LONDON, June 5 (newratings.com) – PartyGaming Plc (ticker: PRTY-GBX), the world's largest Internet poker company, Monday said it had held talks with the US Department of Justice with respect to its activities prior to the imposition of a ban on Internet gambling in the country.
The Gibraltar-based company said in a statement that it was "voluntarily" responding to requests for information from the U.S. Attorney's Office for the Southern District of New York. Internet gambling was effectively banned in the US last October. PartyGaming indicated that it was too early to evaluate the possibility of any specific outcome of these discussions.
PartyGaming Plc, the world's biggest Internet poker company, said it has held discussions with the U.S. Department of Justice relating to its activities prior to October last year, when the country outlawed Internet gambling.
The Gibraltar-based company is ``voluntarily'' responding to a request for information from the U.S. Attorney's Office for the southern district of New York, PartyGaming said in a statement, adding that it's too early to say what the outcome will be.
...Analysts have said Ladbrokes Plc's discussions to buy Web gaming company 888 Holdings Plc were called off because of concern about legal risks after a U.S. crackdown on Web gambling last year. Discussions had also been held between PartyGaming and 888, people familiar with the situation have said.
...PartyGaming (other-otc: PYGMF - news - people ) said it initiated the talks with the DOJ, because U.S. law enforcement agencies had taken action on other online gambling firms who had accepted bets from American customers before the new bill, and it was now responding to a request for information.
"Bottom line is, they're trying to eliminate any cloud that's hanging over their heads," said Joseph Kelly, a business law professor (in the Business Department) at Buffalo State, who has worked with online gambling companies. "They want to be able tell their shareholders that there are no threats of impending prosecution." Kelly said that U.S. attorneys had sent out subpoenas and questions to online gambling firms in recent months. A compromise with PartyGaming would likely take the form of an agreement, rather than a financial settlement, and if the company reaches an understanding with the New York Attorney's Office, it won't face action from other prosecutors. (emphasis added)
A discussion with the DOJ is "the most sensible route for operators that used to offer their services into the U.S., essentially working with the authorities to hopefully draw a line under any potential ongoing litigation," said James Hollins, an analyst at broker Daniel Stewart, who has a "hold" recommendation and a 38 pence (76 cents) price target on the stock.
Numis analyst Richard Carter said today's announcement was a positive move for PartyGaming and its peer group. "Although it is too early to assess the outcome of these discussions, our intelligence tells us that there now appears a willingness on behalf of the U.S. Attorney's Office to settle and draw a line under the uncertainty caused by recent DOJ actions," he said.
Like its publicly traded rival, 888 Holdings, Gibraltar-based PartyGaming is loathe to gamble on legal matters. In April, the company announced it would no longer allow Turkish citizens to place bets on any of its Web sites, even though the government had only outlawed unauthorized online gambling firms from taking bets. "They can't afford to take any chances," said Kelly.
888 Holdings has revealed it, too, is talking to the US justice department about whether the online gaming firm could face prosecution for taking bets in the US prior to the ban of internet gambling on 13 October 2006.
“It is too early to assess any particular outcome of these discussions,” the group said.
Yesterday, rival online gamer Party Gaming confirmed that it has initiated discussions with US Attorney's Office for the Southern District of New York, voluntarily responding to a request for information issued by the office.
888 stopped customers in the US from playing or making deposits on any of the group's real money sites once the anti-gaming law was enacted.
Last week, 888 said it is trading in line with expectations after an encouraging start to the financial year in its non-US markets. Growth has been driven by the rollout of products such as Blackjack in Poker, Crazy Blackjack and games tailored for target markets.
The group has recently launched a new bingo product after it bought bingo business Globalcom.
LONDON The world's biggest listed online gaming firm, PartyGaming, said on Monday its chief executive, Mitch Garber, had taken options for 3.5 million shares and reversed previous plans to sell a chunk of stock. Under his planned sale programme, Garber was to have sold shares between Dec. 19 and Dec. 31. He now holds 8.75 million shares in the firm, more than double the amount he is obliged to hold under his contract.
PartyGaming is waiting for a decision from U.S. authorities on its punishment for taking bets from U.S. gamblers last year before the law was clarified in October.
PartyGaming Plc, the world's biggest Internet poker operator, rose the most in seven months in London trading on speculation that it may have reached a settlement with the Department of Justice regarding past U.S. activities. ... jumped 10 percent, the steepest gain since Oct. 25.
