Life Real Loud

by Bill Reynolds

  Like, we’d just gotten our own ACH working. After PayPal’s initial three-day shutdown I spent a week searching to see if we could do it ourselves. I didn’t want to be beholden to these guys. I found a guy in California who said he would do it. After three or four months of programming and setting up the system, we started our own ACH. It was working, but it was slow. It was maybe two or three percent of our business at the time.

  And so Steve is saying, “We’ve got to shut PayPal down.” I’m like, “Steve, I don’t think this is the time to do it.” All Steve says is “Is our ACH working?” I say, “Yeah, it’s working pretty good.” And he says, “Then turn it off.”

  I go on the website and block out the PayPal deposit option, upload the page, and that was the end of PayPal. Our deposits dropped ninety percent instantly.

  It was a gutsy call, but Lawrence was right. A bunch of customers did as they were told and sent money. Neteller disconnected PayPal, and the company was on its own.

  “The next morning PayPal phones,” says Lefebvre. “They say, ‘What are you doing?’ And we say, ‘Well, we’ve made our election. Good luck to you.”

  Glavine was impressed by Lawrence’s acumen: “Within three weeks or so we were right back where we were.”

  PayPal’s response was swift, aggressively moving into Neteller’s market. It recruited and sent out dozens of sales personnel to travel the globe and wine and dine both current and potential B2B customers. They campaigned hard and scooped up business. They had direct contact with all the merchants and had huge market penetration, around fourteen million members. Neteller had around two hundred thousand members, 1.4 percent of PayPal’s. Neteller estimated that PayPal was getting ten times the business, but the smaller company still had one aspect in its favor: Because of the months of free funding courtesy of PayPal, Neteller had cash flow. “By then,” says Lefebvre, “we had something like a million a month running through the system.”

  Despite being a small company, now without the protective PayPal exoskeleton, the Neteller business model held. The customer base did not shrink; in fact, it grew at much the same rate as before, this time not at the mercy of another company. Lawrence had vaporized PayPal’s ability to pull the plug on Neteller’s transactions on a whim.

  But the rivalry was worrisome. Neteller had gotten into the game early, which was good. It had solved its money transfer bottleneck before expiring, which was good (and perhaps lucky). But now it was going to get royally clocked by this formidable brand name, which wasn’t good at all. Just stomped on over and over. And yet the strange thing was, yeah, sure, PayPal might have been way, way, way bigger than Neteller ever would be—the ape and the ant—but at this point it was beginning to dawn on Lawrence, Lefebvre, et al. that, like, who cares? The industry was growing like an out-of-control California bushfire.

  So that’s the way it went from August 2000 into April 2001, from investor’s cash to near-death to stealth success to getting caught out to going it alone. Lefebvre would soon be leaving the Keg office to set up a satellite in San José, Costa Rica, and talk up bookies and build market share. Lawrence would lease back to Neteller some of his own office space, one of the bays of the Midnapore property he owned way down in the south end. A flooring company had moved out, freeing up retail space. In summer 2001, the company pulled a midnight move out of the Keg building. This period marked another change for the company, says Lefebvre. “It was during the Midnapore era that we began to explore going public.”

  It was also during this period, when the money began to roll in, that the two cofounders decided to increase their salaries, by two and a half times, to $5,000 per month. It still wasn’t much, but to Lefebvre, a guy in his late forties who only a couple of years earlier had been bumming around playing music at CTrain stops, an annual salary of sixty grand—and no law practice—was nirvana.

  As the company expanded through 2001, the brain trust needed to think big—beyond Calgary, beyond national borders. “We discovered we weren’t going to be able do it in Canada,” says Lefebvre. “The investment bankers ask, ‘Is this entirely legal?’ And then they ask, ‘Can you get us an opinion?’ And we reply, ‘Uh …’ It became evident that if we were going to go public we were going to need to do it in a gaming-friendly jurisdiction.”

