Watching the odds on the Black trial

Imploding lenders and toxic loans

PATRICIA TREBLE April 2 2007
Watching the odds on the Black trial

Imploding lenders and toxic loans

PATRICIA TREBLE April 2 2007

THE BILLIONAIRE PRINCE OF BODOG

Canadian tycoon Calvin Ayre is living a life of frat boy dreams, just ahead of U.S. authorities

BUSINESS

He so wants to be a star. Not a Hollywood star. That level of name recognition, he’d like that. But with respect for his business acumen as well. Like Diddy or Trump, or, better, Richard Branson—equally comfortable in an investment bankers’ office as the boldfaced type of the gossip blogs. It would all be in the name of his brand, of course, of Bodog Entertainment Group SA, which started out as an Internet gambling company but which Ayre is looking to turn into something more.

So today, wearing an expression of patient indulgence under his Bulgari sunglasses, the 45-year-old Ayre is on the Pacific coast of Costa Rica to attend a day of filming for his mixed-martial arts TV show, BodogFight, which is broadcast in Canada on The Fight Network. He arrives in a chartered helicopter, then is chauffeured by bulletproof Hummer to the set. It’s a stunning location—a boxing ring set up on the beach, and serenaded by the Pacific surf. Ayre’s Bodog logo saturates everything from the fighters’ knuckles to the matching bikinis of the women hired to traipse around the ring between rounds. One employee even has Bodog tattooed on his shoulder blades. Aside from Ayre, the events’ only real spectators are a couple of ringside announcers, and Ayre’s harem of Costa Rican pin-up girls, who arrange themselves around him, their chests swollen with saline and their tans crispy like Swiss Chalet chicken.

Over the next six hours, Ayre and the ladies watch 22 fighters kick and punch and knee their way through 11 different bouts. “We’ve taken the sport of mixed-martial arts and wrapped it Bodog-style,” he says. That means injecting a healthy helping of sex appeal. The show’s educational component involves a fighter teaching a mixed-martial arts move to a female student; the student then practises the move on another female student, Ayre says, “to bring in the whole chicks-having-sex thing into the equation.” Plus, two of today’s bouts are all-female affairs. “There’s nothing like a girl fight,” Ayre says, actually rubbing his hands in anticipation. In that one, the fighter starts things off with a cartwheel kick to her opponent’s face. Later, another fighter’s nose is so badly broken he must be airlifted to hospital. “Beat him up!” one cornerman shouts. “Do it for your daughter!”

BY CHRISTOPHER SHULGAN • PHOTOGRAPHS BY NAOMI HARRIS

At one point, the local Costa Rican woman whose hand he caresses throughout the day, dressed in a white cotton sundress and bright red platform heels, asks him, “Why you no cheer?” Ayre explains he doesn’t want to be seen favouring any single fighter. “I just want good entertainment, and no one to get hurt,” he explains. Then he winces as one fighter executes an illegal tag to a particularly sensitive point on his opponent’s midsection. “Not seriously hurt, anyway.”

Ayre and his girlfriends are featured onscreen often through the day’s filming. “There’s Calvin Ayre,” says the announcer. “The reason we’re all here today. Calvin Ayre is the man.'” As an assistant mops his brow, and periodically applies makeup, Ayre sits on an elaborately cushioned dais, constructed of driftwood and palm fronds. Just in case we missed the Hummer and the girls and everything else, just to be extra sure we get that Ayre is the star of this show, the chief Bodog is sitting on a throne.

DURING THE LAST YEAR, Ayre’s name has received top billing in a different drama, one with a storyline not so much to his liking—less sex, higher stakes. Since it first began taking bets in 2000, Ayre’s Bodog has become one of the largest online gambling companies catering to the U.S. market. His was a big industry, with worldwide revenues of about $12 billion a year in 2005, half of that generated from the U.S. market. (All figures in U.S. dollars.) Bodog was well situated—not the

biggest, but a respected player in both poker and sports betting, with revenues estimated in the neighbourhood of $250 million in 2006 and a profit margin around 26 per cent, according to previously published reports. (As a private company, Bodog discloses very little financial information.) And the future looked bright. Standard industry projections suggested the online gambling market would double in size by 2010.

