higher. Falcone thinks an annual marketing budget in the millions is more realistic; Sinclair pegs it at $6 million-plus. "If you want to play this game to win," says Sinclair, "you've got to come on with a bang."
Schneider, who doubles as a casino broker, has handled the sales of several established, first-generation casinos that she ranks among the top 20 in earnings. They claimed monthly nets of $750,000 to a million-plus, and the big three - InterCasino, Casino on Net, and Golden Palace - rake in those totals weekly. For Jim and Nick and other recent entrants, the greenback printing press is closed. Sinclair guesses that the newbies are struggling to haul in a million a year - and that's if they succeed. In its annual report last spring, publicly traded software firm Starnet listed $1.5 million in "bad debts" against revenues of $14 million. The debts were delinquent payments from casinos that didn't make it.
What did all this mean for Jim and Nick? Probably that they were entering the arena underfunded and a little late, but just in time to lose their ass.
Sun Server Day came and went, but still no memory board. With few computer chores to keep them busy, the men of 33 Black piled into their rented Mitsubishi pickup and drove to Belize City, where they bought mops and scrub brushes and gene-curdling Latin American pesticides that would be illegal in the US. They were going to spend their downtime scouring the filth from the sprawling, decrepit apartment they'd rented on the outskirts of town.
Bali Gardens is a neighborhood four and a half miles north of Belize City and ten miles south of the Zone. According to its creation myth, a decade earlier a Taiwanese millionaire had banished his daughter to Belize to keep her away from a boy. She consoled herself by erecting a dozen weird cement mansions on a thin strip of land between the Northern Highway and the shallow Caribbean. In a sea-level town spongier than New Orleans, locals had shunned the acreage as especially unstable. Within months, Bali Gardens was sinking. Cracks split the walls. The huge boxes slid off their foundations, and blue crabs dug holes in the yards.
Shell-shocked buildings and palmy horizons - it reminded Jim and Nick of a Vietnam setting from Full Metal Jacket. They renamed it all Kubrickville, and rented a flat in its weirdest pile, a three-story yellow castle with an actual turret on top.
With five bedrooms and three porches, their second-floor spread felt like a ranch home in the sky. No one else lived in the building - but then, no one had lived there for at least four years, and it showed.
Jim and Nick leaned on their fresh new mops, unsure where to start. The air stank of rotten fish sauce, bugs lay dead in mounds, and tropical crud caked every surface. Some of the dirt looked ominous. "What is that?" shuddered Nick, pointing to a huge brown stain spattered across the kitchen wall. "Call the forensics unit," joked Jim.
It was a little too much like Khe Sanh, perhaps, but the Castle was the best place for an expat. In Kubrickville, there were four other houses full of EPZers. Ocean breezes and cheap rents made the crumbling hulks a natural for short-term residents. The SUVs in the driveways, the security guard and gate, the cluster of gringos - it had a certain circled-wagon sahib vibe, like a hardship-post embassy compound.
By Friday night, the memory board had finally arrived, but instead of heading to the Zone to work, the boys took a case of beer up on the Castle roof. A half-dozen Zonians joined them, killing the hours before the weekly mass pilgrimage to the Eden dance club. Lisa, an employee of Jungle Management, was there, as was smooth-skulled Hugh from GamingTech. So was the staff of the fledgling casino WagerWorldWide - Brent and Melissa.
Soon after hitting Belize, Jim and Nick had gravitated to Brent, a tall and stocky Midwesterner with a long goatee and a habit of blasting rap metal through his Kubrickville window. So far Brent was the only other hands-on Web-gaming novice they'd met. Because he wasn't trying to sell Jim and Nick anything, he was more open than some of the other expats about the real level of profit behind the hype, and about his résumé. When they got him up on the roof, they pumped him for info. Brent popped the top off a beer with a car key, and explained what he was doing in Belize.
For two hours a day in the summer of '99, he'd sold copiers in his Midwestern hometown. The rest of the time he was online, researching offshore gambling. Eventually he came across Belize and Glenn Godfrey. "I wanted to get in this business," Brent said, leaning against the ledge of the Castle, "and this was a virgin country that I felt I could trust. I wouldn't get munched up by the big guys, and I could swing the cost of the gaming license."
He cashed in everything he owned, borrowed from everybody he knew, and came up with $100,000. He had to buy his software from Chartwell, but Adam, the guy at Jungle, helped him bargain the up-front payment down to $15,000. Adam lent him a cranny in Jungle's office. Brent, a computer neophyte, installed NT by himself, and WagerWorldWide.com went up on March 6.
