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Poker News | Gambling and the Law

PartyGaming Founder Pleads Guilty to Illegal Gambling Charges

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In stunning news to the poker industry, enough so that it made mainstream media news like Associated Press and Reuters as well, Anurag Dikshit, one of the founders of PartyGaming, has pled guilty to illegal online gambling charges and agreed to pay $300 million to the U.S. Department of Justice for the infraction. The guilty plea was made in person in a New York federal court in response to charges that he violated the Federal Wire Act.
Dikshit was one of the 1997 founders of PartyGaming, which is the parent company of the familiar online poker site, among other gaming ventures, but stepped down from the company’s board of directors in May of 2006 to pursue other projects for the company. But his participation in PartyGaming and creation of its software platform made him a billionaire and the 207th richest person in the world, and he remains the largest shareholder in the company with 30 percent of its stock.

PartyGaming pulled out of the United States market upon passage of the UIGEA legislation, though the U.S. Department of Justice did pursue talks with PartyGaming after the fact with regard to online gambling activities that took place before the company made itself unavailable to U.S. customers. PartyGaming was said to be in willing discussions with the U.S. in order to clear itself of any wrongdoing. However, with the prosecution of Dikshit, his guilty plea, and his acknowledgement of wrongdoing, an entirely different light has been shed on the industry.

In response to the charge that he, during his work with PartyGaming, violated the Wire Act because his clients used the internet to pay gambling charges and fees for the services provided by the company, Dikshit’s attorney Mark Pomerantz told the judge that his client had “a growing awareness of the illegality of the conduct” before PartyGaming left the U.S. market.

“I came to believe it was in fact illegal under U.S. law,” Dikshit remarked to the judge. “I have taken full responsibility for my actions.”

The result of the plea was the $300 million fine, of which he paid $100 million, will pay another $100 million in three months, and pay the final $100 million by September of 2009. Dikshit still faces two years in prison and one year of supervised release, but the sentencing date has been postponed until December of 2010, and he will be allowed free on multi-million bond until that time.

PartyGaming released a statement on December 16th in response to the agreement between Dikshit and the U.S. Attorney’s Office but refused to comment on Dikshit’s case in particular. “Any such developments are completely independent from those of the Company and as such should not be seen as bearing any guidance to the nature of the Company’s own discussions.”

It continued, “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… However, on the basis of the discussions to-date, PartyGaming expects any settlement with the DoJ to involve a payment by the Company of an amount that is significantly lower than that reported to be paid by Mr. Dikshit in today’s Financial Times. In addition, the Company believes that any such settlement is unlikely to include a criminal plea on the part of the Company or any director.”

The potential fallout from Dikshit’s plea, notably that he believed catering to the U.S. market as an internet gaming company was wrong, has the poker industry reeling. Not only does this set a bad precedent for companies that contend they are not violating U.S. law, specifically sites like PokerStars and Full Tilt, but it gives fodder to the anxious and aggressive U.S. Department of Justice to pursue those sites on the basis of this case’s success.

The weeks and months ahead will dictate the future of online gaming in the United States. But will the new Obama administration take a different attitude and perspective on the law? Will Rep. Barney Frank and others in Congress be successful in their efforts to overturn the UIGEA and/or exempt poker from that law? We may have answers in 2009.

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