Redman the perceived value may drive the stock. Here is the perceived value?
Published Thursday, February 4, 1999
Internet gambling venture weaves a messy web
Pat Doyle / Star Tribune
In the brave new world of Internet gambling, the risks began in Minnesota long before anyone could bet on blackjack or basketball with an online casino in the Caribbean West Indies.
Arlo Gordon learned that the hard way. The Willmar farmer lost $90,000 doing deals with a man who ran a Minneapolis firm making software for the online casino in Dominica. At one point Gordon even risked his lucrative sugar-beet business to help the man's company. "I was stupid; he was smart," Gordon said this week. "It was a bad deal."
Global Games Corp. of Minneapolis faces more than $1.6 million in judgments for unpaid loans and other debts. Global says it doesn't have the money to cover that. An investigator for the Securities and Exchange Commission (SEC) is reviewing the losses.
But those problems hardly seem to matter in the unmapped frontier of online gambling. Global's stock prices have risen sharply in recent months amid a series of upbeat news releases on its Web site heralding the start of the Dominica casino.
Internet stocks can be risky, and Global Games illustrates how new and mostly unknown companies linked to the Net and to gambling are some of the biggest dice rolls around.
Those who lost money to Global say they haven't been able to track down former CEO Garry Jamieson, a Canadian who borrowed large amounts of money from them. His $650,000 home -- with cathedral ceilings and three-car garage in Prior Lake -- is for sale, Venetian blinds drawn shut. A man who answered Jamieson's phone this week said Jamieson and his wife were in Canada.
Jamieson later called a reporter, describing himself as a victim and vowing to repay the loans someday. "I don't have a way -- except to get into another venture -- to pay these people off."
His successor, Gary Borglund, blames Global's problems on early software problems and on mismanagement by Jamieson that he said included spending too much money on travel.
But others wonder why Borglund can't repay the loans at a time when Global claims on its Web site that the Internet gambling operation in Dominica is starting to make money.
"We've been trying to find assets, but they haven't been forthcoming," said Henry Field, an attorney for Louis Sudler, a wealthy Chicago real-estate investor with a $595,000 judgment against Global and Jamieson. "They say they don't have any. Why are they running an operation that has no income?"
Global provides Internet gambling software for the virtual casino that Borglund says is really a room with computers in Dominica. Online casinos offer gamblers a chance to place bets from home -- either by playing games of chance or wagering on sports.
The legality of such operations has been called into question by law-enforcement officials in many states, including Minnesota, where former Attorney General Hubert Humphrey III was at the forefront of efforts to keep such casinos from operating.
The pitch
The Sudler family offers an example of how promoters of Internet gambling found money.
Sudler and his wife were vacationing this week in India and Europe and were unavailable for comment. But his son, Zack, 28, of Chicago, said the family's problems began in 1995 after he received a phone call from a former roommate who was working for Global in Minneapolis.
"He said, 'I'd like to bounce some ideas off somebody; your father would be a great person. Do you mind if we fly out and talk to him?' " Zack Sudler recalled.
Soon afterward, Zack's ex-roommate showed up with Jamieson at the Sudlers' home.
"He was very smooth," remembered Zack's sister, Natalie Ames.
Jamieson was promoting a faster version of bingo and the "potential to invest in casinos in Vegas," and he said Global was "close to putting together a deal with an Internet gaming company," Zack said.
Jamieson asked him for $50,000, but, "I said, 'No, I'm not my father. I'm not rich.' "
His father loaned Global Games nearly $250,000 at 12 percent interest. Global agreed to give Louis Sudler 62,500 shares of stock in the company for $625, according to documents in U.S. District Court in Chicago. The stock has traded between 4 and 75 cents a share in the past year.
During the presentation, Zack Sudler said, Jamieson was wearing a tie and suit, he was behaving "courteous and professional," and his proposal "didn't seem like that bad of an idea."
"You don't squeeze somebody's shoes for that kind of money without having your wits about you," he added.
Louis Sudler was supposed to get his money back with interest in 1996, but that didn't happen. The Sudlers tried unsuccessfully to reach Jamieson. Court documents report what happened when authorities went to Jamieson's Prior Lake home last April to serve him a lawsuit: "Woman answered the door and called for Garry. As soon as he saw the papers, he said, 'No, I won't accept,' and shut the door."
Jamieson said this week there was no point in responding to creditors.
"I probably get 200 calls a day from people I guaranteed money to. What do I have to tell them?" he said.
Last July, a federal judge ordered Global and Jamieson to pay the principal plus $81,000 in interest, $250,000 in punitive damages and attorneys fees.
Betting the beets
Affluent beet farmers in west-central Minnesota also took a chance on the Internet gambling business.
"I tried real hard to forget it all," said Gordon, who declined to elaborate on his experience.
But a lawsuit filed against Global Games says Gordon and another farmer pledged shares in the Southern Minnesota Beet Sugar Cooperative as collateral for a $320,000 bank loan to Global.
When Global didn't repay the loan on time, the farmers faced losing their lucrative stake in the beet co-op that is essential to selling the crop. Gordon paid off part of the loan rather than forfeit his beet shares.
He won a $90,000 court judgment against Jamieson and Global; it's part of the more than $1.6 million in judgments against the firm and Jamieson.
Why did the beet farmers plunge into the Internet gambling venture?
"These are guys with a lot of money and not terribly sophisticated," said attorney Stephen Stennes, who represented some of them. "Jamieson is one of these charming guys, a high-roller and fun guy to play golf with."
Global might be part of modern stock deals, but it maintains offices in a building rooted in another era: the Minneapolis Grain Exchange in downtown Minneapolis.
Global's financial condition is largely unknown to the public. Although its stock is traded over-the-counter, it doesn't report financial information to the SEC. It claims exemptions available to smaller corporations with relatively few investors.
The company's Web site in November reported that the firm "will receive a reported $41,200 for September and an estimated $46,800 for October" for its software and technical services for the online casino in Dominica.
But three weeks later, when Sudler's lawyers searched for assets to seize, Borglund told them Global had only $400 in a bank account. He says the casino earnings are being reinvested on the island and that another company is paying Global's rent at the Grain Exchange.
But the future of Global is uncertain for many reasons. Congress has considered outlawing Internet gambling. And an SEC investigator asked Hennepin County District Court in November to send the agency copies of complaints against Global, "in connection with our law-enforcement responsibilities."
Last week, Borglund wrote to creditors that the SEC is "investigating the company's previous stock transactions." He also proposed paying off some of its debt with Global stock, which rose from less than 10 cents a share in October to more than 30 cents a share last month.
"We're trying to clean up what was a pretty big mess," said Borglund, who was president of the firm before becoming CEO last July.
The creditors hope he succeeds. "I don't want Global to sink, because our money is in there," Zack Sudler said.
Jamieson says he's living in Winnipeg but occasionally visits his home in Prior Lake.
Sudler is skeptical.
"Is he sitting in Dominica drinking a piña colada?" he asked.
-- Pat Doyle can be contacted via e-mail at pdoyle@startribune.com
|
