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Online Pirates of the Caribbean 

Three San Francisco men found riches in Antiqua with their Internet gambling site. Now they're federal fugitives. Caribbean

Wednesday, Dec 15 1999
The intermittent rains seemed fitting when the 49ers hosted the Green Bay Packers in a recent Monday night embarrassment. Cameras zooming in on the hometown sidelines captured the grim faces of players and coaches. A benched Steve Young, arguably one of the best quarterbacks the game has ever seen, stared numbly at his team's never-ending ballet of dropped passes, fumbles, and missed tackles. ABC's commentators told viewers they were watching one more chapter in the worst single-season meltdown in NFL history. "The old days seem like a long time ago," muttered announcer Al Michaels.

Four thousand miles away, sitting in an unremarkable office on a Caribbean island, one San Francisco man was watching the game with intense interest when Green Bay quarterback Brett Favre faded back and fired the ball through a gaping hole in the defense to tight end Tyrone Davis. When Davis lurched into the end zone for another Packer score, this 49ers fan began hastily typing out a series of numbers on his keyboard. The figures were the freshest odds for bettors who were wagering on the game's outcome over the Internet, buying and selling "contracts" on the matchup even as the two teams played.

Steve Schillinger felt bad about his home team's 20-3 loss that night, but it didn't stop him from doing his job. Three years ago, Schillinger moved to the tiny island of Antigua and started World Sports Exchange, along with two buddies from San Francisco, Jay Cohen and Haden Ware. Since then, has become one of the world's most popular -- and notorious -- Internet gambling sites.

The former options traders hit the Internet Gold Rush at precisely the right time. Like most successful new media entrepreneurs, they sensed an untapped market, secured investors, and set up shop ahead of the pack. Customers leapt at the chance to place bets from their own homes or workstations. The three online pirates of the Caribbean found themselves basking in a balmy tropical paradise, watching over a business that handles an estimated $200 million in wagers annually.

But the three men are also federal fugitives who cannot set foot on U.S. soil without risking arrest. The U.S. Justice Department contends that their gaming operation is illegal, and wants to shut it down. Nearly two years ago, Schillinger, Ware, and Cohen were among 21 Internet gambling site operators caught in an undercover sting operation and charged with violating a 1961 federal law that prohibits sports betting over the telephone. Most of the other defendants have since paid fines and shut down their sites.

But World Sports Exchange is still taking bets, and fighting the charges. The company argues that it does nothing to violate U.S. law. After all, the company -- its computers, its employees, the whole operation -- is 1,300 miles from U.S. soil, wholly run from a small nation that has welcomed it and granted it full permission to operate.

Since their indictments, Schillinger and Ware have remained in Antigua. Cohen, though, has slipped back into the U.S. to face the music personally. He plans to emerge from hiding and show up for his approaching trial in New York, and challenge the government's case. His court date is scheduled for Feb. 14, coincidentally about the same time Congress may make a final decision on what exactly it wants to do about such ruffians.

In just a few years, online gambling has exploded into a $1 billion-a-year business. Whatever happens in the World Sports Exchange case could affect more than 700 other gambling sites. And whatever affects online gambling will also affect further Internet regulation, and even the economies of small nations like Antigua. And let's not forget Nevada's casinos, which are already losing millions to online gambling.

How did three men from San Francisco wind up in the middle of the hottest court battle going over international Internet gaming? Where did World Sports Exchange's unique and sophisticated operation come from?

The answer would be the West Coast's unofficial university of gambling -- the trading floor of the Pacific Exchange in downtown San Francisco.

The twin doors of the 220 Montgomery building open into a lobby of walls and pillars painted to resemble marble, all dwarfed by a gaudy, two-story chandelier. Staircases on either side ascend to the second level where, past an electronic gate and security guard, sits the noisy trading floor of the Pacific Exchange.

Open for options trading since 1976, it is the third most active stock exchange in the country, behind Chicago and New York, and also acts as a last refuge for the nation's tardy traders. The floor remains open until two minutes after 1 p.m. each day, allowing the rest of the U.S. a few extra moments to complete its trades.

Until three years ago, this was where Steve Schillinger, Jay Cohen, and Haden Ware worked.

On a November morning, the room appears busy yet oddly calm, reflecting a temporary lull in the markets. Paper litters the floor, a reminder of the chaos that periodically erupts. Traders earn six-figure salaries, but they also endure unimaginable stress. They wake up when it's still dark outside, don their floor jackets, and stand from 6:30 to 1 p.m., barely slowing down for a takeout lunch. They scream out orders, yell into telephones, or silently brood at the changing rows of colored figures on monitors that line the room. Success or failure is measured in seconds. A trader can make millions on a shrewd move, or screw up and tank so badly that he never works in the business again.

Steve Schillinger is remembered by several traders as a gregarious, husky 6-footer from Chicago who worked the floor for 18 years. When Schillinger's name is mentioned, the reaction from his former colleagues is always the same -- a pause, followed by sly, knowing laughter, and a shake of the head. They loved or hated Schill, as he was known. But he was always upbeat, and possessed an incredible head for numbers.

About The Author

Jack Boulware


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