  Before long, Lawrence ran out of room in the Midnapore bay and had to lease space from the office building across the street. “We’d be running back and forth,” Glavine says, “from the car wash to the other building and back to the car wash.”

  The cool downtown loft-space office was gone, and the surf-and-turf era was over. Now they were worker bees in strip-mall hell, twelve miles from the heart of the city, living on Wendy’s and Mickey D’s in suburbia.

  VIII (2001–03)

  Meat Loaf with the Man Purse

  On April 25, 2001, Lefebvre moved to Costa Rica to set up a Neteller B2B shop. He and Lawrence decided his job would be to meet and greet the sports-book people and convince them Neteller’s model could revolutionize their business by making them more money and losing them a lot less. But he required experienced help, so a few lucky ones from the Keg office inner circle got to go with him.

  “So, Mer, want to move to the Caribbean?”

  “Ha-ha … When and where?”

  The buzz had been going around the office. Exotic destinations—way more exotic than Calgary in the wintertime—were gossiped about, places such as Jamaica, Antigua, Costa Rica. Was it only one place Neteller was setting up? Was it more than one? Who was going? Was anyone really going? The rumors were kicked back and forth in the hacky sack zone. “They decided to go to Costa Rica because Steve already knew about it,” says Glesby.

  There were other reasons. One cliché that is sometimes trotted out to describe Costa Rica is that it’s the Switzerland of Central America: it’s got alpine forest, it’s a neutral country, it has no military presence, and, yes, it’s a bit soulless. Sure, it has issues—the environmental consciousness of many of its citizens seems to be stuck in the Mad Men era, for instance, and small-time crime is rampant (if you don’t lock it down, it’ll be gone). But it has a stable government that allows legal gambling and legal prostitution to flourish. A real tourist draw, you might say, for older male Americans. More pointedly, while close to the United States, it remains outside its jurisdiction. You can fly from Houston to San José, the capital, in three hours. And maybe it’s because San José has the Hotel Del Rey.

  Lawrence could have followed the path of the World Sports Exchange (WSEX), which was created in Antigua and run by a couple of American ex-stockbrokers who wanted to set up a sports gambling business. He could have planted Neteller in Antigua, which chose to view gambling as a legal activity before Costa Rica did. But by this point Costa Rica was gaming central—roughly one-third to half of all gaming companies operated there, according to Lefebvre. A big part of Neteller’s business became meeting new merchant clients to cajole them into becoming part of its system. “One of the big concerns in the industry was using money transferers who could grab the money and run,” says Lefebvre. “In any given month, those guys might be holding several million dollars on Visa or MasterCard or Western Union, until they settle. If they start using money transferers who aren’t reliable, even if you settled with them weekly you’ve still got a whole week of receipts that you could beat them for.”

  That suspicion was a natural barrier to entry into the market, but Neteller found a way around it. Lefebvre says, “We had the confidence of all of the people we worked for because we were approaching it professionally and responsibly. The thing that made us golden in the industry was we never, ever, paid a dime short or a minute late. Having a presence in Costa Rica, where people could walk over and actually see you, enhanced that.”

  Another factor that made Costa Rica so attractive was the relatively tax-free situation. “We set up a Costa Rican company, and there were some Bahamian companies inv
olved,” says Lefebvre. “We were experimenting with running our profit center not in Canada, trying to avoid paying Canadian taxes.”

  Online gaming was big business in Costa Rica, but gambling itself was a gray area. It wasn’t exactly legal, but it wasn’t exactly illegal. Lefebvre explains,

  Blue Marlin, for instance, was an online gaming site that had a bricks-and-mortar site called the Hotel Del Rey in San José. It was world famous because you could gamble there, and they had a live sports book there. The thing that distinguished it was that on any given night there were two hundred to three hundred prostitutes wandering among the gamblers.