Sportingbet Plc, the Web bookmaker that owns Paradise Poker, rose 7.6 percent, while online casino company 888 Holdings Plc advanced 3.5 percent as analysts said a U.S. settlement may act as a trigger for mergers and acquisitions across the industry. PartyGaming spokesman John Shepherd declined to comment.
PartyGaming began negotiations with the Justice Department in June 2007 as industry concern spread about possible legal action against companies that took bets from Americans before a 2006 law barred foreign betting Web sites. Anxiety among acquirers and lenders about possible future legal action or costs related to past U.S. business may have held up merger activity, analysts say. Any settlement by Gibraltar-based PartyGaming would be ``material'' and would ``give people a better idea what they were worth if they were open to acquisition,'' said Mark Brumby, an analyst at Blue Oar Securities in London. ...
... EU regulators will now ``engage in a detailed examination of the factual and legal issues raised by industry in the next five to seven months, as well as seek dialogue with interested parties and the relevant authorities.'' The commission will then ``present its findings in an investigation report which could lead to the launch of WTO proceedings should this be warranted,'' according to today's statement (by the Remote Gambling Association).
There were plenty of "Friday rumours" to keep traders on their toes. Online gambling group Partygaming leapt 26¼ to 286½p amid speculation that it was close to reaching a $600m-$800m settlement with the US Department of Justice. Dealers noted that the resolution of Partygaming's legal problems in the US would pave the way for the return of possible bid interest.
A $1 billion bet is said to be on the table for the Department of Justice to forgive the past crimes of an online gambling company, opening the door to a new Internet gold rush. Rumors swirled yesterday on two continents that an unprecedented settlement was in the works between the Department of Justice and one of the world's leading online-gaming empires, PartyGaming Plc, to forgive illegal betting made online in the US prior to a 2006 law banning it here.
... Industry sources said the rumored settlement - nearly two years in the making - would be a surprising breakthrough, but also very expensive, costing as much as $1 billion by one estimate. "If there's a settlement it will involve a huge number," said one industry source familiar with the settlement effort.
PartyGaming's husband-and-wife founders, Russ and Ruth Perisol, earned a $7 billion windfall when they took their company public in London, and could be bankrolling part of the settlement to avoid shareholder backlash.
COMMENT: Settlements are contractual agreements to end legal disputes. United States v. ITT Continental Banking Co., 420 U.S. 223, 228 (1975); Village of Kaktovik et al. v. Watt, 689 F.2d 222, 230 (D.C. Cir. 1982). Such agreements cannot dispose of the claims of non-participants. Firefighters v. Cleveland, 478 U.S. 501, 529 (1986). Similarly, plea agreements, which are also contractual in nature, cannot subject property to forfeiture unless permitted by substantive statute. United States v. Reckmeyer, 786 F.2d 1216 (4th Cir.), cert. denied, 479 U.S. 850 (1986); United States v. Roberts, 749 F.2d 404 (7th Cir. 1984), cert. denied, 470 U.S. 1058 (1985). Moreover, a plea agreement may significantly limit existing statutory forfeiture provisions. See United States v. Paccione, 948 F.2d 851 (2d Cir. 1991). It is important to note that while unambiguous, good faith settlements and plea agreements will be read and interpreted according to their terms, any ambiguities or imprecise terms will be construed against the government. See United States v. Harvey, 791 F.2d 294, 300 (4th Cir. 1986); United States v. Field, 766 F.2d 1161, 1168 (7th Cir. 1985). Because the courts are inclined to read such terms against the government even when defense counsel has contributed to the ambiguity or imprecision of the agreement, Harvey, 791 F.2d at 301, it is essential that federal prosecutors and forfeiture attorneys strive for clarity, precision, and detail in defining the obligations of each party to the agreement. Fields, 766 F.2d at 1168.) (From DoJ's Criminal Resource Manual online)
PartyGaming notes the story published in today’s Financial Times (see below) ... As PartyGaming stated in its announcement on 4 June 2007, the Company initiated discussions with the DoJ with the aim of removing any uncertainty regarding the Company’s legal status in the United States in respect of the period prior to the passing of the Unlawful Internet Gambling Enforcement Act on 13 October 2006, when the Company allowed customers in the US to play or make deposits on the group’s real money sites. The Company cannot comment on the accuracy of the report in today’s Financial Times concerning developments involving Mr Dikshit, but 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. (emphasis added)
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. 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.