Problem was, the U.S. Department of Justice said it was illegal to accept wagers over the Internet. Technically, in Canada all gambling is illegal except for specifically cleared instances, such as provincial lotteries and casinos. However, legal experts say it’s unclear

whether placing bets online is a criminal act— especially when the bets are placed with an offshore company. Ayre and his competitors got around such technicalities by basing their companies offshore, typically in Antigua or Costa Rica. Many, including Bodog, also housed their servers on Canada’s Kahnawake reserve, where the Mohawk Indians argue their native sovereignty places them outside the jurisdiction of the laws of both Canada and the U.S.

All of which bugged the Yanks, who passed a law last year to make it tougher for their citizens to gamble online. The Unlawful Internet Gambling Enforcement Act took effect at the

start of calendar ’07 and barred U.S. financial institutions from processing gambling-related transactions. Also last year, the U.S. Department ofjustice began arresting executives who worked for online gambling companies. The first, David Carruthers, the CEO of Londonbased Betonsports PLC, was nabbed at Dallas/Fort Worth airport on a layover on his way to Costa Rica on charges of tax evasion and racketeering; after several court appearances, he’s still being held in the States under house arrest, ankle bracelet and all. More recently, just as the company stood to make millions from betting on SuperBowl XLI, American authorities in January nabbed the two Canadian founders of NETeller, a $3-billion publicly

traded e-wallet, similar to PayPal, which functioned as a payment vehicle for gaming firms. The men, former Calgary residents John Lefebvre and Stephen Lawrence, are charged with laundering billions of dollars in transactions through NETeller.

THE DAY’S EVENTS INCLUDE TWO ALL-FEMALE FIGHTS, ‘TO BRING IN THE WHOLE CHICKSHAVING-SEX THING INTO THE EQUATION,’ HE SAYS

The combination of the arrests and the new law roiled the online gaming industry. “It’s caused havoc,” says Alex Igelman, a lawyer specializing in gambling law. Stock market valuations have tumbled to fractions of what they were a year before. The industry’s largest outfit, PartyGaming PLC, is trading at less than a third of the price of its shares

at the start of2006. It, along with such major publicly traded competitors as Sportingbet PLC and BetonSports PLC, all of whom derived most of their business from the U.S., have either exited that market or are in the process of leaving.

Where does the privately held Bodog fit in all this? Ayre cancelled the online gambling conference he threw annually in Las Vegas, then followed the rest of the industry in announcing the refocusing of his expansion efforts to Europe and Asia. Ayre also is moving his operational headquarters and residency to the former British colony of Antigua. Unlike Costa Rica, its government has demonstrated a willingness to protect its online

gambling industry from U.S. law enforcement. In fact, Antigua recently won a gambling-related trade dispute at the World Trade Organization, providing its companies with a modicum of legal protection if they continue to accept bets from Americans.

Ayre will need the protection. So far as the U.S. Justice Department is concerned, the chief Bodog has got to be one of America’s most wanted. The reason is visible to anyone who takes a tour through Ayre’s Costa Rican home. Located a half-hour helicopter ride away from the coast, on the outskirts of San José, the Costa Rican capital, the Bodog “compound” is a 10,000-sq.-foot, $3.5-million bachelor pad. The centrepiece is the pool with a swim-up bar and a waterfall where Ayre likes to perform backflips for admiring guests. An interior bar, this one chrome-plated, features photos of King Bodog with such famous female celebrities as Paris Hilton and Jennifer Love Hewitt. Then there’s the custom Harley with front forks that spell out “Bodog” in tiny rubies. Tanning by the pool is Ayre’s requisite eye candy—this time it’s Lindsay, an Arizona “model” Ayre flew down to San José after she sent him photos of herself through email.

A blown-up copy of his cover appearance for the 2006 billionaires issue of Forbes magazine occupies.a large slab of wall space in the

hall by the kitchen. Additional copies of the issue decorate horizontal surfaces throughout the house. When a visitor asks for one as a keepsake, Ayre is only too happy to oblige. “Cyber bookie Calvin Ayre sticks it to Uncle Sam,” reads the cover tag line; the headline for the story inside blares, “Catch me if you can.”