  You can gamble at the Del Rey, but you can’t call it gambling. In roulette, you throw a ball into a wheel and the wheel spins and you get one to thirty-five red and one to thirty-five black. And then there are the two green ones that put all the odds in favor of the house. Well, roulette is illegal in Costa Rica, so what they do is they have these bingo-ball tumblers and each of the Ping-Pong balls inside the tumbler has exactly the same markings as a roulette wheel would have. You’re playing bingo but Costa Rican bingo goes exactly like roulette. You bet money exactly like roulette and you win money exactly like roulette, and you take money home or lose it exactly like roulette—but it ain’t roulette. Blackjack is called rummy, and the difference is that if you get three of a kind you get rummy, and that’s a big payout. And that’s what proves it’s not blackjack.

  At one point, the Costa Ricans decided they had to get heavy with sports books, because they had to show the Americans they were getting heavy about sports books, and so they went around and shut down all of the bricks-and-mortar sports books. So the Blue Marlin, with its rummy and its bingo and its prostitutes, had its sports desk shut down in a police raid. Why did they shut it down? Because it’s illegal. But internet gaming, of course, wasn’t shut down. Why? Because the internet gaming sector probably hired fifteen thousand people in San José to do customer service.

  When Costa Rica decided to perform this Kabuki for the U.S., Neteller wasn’t even considered a gambling or even a gambling-associated company. Lefebvre says,

  At one point, Banco Nacional de Costa Rica [BNCR] decided it would no longer operate accounts for gaming businesses, and so all of the gaming businesses had to shut down their BNCR accounts and open up accounts with private banks—which cost them one day of lining up in the bank, basically. That was all the inconvenience that was dealt to them. I went to Banco Nacional, where we operated accounts freely, and asked them, “We’re not a gaming company but our whole business comes from gaming companies, so do you have a problem with our business?” They said, “No, no, no, no!” Eventually, merchants started opening Banco Nacional accounts so Neteller would be able to settle up faster every Monday. It was all pretty funny.

  Lefebvre estimates it took him three months to get the San José Neteller branch fully operational. He says,

  It’s frustrating. Costa Rica is a terrible place to do business. ICE [Instituto Costarricense de Electricidad], Costa Rica’s telephone company, you go in there and pick a number to get an appointment to set up a telephone business. Then you wait all day with your number in a room full of people sitting in chairs. It gets to four o’clock and they say, “Sorry, we’re finished, come back tomorrow.” Then you have to come back the next day and take a new number. So you wind up having to get there an hour before it opens in the morning to be first in line. They do actually serve at least one person, and there’s more than one wicket.

  People down there, they try to negotiate themselves into a position where they don’t have to do any more work for you. They’ll say they can’t do anything more for you until you have uno, dos, tres, cuatro más cositas.

  And the lawyers are complete liars. They take money from you and then they don’t do anything. They’ll say, “Well, I’m having some difficulties.” What they mean is, “I’m having some difficulty doing anything at all except taking your money.”

  Another reason for Neteller to set up shop in Costa Rica was the cheap labor. Lefebvre and Lawrence realized they needed to grow the company—and fast. They needed more employees on the phones helping customers work through their issues, and more shift workers. The brute arithmetic was that Canadians cost fourteen bucks an hour and Costa Ricans cost three. So Lefebvre hired a bunch of locals to work the phones. Some worked hard and stayed with the company; some didn’t. According to Lefebvre, “Many Costa Ricans did the least possible they had to and not get fired. We probably had to have two more people than we needed just to make up for the downtime. But even with all the fucking around they still did some actual work.”

  Sometimes the work-avoidance irritants went into scary comedy territory. Lefebvre says,

  One guy, José, was sending back and forth messages about the Beloved Leader, about when the plane comes down in the farm field and we all leave to go to heaven. It was weird, halfway between Jim Jones and some paramilitary thing—or just a drug deal.

  Fortunately, around this time we had a keystroke program installed. Some guys were burning up tens of thousands of our dollars of telephone time talking to their friends all over the world—we didn’t have many customers in El Salvador, for example. They didn’t realize we had the capacity to see that they were on the phone for two hours, five nights a week, with somebody in Nicaragua while they should have been working. Or they were surfing the internet, or downloading viruses onto our computers—we had to take control.