As small-timers, Brent and Melissa focused on intense customer service. They refunded money to gamblers who were simply too dumb or underRAMed to handle their software. They instant-messaged their users, and played the role of different help-desk reps - Brent became "Heather" - so the casino would seem like it had a staff.
It was all very seat-of-the-pants; they even got themselves a summer intern, Fred, an MBA student from a college in the Western US. Lest you think, however, that Brent was a carbon copy of Jim, or one of those second-wave high-risk investors Craig Williamson was touting, you should know that his road to Belize started when he followed up on some iffy entrepreneurial advice he got from an acquaintance. "Start a raffle," the guy said. "Sell tickets at $125 a pop and raffle off his-and-hers Mercedes. Don't buy the cars until you're in the black."
Brent gave it a shot. He'd barely gotten started when a letter arrived from his state's attorney general. It said, "You're operating a game of chance. Cease and desist now." The letter convinced him that games of chance were best pursued offshore.
Underneath it all, Brent was just a younger, less-pickled version of your factory-issue pirate expat. He was at home in the gray areas of offshore life. After the Kubrickville rooftop party, he and Jim and Nick reconvened at Eden, taking chairs at the designated EPZ table on the edge of the dance floor. As bass-boosted Latin pop boomed out of the speakers, courtiers of every hue from Belize's multiethnic jumble, including Mickey and Neville the Fixer, dropped by to pay their respects.
"I could stay in Belize forever," Brent beamed. And he just might. "I've taken the necessary precautions," he shrugged, alluding to potential legal problems, "but if I have to give up my US citizenship, and if I can't go home, so be it."
Jim and Nick weren't taking that kind of gamble, but they had plenty of other problems. They were out on a limb financially, and it worried them that Brent, who was already up and running, didn't seem to be getting rich. By May, WagerWorldWide had its own office, 350 customers, and a fistful of maxed-out credit cards. Brent and Melissa were struggling to make their monthly payments to Chartwell, which had demanded a heavier-than-normal cut of the take in return for the up-front discount. Every other spare cent went to marketing - spamming, email address harvesting, promotions on other sites. One early, costly ad campaign had brought 11,000 clickthroughs - and not a single registered customer.
"We were sweating one day," recalled Brent. "Somebody got up two grand on us in blackjack. We didn't want to write that check. Luckily we didn't have to."
It was a hard slog, completely contrary to their naive expectation of instant wealth. If WagerWorldWide was like most online casinos, its 350 customers would be worth a mere $250 in profits each. It was a long way from becoming InterCasino, with its $50,000 winners and promo trips to Vegas.
Brent responded by doing all the things Web gaming operators do to make a struggling site profitable. He added an online sports book. Thinking shelf space, he also started a second gaming site called bigdogcasino.com. To amortize the cost of marketing and software, most operators cram another casino or six onto their servers, since the cost of a second or third site is nothing compared with the cost of the first one. Which leads to another problem: With 1,000 casinos in existence and more coming all the time, not only are there too many competitors entering the market, but the sites already up and running are prone to mitosis.
Are the operators adding sites because they're making so much money, or so little? No one knows, but cloning, like third-party hosting and the old hands' shift into software sales, raises questions about gaming's profitability. Does the money lie in running a casino, or in convincing someone else there's money to be made running a casino? Another unknown. Jim wanted to be in the gaming-software biz, but there were 40 such software firms and repackagers last year. Now there are 60, and the growth continues to outpace the number of new egamblers logging on. Proliferation has driven the up-front price of a gaming program down below $100,000, drawing fresh recruits into a crowded business. The software companies are beckoning the likes of WagerWorldWide forward, even as several developments on the horizon make the future look scary.
First, the traditional offshore nations have an image problem. Jim may like to rub up against shady glamour, but some potential gamblers associate the Caribbean with money laundering. In the long run, most first-world consumers will want to send their money to a business with a first-world address. Increasingly, they can, as more Web sites set up in Australia, the UK, and other reputable-sounding places. Those countries test and regulate their casinos, which makes consumers feel safer.
If the US were to enter the market, consumers would feel really safe. And the US will inevitably emerge from its legal murk. When it does, Craig Williamson's world of secondhand offshore gamblers may be pushed aside. He himself had predicted what would happen. "The second wave coming to this industry," he'd said, "is the people who want to put the money in but don't want to be here. The third wave is the institutional investor." In gambling, the institutional investors are behemoths from Vegas.