There are Third World dictators who have been deposed by the U.S. for less. Making Ayre even more of a target is the fact that, almost alone among his major competitors, Bodog continues to accept bets from Americans who have figured out ways to circumvent the new laws, including using other, offshore-based e-wallets to process their transactions. “Look, any entity taking bets from U.S. citizens is on a list for prosecution,” says Michael Tew, a New York-based online gambling consultant. “[Ayre] is in the top 10, particularly given his media profile, and his flamboyant way of doing business. Bodog is now the 1,000-lb. gorilla taking bets from U.S. citizens.”

LEGALLY DUBIOUS capitalism is nothing new to Calvin Ayre. He was born in 1961 and raised in Lloydminster, Sask., the second of four children of Ken and Wilma, a Scottish couple who made their living as grain and pig farmers. The couple instilled an entrepreneurial streak in their children by assigning them a litter of pigs to raise each year. When it was selling time, Calvin and his siblings kept the cash—an excellent lesson in nurturing a business, he says. When Ayre was in Grade 6 his family moved to B.C.’s Okanagan Valley, where Ken Ayre founded a water purification business. After high school, young Calvin went east for a science degree at the University of Waterloo. Next was Western, for law school, but Ayre’s grades, he says, got him kicked out in the first year.

In 1987, when Ayre was 25, his father, Ken, and several friends became embroiled in a marijuana-smuggling scheme. The plan, according to one of the participants—a B.C. drywall contractor named Bill Roberts, who has two kids with one of Calvin’s sisters—was for Bill’s brother, Paddy, a licensed pilot, to fly a plane from the Bahamas to a small New Brunswick airstrip. To make the long journey, the men arranged to outfit a plane with longrange gas tanks. Problem was, the company that installed the tanks was a front for American law enforcement, which outfitted the tanks with a transponder. When Paddy Roberts landed, on Oct. 3,1987, the RCMP were waiting. In 1988, Paddy Roberts was sentenced to five years in prison. Ken Ayre and Bill Roberts later got four years each.

AYRE IS NO STRANGER TO DUBIOUS BUSINESS. IN 1996, HE WAS BARRED FROM WORKING WITH PUBLIC COMPANIES IN B.C. FOR 20 YEARS.

Asked about the incident, Ayre says only: “I was in university at the time.” He would soon have his own legal entanglements to worry about. In 1990, Ayre had just finished his M.B.A. at Seattle’s City University when Paddy Roberts was paroled from prison. Ayre had gotten a job as president of an ailing heart-valve manufacturer, Bicer Medical Systems, then listed on the Vancouver Stock Exchange. Ayre hired as marketing director a friend Roberts knew from prison: Erich Brunnhuber, a notorious Vancouver stock promoter who’d just been paroled from a seven-year sentence for fraud, for falsely inflating the share prices of a half-dozen Vancouver Stock Exchange companies. Regulators forced Ayre to fire Brunnhuber. But according to the results of an investigation that spanned several years, Ayre continued to associate with Brunnhuber; he also misrepresented Bicer’s affairs to regulators and committed insider-trading violations. As a result, in 1996, the province’s securities commission fined Ayre $10,000 and barred him from working as an officer or director with publicly traded companies in B.C. for 20 years. “That was my first professional venture, outside of university,” Ayre says. “Two main lessons I learned from that—to pay a lot more attention to detail, and to be a lot more cautious about the quality of the people I associate with.”

Which brings us to Bodog. The company grew out of an investment Ayre made in the wake of his stock-trading debacle, in the mid’90s, just as the Internet was revving its economic engine. Several Vancouver outfits were setting up offshore operations to accept sports bets over the Internet. Styling himself as a software consultant, Ayre snagged a couple of contracts to build programs to run the betting sites, then began licensing his program to other companies. His biggest deal, he says, was a $4-million contract with a Vancouver outfit called Cyberoad. But as he whipped his program into shape, he realized there was far more money in running a gambling site

of his own. He happened upon the name Bodog because it was a short, catchy and slightly rude moniker with, most importantly, a free dot-com URL. It’s grown to include a music label and a poker lifestyle show, Calvin Ayres Wild Card Poker, plus BodogFight, which also stages pay-per-view live events on top of the cable show. But the big money still comes from gambling: seven years after it began operating, Bodog is the largest company still accepting sports bets and for-money poker wagers from the U.S. market.

