In breaking news from Party Gaming, the parent company of PartyPoker, it was announced that an agreement had been reached with the U.S. Government over violations of internet gambling law. The move sent Party Gaming’s stock, which is traded on the London Stock Exchange under the symbol “PRTY,” soaring 14% on Monday. The settlement could allow the company to re-enter the U.S. market legally if and when internet gambling is legalized and regulated. Party Gaming agreed to fork over $105 million to U.S. authorities for its wrongdoing.The two sides officially inked a Non-Prosecution Agreement for offering internet gambling to U.S. customers prior to the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) back in 2006. A total of $105 million must now be paid out in installments every six months, with the first fine of $5 million due this month. In September, the company will owe $10 million. Its final payment takes place in September of 2012.
In the process, the company agreed to a Statement of Facts outlining its role in the U.S. market prior to the UIGEA being signed into law by former President George W. Bush on October 13th, 2006. The company admitted that it had offered real money online poker and casino games beginning in 1997 and that payments were processed by third parties, which it claimed “were contrary to certain U.S. laws.” Party Gaming further agreed not to offer internet gambling services to United States customers that violate the country’s laws. These mainly consist of the UIGEA and Wire Act of 1961.
The agreement comes after months of negotiation between Party Gaming and the U.S. Attorney’s Office (USAO) in the Southern District of New York. Jim Ryan, Party Gaming’s Chief Executive Officer, commented in a statement to the London Stock Exchange, "The resolution of our position with the U.S. authorities marks an important day for Party Gaming. It has been a long and complex process, but we have reached an amicable solution with the USAO 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."
You might be saying to yourself, “Didn’t Party Gaming already settle with the U.S. Government?” You’re not too far off. In December, one of the company’s co-founders, Anurag Dikshit, admitted to violating the Wire Act in a New York courtroom. In the process, he agreed to pay out a sum of $300 million and faces up to two years in prison. His sentencing is scheduled for December of 2010 and Dikshit will cooperate with U.S. authorities in the interim. The action sparked an outcry from across the industry, notably from the London-based Remote Gambling Association (RGA), whose constituents include publicly traded internet gambling companies like Party Gaming and 888.In a press release distributed back in December, the RGA commented, “These events show that the outgoing U.S. administration and the Department of Justice have shown a total disrespect for the legal rights of European online gaming companies and those associated with them.” The RGA cited violations of the General Agreement on Trade in Services (GATS). The organization is also involved in an ongoing dispute through the World Trade Organization (WTO) over the UIGEA.
The Statement of Facts also states, “If requested by Party Gaming, the USAO will bring the co-operation and remedial actions of Party Gaming to the attention of other licensing and regulatory authorities.” What ramifications this will have, if any, remain to be seen. PartyPoker, which was once the largest online poker site in the world, vacated the U.S. market back in 2006 upon the passage of the UIGEA. Other publicly traded companies such as 888, Betfair, and Ladbrokes are all members of the RGA and do not accept U.S. customers.
Congressman Barney Frank (D-MA, pictured at right) revealed to The Hill that he plans to introduce internet gambling legislation after the Easter Congressional recess and before the end of April. What his bill will entail is not yet known. Frank introduced HR 2046, the Internet Gambling Regulation and Enforcement Act, in 2007 and also tried to clarify the UIGEA with the Payments System Protection Act (HR 6870) last September. Neither was passed during the previous Congress and both must be reintroduced for consideration.
