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Poker News | Gambling and the Law

PartyGaming Pleads Guilty to US Charges With $105 Million Fine

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In a case that has been watched by the poker community since its inception, a resolution was announced today. PartyGaming PLC, parent company of PartyPoker, accepted a guilty plea as it pertained to allegations by the United States Department of Justice of providing illegal online gambling services to U.S. citizens prior to the site’s withdrawal from the market in late 2006. While there will be no attempts at criminal prosecution in exchange for the plea, the company has agreed to pay a $105 million fine.

The complications of the situation arise from PartyGaming’s activities in the U.S. prior to the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA). As one of the biggest poker and gaming sites on the internet, the publicly-traded company made the tough decision to leave the multi-million dollar U.S. market after the UIGEA was passed, in order to avoid any run-ins with the government. However, the U.S. Department of Justice went after PartyGaming anyway on the grounds that they provided illegal services to U.S. customers before 2006, even though the legal basis for their investigation was the UIGEA, which was passed after the time period of their focus. Regardless, PartyGaming attorneys did not feel that they had much ground to fight the charges, though all parties went through a long period of negotiations.

In the midst of those talks, one of the PartyGaming founders, Anurag Dikshit, made a deal with the Department of Justice on his own individual matter. He pled guilty to the charges and agreed to pay a $300 million fine, which was certainly his choice but did not set a good precedent for PartyGaming’s still-to-be-decided case. Nevertheless, PartyGaming tried to separate itself from Dikshit’s plea.

In the end, however, PartyGaming made almost the same plea, though they somehow got away with paying one-third of the fine. In a press release, PartyGaming discusses some key terms of the non-prosecution agreement it made with the Department of Justice via the U.S. Attorney’s Office. Some of the facts, per the agreement, included the fact that PartyGaming offered internet gaming to players in the U.S. from 1997 to October 13, 2006, at which time the company withdrew from the American market. But prior to that date, “certain of the U.S. customer transactions intended for PartyGaming that were processed by third parties, and other gaming and payment-related activity, were contrary to certain U.S. laws.” Thus, according to the plea deal, PartyGaming broke the law.

Also noted in the agreement was that PartyGaming will agree, going forward, “to maintain, with respect to its operations, a restriction preventing internet gambling services from being provided to customers in the U.S. in violation of the prevailing law of the U.S. or any jurisdiction within the U.S.” This, however, leaves open the possibility of eventually reentering the American market should the law change, as is the intention of some lawmakers like Barney Frank per the 2009 Congressional agenda. Should that occur, PartyGaming is now in good standing with the U.S. government according to the deal, and may use that cooperation as its welcome mat to come back to United States customers the moment the law allows.

For now, PartyGaming is on a payment plan for the $105 million fine. Payments begin April 10, 2009 and continue in semi-annual increments through September of 2012. The payments will reportedly come from the company’s existing financial resources.

In response to the agreement between PartyGaming and the U.S. Department of Justice, CEO Jim Ryan commented, “The resolution of our position with the U.S. authorities marks an important day for PartyGaming. It has been a long and complex process but we have reached an amicable solution with the USAO [U.S. Attorney’s Office] that makes commercial sense for our business and is in the best interests of shareholders. We are now well-placed to seize organic as well as strategic opportunities that previously were beyond our reach.”

Pair that statement with a recent one by the PartyGaming finance director upon the recent release of its earnings, who said he was “reasonably optimistic” that online gaming was on its way to legalization and regulation in the U.S., and the company is clearly looking forward to a possible return to the most lucrative online gaming market in the world. Time - and the direction of U.S. laws - will tell.

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