A further announcement will be made in due course once the settlement negotiation has concluded.
Contacts:
PartyGaming Plc +44 207 7337 0100
Peter Reynolds, Investor Relations Director
John Shepherd, Director of Corporate Communications
The two-year battle between the online gambling industry and US prosecutors reached a significant milestone when Anurag Dikshit, co-founder of PartyGaming, on Tuesday agreed to plead guilty to a charge related to internet betting and pay the US authorities $300m.
Appearing in the Southern District Court of New York, Mr Dikshit, the largest shareholder in the UK-listed company, read a statement expressing regret for his actions. Mr Dikshit, who has already paid $100m, will pay another $100m within three months and forfeit the final instalment before September 30, 2009. He also agreed to co-operate with the US Department of Justice. Judge Jed Rakoff set his sentencing date for two years from Tuesday and could penalise him with up to two years in prison and a year of supervised release. ...
Mr Dikshit admitted to violating the Wire Act, although he said he was not always certain of the law. Mr Dikshit was the technician behind PartyGaming’s meteoric rise that resulted in a £5bn ($7.8bn) flotation in 2005 to become a FTSE 100 company. He wrote the software that enabled it to become the world’s biggest online poker site before anti-gambling legislation in 2006 forced its exodus from the US. He retains a 27 per cent stake in the company.
The company said it remained in talks with the DoJ about a settlement likely to result in a payment to the US authorities “significantly below” the $300m Mr Dikshit is paying. Its shares rose 27 per cent, while 888 and Sportingbet, other online gambling companies, also rose significantly as analysts raised the prospect of the industry making a clean break with the past and moving towards consolidation.
The court granted Mr Dikshit bail on a $15m personal-recognisance bond. Under that agreement his travel is restricted to India, Gibraltar, where he lives, the European Union and Manhattan.
Extorting the post-GATS-slash settlement private 'settlement':
COMMENT: Settlements are contractual agreements to end legal disputes. United States v. ITT Continental Banking Co., 420 U.S. 223, 228 (1975); Village of Kaktovik et al. v. Watt, 689 F.2d 222, 230 (D.C. Cir. 1982). Such agreements cannot dispose of the claims of non-participants. Firefighters v. Cleveland, 478 U.S. 501, 529 (1986). Similarly, plea agreements, which are also contractual in nature, cannot subject property to forfeiture unless permitted by substantive statute. United States v. Reckmeyer, 786 F.2d 1216 (4th Cir.), cert. denied, 479 U.S. 850 (1986); United States v. Roberts, 749 F.2d 404 (7th Cir. 1984), cert. denied, 470 U.S. 1058 (1985). Moreover, a plea agreement may significantly limit existing statutory forfeiture provisions. See United States v. Paccione, 948 F.2d 851 (2d Cir. 1991). It is important to note that while unambiguous, good faith settlements and plea agreements will be read and interpreted according to their terms, any ambiguities or imprecise terms will be construed against the government. See United States v. Harvey, 791 F.2d 294, 300 (4th Cir. 1986); United States v. Field, 766 F.2d 1161, 1168 (7th Cir. 1985). Because the courts are inclined to read such terms against the government even when defense counsel has contributed to the ambiguity or imprecision of the agreement, Harvey, 791 F.2d at 301, it is essential that federal prosecutors and forfeiture attorneys strive for clarity, precision, and detail in defining the obligations of each party to the agreement. Fields, 766 F.2d at 1168.) (From DoJ's Criminal Resource Manual online)
EU Commissioner Peter Mandelson wrote to the Bush Administration’s USTR in June 2008 requesting a freeze on all enforcement actions by the US authorities against European online gaming companies on the grounds that they violated international trade rules set by the World Trade Organization. Mandelson suggested that the prosecutions stop until a proper dialogue could take place so as to avoid unnecessary escalation of the dispute at a time when the EU had already launched an enquiry into US actions following an RGA complaint made under EU Trade Barrier Regulations. (RGA president Clive) Hawkswood added, “Not only has that request remained unanswered, but now the US authorities, it seems, have succeeded in pressuring a major shareholder into making a deal. A major line has been crossed and it could set a very worrying precedent.”