The Kyl Bill passed the Senate 90 to 10. It died in the House because too many different brick-and-mortar gambling interests wanted to carve out exceptions for themselves. The manner of its death bodes ill for any comprehensive Web gaming ban: It was a clear sign that land-based US gaming interests realize there's money in the Web. While they may want egambling regulated, and the offshore upstarts quashed, they don't want to forfeit their own cut of future profits. They sense that the Net could be an extension of their empire, and this possibility means trouble for the little guys. The land-based casinos' trade groups officially oppose Web gaming. The membership, however, is split, with more and more casinos favoring Web gaming - or at least seeing it as unavoidable. They don't want to be left behind. The Nevada Gaming Commission may fear and oppose Web casinos, but it has had to block some of its eager big-name license-holders from entering the cyber realm.
On the Web, brand is king. If there's ever a Bally's or a Trump online, these established names could lend Web gaming a stamp of respectability. Users who balked at giving their credit card number to some unknown URL wouldn't think twice about losing money to a familiar logo. "Why gamble at Jim's Caribbean Casino," asks Marc Falcone, "when you can go to a name you know?"
The process is well under way everywhere but North America. European goliaths like William Hill and Ladbrokes - established, legal, trusted megabookies - have launched sports betting sites in the past year. Punters can now place ewagers on soccer games using the same brand-name outfit they visit in person. And both the gaming powerhouses and startups are jockeying to put wireless and interactive-TV apps at their fingertips.
In the US, many land-based casinos are planning ahead for the day when the all-powerful Nevada Gaming Commission and gambling industry trade groups stop saying no. In September, for example, Harrah's inaugurated a play-for-fun gaming site. The dotcom Harrah's will develop a huge customer base, and as soon as the law permits, Harrah's could simply flip a switch and turn those freebie customers into money players.
The old hands of Web gaming know this. Their two commodities are their software and the customer lists from their Web sites, and most have split their companies in half accordingly. When the time comes, they may keep their software halves, but they'll auction off their customer bases to the land-based giants and step out of the way. "They're going to sell out," predicts Sue Schneider. "There isn't anybody in this business who thinks they're in it for the long haul."
Though Falcone and Schneider still give small-time operators a shot, Sebastian Sinclair thinks it's too late for people like Jim and Nick and Brent and Michelle, and perhaps too late for Jim's software dreams as well. 33 Black's best hope is for the legal limbo to continue. Some observers think Web gaming will become legal only after a rerun of Prohibition brought on by the passage of the Kyl Bill, then brought to an end a few years or decades later when the Feds admit that the ban doesn't work. Jim and Nick need the current impasse to last just long enough for them to develop a customer base and debug their software so they can sell and run. If they don't, when the limbo dance is over, they'll be flat on their backs. Squashed like bugs. Crapped out.
Weeks after Jim and Nick toasted the memory board's arrival, 33 Black still hadn't made a cent. The new memory was installed, the cable from the office had reached the satellite dish, and Glenn Godfrey had come through with 16 IP addresses. 33 Black had gone global. It just didn't work yet, thanks to a glitch in the handshake between database and middleware.
While Roland rewrote 16,000 lines of code, Jim and Nick lapsed into Delta Force. The office vibe wobbled between grad school and Jonestown. Duct tape held blue cloth over the windows, blotting out the tropical sun. An 8-inch diving knife stuck straight up out of the wooden table in the middle of the room. Belikin bottles mounted in the corner, and Jim milked Napster for new wave songs from his college days.
Sometimes Jim fiddled with the graphics on his casino program, making the dice roll faster in an Asian game called Sic Bo. Often he and Nick just did busywork, like buying rugs and cheap plastic chairs, or not-so-busywork, like watching DVDs on their laptops. They often traded lines from favorite movies. Jim, powerless to get his casino up, kept barking, "I will cut off your Johnson!" like the gang of German nihilists in The Big Lebowski. Nick quoted from PCU, a dumb comedy about college life in which two Hacky Sack types try to complete a task. "Dude," says one stoner to the other, "this is hard. Let's quit." Nick thought it should be the motto of every egaming startup.
Their casino's birth had been rendered still more painful by the long-departed lawyer, Roger, who'd neglected to get a certain certificate without which 33 Black couldn't do business in Belize. Nick had to schedule a meeting with Belize's trade secretary to sort it out. It was one more glitch in a torrent, most of them software-related. After Roland's rewrite, 33 Black continued to bonk. Finally, when days of delays became weeks, Jim and Roland limped back to the States in late May. If they were headed for a long wrestling match with their code, they wanted to do the grappling at home.