CRUISING AT about 500 feet in a chopper over the Costa Rican coast, Ayre points below him at a hilltop manse that has an entire island all to itself. “I bet that guy can play his music loud,” he says, sounding envious. Sounding, in fact, a bit like a male in early adolescence. Ayre has built an empire by residing at that level of maturity. Still, there is something prototypically Canadian about Ayre’s pursuits. Like the Bronfmans in the days of prohibition, or any number of Canadian entrepreneurs since, Ayre is making reams of money using the U.S. border, and the gap between what’s possible, and what’s legal, to make money from American vices.

What’s remarkable now is his decidedly un-Canadian absence of self-consciousness. “I got into mixed-martial arts because I liked it,” he says. “That’s how I decide to get into anything. I’m the brand; if I like it, I figure the people who like Bodog will like it too.” Ayre says with Bodog he’s catering to males between the ages of 18 and 40. That’s aiming a little higher than he hits.

AYRE INSISTS HE DOESN’T MISS GOING TO THE UNITED STATES. ‘MY LIFE’S IMPROVED... I’M NOT A FAN OF THOSE CELEBRITY PARTIES ANYWAY.’

There remains one form of rebellion Ayre doesn’t dare to transgress. He will not set foot in the U.S. His situation has some irony to it. Throughout his life, Ayre’s aspired to a certain breed of success. You can see it in the celebrity photos he’s fixed to the wall of his house. You can see it in the way he’s engineered his own persona as the public face of the Bodog brand-the Casanova soldier of fortune as comfortable pulling a pen across nine-numeral contracts as pulling the trigger of the Heckler & Koch 9mm handgun he brags about keeping in his desk. He aches to be seen as a Hugh Hefner for the poker-playing, post-Maxim age.

Is he still a billionaire? Well, that’s complicated. On his own frequent press releases, Ayre’s name is seldom mentioned without the adjective “billionaire” preceding it. And since the crackdown, Bodog has clamped down on the financial information it discloses, so any discussion of his revenues is unverifiable guesswork. But for what it’s worth: “The crackdown has probably helped his revenues,” says Michael Tew, an online gambling consultant who says Bodog has attracted American punters as its larger competitors have left the U.S. market.

So wouldn’t that mean his net worth has actually gone up? Well, no. Despite increased revenues, Bodog’s value has likely decreased because its industry has grown far more risky. “The risk has increased tenfold,” says Tew. “Anyone wanting to acquire Bodog would discount their offering price because the whole market is so difficult to predict.” If it was acquired today, Tew says Bodog would get far less than the billion it was valued at last year. Forbes agrees; Ayre didn’t make the 2007 list.

In the meantime, Ayre insists not being able to go to the United States hasn’t affected his life whatsoever. “I didn’t go there much anyways,” he says. “Actually, my life’s improved since I stopped going to the United States. I’m not a fan of those celebrity parties anyway.” Minutes later, Ayre is talking about his plans for BodogFight when he mentions plans to stage a pay-per-view event this summer in Los Angeles. “Of course,” he says. “I won’t be able to be there.”

The smirk that follows is a little forced. It’s apparent he’s still coming to terms with his new situation. His fate seems redolent of the short story about the monkey’s paw, whose wishes, once fulfilled, force its owner to regret ever making the wish. The mechanism that’s responsible for his success, online gambling, has made it impossible for him to become the sort of figure he’s always aspired to be. So long as he’s barred from the United States, Ayre will never be able to build his celebrity profile to the extent that he craves. “Who knows,” Ayre says poolside at his Costa Rican bachelor pad. “Perhaps this whole thing will even help build the myth.”

Perhaps. In the meantime, he’d better get comfortable in that palm-backed throne. M