On Tuesday, PartyGaming founder Anurag Dikshit pled guilty to violating the Wire Act of 1961 in the Southern District Court of New York. Judge Jed Rakoff scheduled sentencing for December 16th, 2010, according to Bloomberg News. Dikshit posted a $50 million bond and will fork over $300 million in three installments to the United States Government.
Bloomberg quoted Dikshit as saying that Party Gaming accepting customers from the United States “was in fact illegal under U.S. law. I have taken full responsibility for my actions.” The owner of 27% of Party Gaming and its largest shareholder, Dikshit has already paid $100 million, agreed to pay another $100 million within three months, and will post an additional $100 million by September 30th, 2009. An Associated Press article notes that Forbes indicated Dikshit was worth a whopping $1.6 billion in 2007.
Other large-scale owners of Party Gaming, which is publicly traded on the London Stock Exchange under the symbol “PRTY,” include Ruth Parasol and Russ DeLeon, each of whom holds a 17% interest in the company. Neither member of the husband and wife team has yet made any agreement with the United States Government. The penalty for violating the Wire Act is up to two years in prison. It’s unknown whether the prosecution will seek that length for Dikshit. The Party Gaming owner traveled to the U.S. under his own accord.
Party Gaming’s stock rose dramatically on the prospect that Dikshit’s settlement with the United States Government may help clear the way for the company’s return to the market should internet gambling become legalized in the future. Last Friday, PRTY stock had traded as low as ₤119. It ballooned over 25% on the day at the time of writing, up ₤37.75 to ₤176.50. Over the past 52 weeks, the stock price has wavered between a low of ₤17.50 and a high of ₤312.00.
Last year, Party Gaming entered negotiations with the U.S. to clear the air legally about its actions prior to the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) in 2006. The statement by the company to the London Stock Exchange revealed, “The Company’s discussions with the DoJ have made good progress and it is currently negotiating the final terms of a possible settlement. Whilst these discussions are at an advanced stage, the terms of any settlement have not yet been finalized and there can be no guarantee that an agreement will be reached.”
The company’s online poker room, PartyPoker, exited the U.S. market in late 2006 upon the passage of the UIGEA. Paradise Poker and other sites owned by publicly-traded firms left the market as well, leaving PokerStars and Full Tilt Poker, both privately owned, as the world’s two largest rooms. As late as 2005, the PartyPoker Million was a World Poker Tour stop.
Various news sources differ in the amount of bail, if any, that Dikshit posted on Tuesday. However, the Financial Times noted that the terms of his agreement allow him to travel to any country in the European Union, Manhattan (in the United States), India, and Gibraltar, which is where he currently takes up residence.
Sportingbet and 888, both publicly traded on the London Stock Exchange, saw their shares rise as well as a result of Dikshit’s settlement. 888 was up ₤10.00 to ₤79.75. Sportingbet (which is traded under the symbol “SBT”) was up ₤3.00 to ₤30.00. Party Gaming is expected to release another statement in the coming days providing a reaction to Tuesday’s news.
The hearing took place this afternoon in White Plains, New York at 2:00pm Eastern Time. A call placed to Judge Rakoff’s chambers revealed that a plethora of news outlets attended the proceedings, which will likely set a major precedent on how running an internet gambling site is prosecuted in the United States.