Nick was left alone in the echoing Kubrickville apartment. May turned into July. The expat circuit became old hat to Nick - karaoke night at a bar called Lindbergh's Landing, Eden, Raul's, repeat. His beer-and-rent stipend came from the casino's dwindling startup fund. On occasion, he'd blow some money at the country's sole brick-and-mortar casino, the Princess, where Russian showgirls paraded nightly before a sparse crowd of slot-pulling locals and fannypacked Americans who must've wondered if their cruise ships had stopped in the wrong port. On the weekends, he'd take a prop plane to Belize's most popular beach, the resort island of Ambergris Caye.
During his long, dull days in the Zone, he got fully steeped in the enclave's gossip. Rumors said that the Zone's snack bar had been robbed (true), and that one of the expats had been raped (false). With his 50th birthday looming, party-hearty Mickey was suffering chest pains and considering abstinence. Then there was the outbreak of a mysterious disease that made your head swell up like a gourd. Nick caught it. He scratched around for some bootleg antibiotics to ward off the face bloat and to slay the amoeba that had pulled the ripcord on his gringo bowels. Should anything more serious strike, there was only one prescription: Miami.
He also learned about that other pitfall of cybercolonialism: backbiting. In a country where there's only one of everything, the EPZers ate at the same restaurants, hit the same nightclubs, and tripped over one another at the beach. Adam had wanted to make the forced intimacy 24/7 by having everybody chip in for a weekend condo on Ambergris. But that idea was now stone dead, because Brent and erstwhile mentor Adam had fallen out hard, which was why Brent had moved his server to a new office.
Among other things, they were mad at each other because Adam had tried to make his assistant Lisa sign a cultish contract saying she wouldn't sleep with anyone who worked in the compound. Lisa refused, and started seeing Brent. Earlier, Adam had fired another expat female, and instead of returning to Canada she signed on at Windnsea and began dating a Chartwell guy. In the resulting Zonewide feud, it was Adam and Ross versus everyone, and all of them were neighbors in Kubrickville.
Nick watched the tiny soap opera from a distance, knowing that before long he'd be in the middle of it. The Zone was desperate for new blood. "The girls are looking at me," he sighed, "and wondering if they're going to be sleeping with me. I'm looking at them, wondering the same thing."
Of course, there was always an out. If the incest finally drove Nick or any of the other websters crazy, they could pack up and rebuild somewhere else. Adam and Ross, for example, were making little secret of their distaste for Belize. Rumors had them starting over in another country, or moving to Miami and running Jungle by email.
If they left, they'd be replaced. There were already four new sports books headed for the EPZ from around the Caribbean. Another had just landed from Britain, its middle-aged, mom-and-pop operators nestled in the same corner of the Jungle offices where Brent's server once hummed. Everybody was trying to sell the Brits on a Web casino as well. Windnsea said more casinos, colocators, and absentee vice lords were on the way. Chartwell said it had 750 leads and 27 strong possibles. The proof was in the fresh gringos trickling into the compound, and the 70,000 feet of new office space going up behind the pool. In a symbolic baptism of the EPZ as a gaming destination, one unindicted coconspirator from Antigua's infamous wsex.com had flown in to look at some space. Belize had a shot at becoming the flavor of the year in the ever more mobile, server-in-a-suitcase world of Net gambling.
Whether Jim and Nick would get in on the action remained an open question: At press time, 33 Black had yet to launch. Jim spent his summer working his day job in DC, and tweaking code all night. Sometimes Roland chipped in. Thousands of miles south, Nick was mostly waiting. He'd go to Mickey's at night, then drop by the office to find Jim online. They were spending $3,500 a month on bandwidth so they could instant message. In August, some long distance Delta Force led to a gripey exchange:
BelizeNick, 2:08:14 am: I'd have to assume that something very good is happening, or something very bad ... for you to be in the office this late ... so give, biyotch.
BelizeJim, 2:08:52: I'm HERE, making you rich.
BelizeNick, 2:09:43: Great ... I love the team spirit ... Can you feel the love in the room?____________
Jim explained that he'd just spent four hours downloading a slot machine program. It was 3:09:43 on the East Coast.
BelizeNick, 2:10:50: JAY-sus.
BelizeJim, 2:11:08: I'm HERE, working for you.________
Nick responded with the question that he may still be asking a year from now. "Well then," he typed, "why ain't I RICH?"