  That’s how we learned that José was operating this clandestine undertaking from one of our computer stations. Then, late one night, he brought a woman to the office. All of the people doing telephone customer service were sitting in a room at about a dozen stations. I had an office just off to the side, which was sort of private. I could close the door. And José brought a woman up and took her into my office, for about an hour, and then she left. Then José went back to work. He later insisted that it was his wife.

  José’s justification was funny, as though he didn’t see anything wrong with taking a woman into the boss’s office for a rendezvous so long as it was his wife. But no matter, Lefebvre knew he had the guy, because people in the office had seen the woman. He explains,

  We were able to insist to José that he bring his wife around to meet us. He was busted. So he was fired without us having to mention that we had him on a keystroke program doing a drug deal. When you get information on a guy, you’ve got to be careful because, first of all, you don’t know what he’s doing, and second, you don’t know what’s going to happen to you if he finds out that you found out that he’s doing something.

  We were fortunate to be savvy enough not to blow that one.

  • • •

  When Lefebvre arrived in San José in April 2001, he stayed at the Hotel Parque del Lago, located on Paseo Colón, San José. He oriented himself a bit and looked around for office digs, not to mention a more permanent residence, and then sent for Glesby. She arrived about a month later, on May 2, two weeks short of her twenty-fourth birthday. Then Lefebvre called for Eltom.

  Eltom had given notice at his apartment and then moved out, but then everything stalled—he couldn’t fly down to San José because there was no place for him to work. Lefebvre and Glesby were still scrambling around trying to find office space—any office space. He had to wait about a month. He was given $500 in spending money. He went through that. His stuff remained mostly packed as he slept on various couches, just waiting for the word. He stayed in a hotel or two, waiting. It was like absurdist humor, but also frustrating.

  Finally, Eltom boarded a plane, his first-ever flight. Lefebvre and Glesby had it sorted: he would work out of an internet café (now a strip club) and Glesby the pizza joint while Lefebvre kept searching for permanent digs. Neteller offered the internet café owner a deal: give us one computer station full-time, all the time, and we’ll pay you the full freight by the hour. The guy wouldn’t go for guaranteed incom
e. They couldn’t believe it but kept working him over. Eventually he relented, but he still could not see the advantage to his business. To him, if Neteller was occupying one station all the time, how was anyone else going to able to use it? Eltom called this Three Stooges logic “CR madness.” To him, working in San José was like working at a carnival. When he wanted to smoke, he wouldn’t light up inside—he’d go outside and sit on the steps. Inevitably, cops would swing by to hassle him. To them, you don’t do that. You must be up to no good. It was befuddling.

  Eltom eventually learned enough Spanish to get by. He learned it in the most natural circumstance possible for a young man: trying to pick up beautiful Costa Rican women. “Some people take lessons. I figured, what more motivation do I need?”

  For three or four months straight, it was Glesby and Lefebvre during the day and Eltom from 3 or 4 p.m. until 2 a.m. Lefebvre also put an anuncios, classified ad, in the weekly English-language Tico Times to hire bilingual staff for a call center. His Spanish was poor, but he had to get over worrying about this handicap, take control, and find a good space for Neteller.

  In its heyday, Costa Rica would have had hundreds of online gambling sites. There were plenty of educated people kicking around who spoke English fairly well, and there was a lot of customer service involved in taking care of all those sites. Costa Rica was fertile ground, an offshore bookie sanctuary the Americans couldn’t touch. A lot of young people worked the phones.

  “We didn’t know it would expand so fast,” says Glesby. “The first office we had was more than enough.” She handled customer service from nine to five, maybe nine to nine, and helped Lefebvre when she had spare time. He found her an office on the top of the Dos por Uno Pizza in San Pedro. She worked in the manager/owner’s office. “We went to each sports book. Rob was sales, I was accounting, and Steve and John were the owners. We went door to door, a lot of face to face: ‘Hi, how are you, we’re here, hey, let’s do some business.’”