PartyGaming Plc and its shareholders are not obvious targets for enforcement action of this kind. The company is listed on the London Stock Exchange, is fully licensed in an EU jurisdiction, was among the very first to cease accepting US customers when the Unlawful Internet Gambling Enforcement Act passed, has never offered sports-betting to avoid violating US law and has co-operated fully with the US authorities. More generally, It has been closely involved in a whole range of industry initiatives that have served to improve the reputation and accountability of the sector as a whole.
“It’s amazing really that a company which has just been voted by the leading industry publication as ‘responsible operator of the year’ is the one that has been most targeted for this sort of enforcement activity while other businesses that are still active in the US market, including notably US operators, do not appear to be targeted in the same way. That this happens while the US Internet gambling market, the biggest in the world, continues to grow and while US companies are free to develop their businesses in Europe, is quite astonishing. In the circumstances it is not unreasonable for us once again to seek the support and protection of the European Commission. We hope and believe that these continuing breaches of international law by the US will serve to strengthen the Commssion’s resolve” said Hawkswood.
The EU Commission started an investigation of the RGA’s complaint in March 2008. Describing the process, Lode Van Den Hende of Herbert Smith, the RGA’s law firm in Brussels said, “The US has been given ample opportunity to respond to the legal and factual arguments presented in our complaint. However, we understand the US’ defence has been flimsy and that the Commission will, therefore, have to confirm the RGA’s assessment of WTO unlawful, retroactive and discriminatory enforcement. The next question is what will be done about it, given the acceleration of events causing this dispute.” ...
Ending nearly two years of negotiations, PartyGaming agreed Tuesday to settle with the United States for $105 million, after admitting its past activities here were illegal. Under the terms of the agreement, inked Monday with the United States attorney's office for the Southern District of New York, the Justice Department said it will not prosecute the company for offenses committed during its near ten-year tenure as a United States-facing casino and poker operator. Those terms, unsurprisingly, were a boon for the company's mercurial share price, which rose over 14 percent in London trading Tuesday.
"I think what's absolutely critical here, and needs to be understood, is that we have a non-prosecution agreement," James A. Ryan, the company's chief executive, told investors on a conference call Tuesday. "We are not being charged with any offense under any statute."
In a prepared statement, Lev L. Dassin, the acting United States attorney in Manhattan, said the Justice Department's decision to enter into the agreement was based, in part, on PartyGaming's "early and full cooperation with the Government."
... PartyGaming has agreed to pay the $105 million -- proceeds of its United States operation, the Justice Department said -- in twice-yearly installments, the last of which is scheduled for September 2012.
Against the backdrop of stagnating poker revenue, and newly shorn of any threat of retroactive prosecution, the company was optimistic about tapping capital markets to finance consolidation efforts.
"What resolving the concerns of the U.S. government does for our business is it opens up opportunities that would not have otherwise been available to us, specifically our access to equity and debt markets," Mr. Ryan said. "With this particular issue now closed -- resolved -- we believe we are in a position . . . to look at consolidation opportunities that were much larger than we could have in the past."
Some analysts and commentators believe PartyGaming's deal with the Justice Department puts it in pole position for licensure in America, should individual states or the federal government ever elect to regulate and tax online casino, poker -- or both. ... (emphasis added)
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A lousy hand for poker's top promoter WPT Enterprises failed to heed the old dictum of knowing when to hold 'em and when to fold 'em.
Aug. 26/09
Poker's one-time leader has just folded its hand. WPT Enterprises, the parent company of the renowned World Poker Tour, raised the game's stakes a few years ago, helping create the huge surge in popularity of no-limit Texas Hold 'Em. A televised tour, giving viewers a peek at players' hole cards, was the ace up its sleeve.
During the winning streak, there was talk that WPT could be worth substantially more than its $500 million market value, and that poker legend Doyle Brunson was plotting a bid. But WPT's owners didn't walk away from the table at the right moment. They are selling now for chump change -- a measly $12.3 million and a tiny cut of future revenue.
WPT counted on gamblers' luck. But new players started chipping away at its stack. The company responded by going on tilt -- betting too much on expansion, including costly failed ventures online and in China.
The poker craze may have died down but it hasn't died. The World Poker Tour is a recognized brand with its tournaments still broadcast in 150 countries, and a new deal for an eighth season on Fox Sports in the US.
You got to know when to hold 'em, know when to fold 'em.
Know when to walk away, know when to run
You never count your money, when you're sittin' at the table.
There'll be time enough for countin', when the dealin's done.
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