PartyGaming founder to pay out $300m

PartyGaming founder to pay out $300m, by Roger Blitz - 15th December 2008
(Credit: Financial Times)

The biggest shareholder in PartyGaming, the UK-listed online gambling company, has agreed to pay US authorities $300m and plead guilty to a charge relating to illegal web betting in the most prominent prosecution so far in the US clampdown on internet gambling.

Anurag Dikshit, co-founder of the company, retains a 27 per cent stake and is due to appear in the Southern District Court of New York on Tuesday to admit to an offence under the Wire Act and to agree to co-operate with the US Department of Justice, people close to the situation say.

No plea bargain has been agreed, and Mr Dikshit, one of India’s richest businessmen, risks a jail sentence of two years. He hopes the DoJ will recommend to Judge Jed Rakoff that, having gone voluntarily to the DoJ, he should not go to jail.

Observers say it is a landmark moment for online gambling.

Mr Dikshit’s fate and the DoJ recommendation will be watched by individuals and companies who have been pursued for taking bets in the US.

They want to put the liabilities behind them to enable consolidation and growth.

But Ruth Parasol and her husband Russ DeLeon, Party Gaming’s co-founders, who each own 14 per cent of the company, have shown no sign of any willingness to settle.

PartyGaming, which enjoyed a stellar rise as a FTSE 100 company three years ago and made millions out of online poker, has been in separate talks with the DoJ for months, as have other companies – including 888 and Sportingbet.

In a statement to the stock exchange on Tuesday, the company said: “The company’s discussions with the DoJ have made good progress and it is currently negotiating the final terms of a possible settlement with the DoJ.

“Whilst these discussions are at an advanced stage, the terms of any settlement have not yet been finalised and there can be no guarantee that an agreement will be reached between the company and the DoJ.”

Shares in PartyGaming rose 7½p to 146¼p in mid-mornng trading. James Hollins, an analyst at Daniel Stewart, noted that the company’s statement made clear that its own negotiations with the US authorities are independent of those of former directors, “implying, in our opinion, that the likelihood of a settlement and a fine ‘significantly lower than that reported to be paid by Dikshit’ are now very high.”

People close to Ms Parasol and Mr DeLeon say they believe the new White House administration will have weightier concerns than online gambling. Many in the industry believe the US will regulate online gambling and say Las Vegas gambling operators are lobbying for regulation of an industry they shunned.

Mr Dikshit is believed to have found the pressure too much and is ready to risk jail to draw a line under the matter. But it is thought unlikely that he will sell down his shareholding in the company. Mr Dikshit’s representatives declined to comment.

He made £420m when the company floated in 2005 and a further £65.7m when he sold another batch of shares the following year. He also received a dividend of $64m that year.