In the summer of 2004 Michael Schillaci, alias “Schillaci 13”, conducted a major sports-betting operation out of a bar in Minneapolis. Based on the evidence available, the Minneapolis police raided his place of business and arrested 12 people, including Schillaci. The following is a summary of the case against “Schillaci 13” and how the investigation into his activities unfolded.
The Early Years
In the early 2000s, Schillaci was deeply in debt and looked for ways to make money. He heard about the newly legalized sports betting in Minnesota and decided to invest in the Minnesota Sports Network (MSN). The company was then owned by the Minnesota Twins and the Minnesota Vikings, and it launched in the same year as the sports betting law went into effect in Minnesota. Because of this connection, it was not hard for Schillaci to get in on the ground floor of the growing enterprise, and he started out small, placing a few bets here and there. In 2001 his girlfriend, Christine Haubner, got him in trouble with the IRS when she claimed that several of his checks were not valid payments for her freelance art work and took him to court over the issue.
Meanwhile, back in Minneapolis, Schillaci had gotten to know a man named William Frentsche. Frentsche was one of the original organizers of Twin Cities Black Football, a group of African American men who played football in Minnesota in the late 1800s. In the 1980s, Frentsche co-founded the True Colors Foundation, which supports “young people [who] come from under privileged circumstances and have a difficult time fitting in with the average teen.” After 9/11, Frentsche started the I Love New York City (ILNYC) program, which brings people together to socialize and exercise. ILNYC is now a nonprofit organization and does a lot of social work in the city.
After the Twin Cities Black Football group started a new team, the Aryan Brotherhood, many of its members began placing bets with Schillaci. Soon, he was making enough money to pay off his debts and decided to make a big move: he bought the MSN sports betting license for $25,000. Before the end of the year, he sold it for $125,000. That same year, he purchased a bar in Minneapolis and turned it into the headquarters of his organization. He hired a manager, Joe McKnight, and gave him a five-year contract guaranteeing him $300,000 a year. McKnight was responsible for taking care of clients’ accounts and making sure that their wagers paid out promptly. Another of Schillaci’s employees was Chris Schillaci, who later became an assistant district attorney in Minneapolis and is now a deputy sheriff.
In 2003, the Vikings’ team president, Carl Peterson, and his general manager, Mike Tannenbaum, were arrested and charged with participating in a sports betting scheme similar to Schillaci’s. That year, Minnesota legalized online poker, and several people got in trouble with the law after opening online poker cafes in the state. The following year, many of Schillaci’s employees, including McKnight, were convicted of various crimes relating to interstate sports betting. In 2006 he settled with the IRS for $1.6 million, and in 2007 he pleaded guilty to four counts of filing false tax returns. In 2009, the IRS filed a lien against his property because of unpaid tax bills. His home, bar, and business were put up for sale, but he was able to keep the bar. He sold the home and business to a man named Michael Ratchford and still lives in the bar, where he runs a gambling operation and does most of his betting from.
Operations & Arrest
In 2004 the Minnesota State Police Gaming Control Board (GCB) launched an undercover operation into illegal gambling activities. They set up a phony website, Minn-Sports.com, and got in touch with McKnight, who told them that he was looking for a way to make extra money. They told McKnight that they were in the business of supplying money for legal gambling, and they asked if he would be interested in getting involved. McKnight agreed, believing that he could make a lot of money and that it would be a great way to help out friends in need. The GCB also had a confidential informant (CI) work with McKnight. The CI, who was not supposed to disclose the information, told police that he had been having contacts with agents of the Gambino crime family for many years and had provided them with inside information about various sports betting schemes. These schemes usually involved people placing bets with bookmakers and skimmers, people who launder money, and people who run numbers on soccer games.
From there, the GCB set up a sting operation that they called the Spet 13 ring. The ring was named after the 13th Street gang in Minneapolis, and its members would wear the colors red, white, and blue — the same as the American flag — to identify themselves. They targeted high schools and colleges in the area around Minneapolis, and their main objective was to catch students involved in illegal gambling, especially online sports betting. In the first wave of enforcement, the GCB arrested four students in the first month. They then began working with schools and coaches in an effort to get the word out about the dangers of online gambling. They held “student casino nights” at various schools in an effort to generate interest in preventing student abuse. At one of these events, a Minnesota State Trooper caught wind of the operation and called for backup, which led to the arrests of another five students. Another six students were arrested during the following month as a result of an undercover operation that the GCB and Minnesota State Troopers conducted at the University of Minnesota. In all, the GCB and Minnesota State Police made 18 arrests in the first year of the campaign and estimated that they had prevented illegal online gambling activities by students in the Twin Cities area.
In the summer of 2004, Schillaci began advertising his services, “Let me be your fixer-upper. I’ll find you a top dog”, in the Minneapolis area. He soon began getting calls from people interested in fixing horse races or soccer matches for money. He would set up the bets and collect the money, sometimes giving the clients a percentage of the profits. Once he got the money, he would deposit it in a bank account, sometimes using some of the funds to make larger deposits. Once he had a sizable amount in the bank, he would move it to a different account.
In 2005, a Minnesota State Police officer named Dave Hoch began investigating Schillaci. Hoch was one of the 18 arrests made in the first year of the Spet 13 operation and was particularly interested in finding out more about how Schillaci made his money. One of Hoch’s main sources of information was a former employee of Schillaci’s named Steve Kelly, who provided Hoch with information about the inner workings of the Spet 13 operation. Kelly later became an informant for the FBI and wore a wire to collect evidence against Schillaci.
Meanwhile, back in New York, Frentsche’s I Love New York City (ILNYC) had gotten involved with a man named Kevin D’Arcos. He was the head of an undercover gambling operation, and he asked Frentsche for help setting up a sports betting scam in the Big Apple. Frentsche agreed, and they created a sham website, BrooklynSports.com, which looked just like the real website of the New York Islanders, and they made their first bet, $1,000, on the baseball season opener between the New York Yankees and the Minnesota Twins. They made several other bets, and when the season ended they walked away with $11,000. After that, they moved directly to the casinos, where they started cheating at roulette and blackjack. They went through about $15,000 in 45 minutes at the casino, which closed down and filed a report with the NYPD. The following day, the NYPD arrested them and charged them with criminal possession of a credit card. Frentsche pleaded guilty and was sentenced to 6 years of probation.
That same year, a group of gamblers and bookmakers who were part of the “Metro” sports betting operation, which had locations in New York, Boston, and Minneapolis/St. Paul, sued the three major sports teams in Minnesota, claiming that they had been victimized by the Spet 13 operation. They asked the court to order the teams to pay them back in damages and legal fees. In 2006 their case was settled out of court for an undisclosed sum.