London-based Sportingbet PLC has agreed to pay $33 million to the U.S. Department of Justice (DOJ) to keep the online gambling operator out of court in the States. Sportingbet was under investigation for illegal internet gambling operations between 1998 and 2006.
The U.S. Attorney for the Southern District of New York said that Sportingbet offered internet gaming to players in the U.S., including real money online poker, as well as wagering on sports and casino games. Under the settlement, authorities will not prosecute Sportingbet, giving the company a clean slate in the States.
“This settlement enables Sportingbet to draw a line under events of the past,” Sportingbet CEO Andrew McIver said. “It is in the best interests of our shareholders and we can now look to the future with increased confidence.”
When the Unlawful Internet Gambling Enforcement Act (UIGEA) was drawn up in 2006, all online gambling sites listed on the London Stock Exchange stopped taking customers from the United States. But Sportingbet had troubles in the country before the UIGEA was passed. The company acknowledged in the settlement that it misrepresented “the nature of its customers’ gambling transactions to U.S. credit card issuers that disallowed the use of their cards for internet gambling” and took steps to mask payments of winnings to U.S. customers.
In 2006, Sportingbet chairman Peter Dicks was arrested at New York’s JFK airport and imprisoned briefly before returning back to the United Kingdom. Soon after, the company’s U.S. poker room, Paradise Poker, stopped accepting U.S. customers and Sportingbet’s other U.S.-facing gambling businesses were sold off.
The $33 million settlement with the DOJ represents the proceeds from U.S. customers from 1998 to October 2006. Sportingbet will be forced to pay out installments of $15 million this year, $12 million in 2011, and $6 million in 2012. Despite the settlement, however, the market shifted favorably toward Sportingbet. Company shares rose 14% in London trading after news of the agreement with U.S. authorities was released.
Said McIver, “The resolution of any risk associated with Sportingbet’s former U.S.-facing business, combined with the considerable actions taken by the Group over the past three years, ensure that the Group is well placed to capitalize on the many opportunities available in the global online gaming industry.”
Sportingbet isn’t the first online gaming company to settle with the United States DOJ. PartyPoker parent company Party Gaming agreed to pay $105 million to enter into a non-prosecution agreement with the U.S. Attorney’s Office for the Southern District of New York in April 2009 after an investigation involving the offering of internet gambling services to customers residing in the U.S. prior to the passage of the UIGEA.
Party Gaming agreed to stop providing internet gambling services to customers in the United States, much like the agreement Sportingbet made this month. However, their penalty was much stiffer than Sportingbet’s because Party Gaming operated the most popular online poker site (PartyPoker) in the world at the time.
