Dominating headlines this week has been the news that Anurag Dikshit, who was one of the original co-founders of Party Gaming, the parent company of PartyPoker, pled guilty to violating the Wire Act and participating in illegal gambling in a court room in White Plains, New York on Tuesday. He agreed to pay a total of $300 million in damages and may be sentenced to up to two years in prison. The judge in the case, Jed Rakoff of the Southern District Court of New York, scheduled a sentencing hearing for December 16th, 2010, two years from the date of his appearance. The 37 year-old Dikshit came to the United States on his own from Gibraltar, which is where he resides.

Dikshit owns 27% of Party Gaming. According to the Associated Press and other major news media who attended the hearing on Tuesday in New York, Dikshit has already paid the United States Government $100 million. He promised to pay another $100 million installment within three months and the final $100 million by next September. He pled guilty to violating the Wire Act of 1961, which has traditionally applied to online wagering on sports. It’s not clear whether online poker was the chief issue at hand in the case.

The legal issues stem from Party Gaming accepting customers from the United States prior to the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) in late 2006. The company exited the market almost immediately, as Party Gaming is publicly traded on the London Stock Exchange. The Associated Press noted that Dikshit helped build its software beginning in 1998. The Financial Times quoted Dikshit as saying, “I came to believe there was a high probability that the company’s business was illegal under U.S. laws. I acknowledge my actions and have come to believe that what I did was wrong.”

You can tell from this article that a number of high-profile news media were on-hand for the proceedings on Tuesday afternoon, one of the first tests of the Wire Act and UIGEA since the latter was passed two years ago. Among those keeping a watchful eye on the proceedings was Clive Hawkswood, Chief Executive for the London-based Remote Gambling Association (RGA), of which Party Gaming is a member. Hawkswood commented in a press release distributed late Tuesday, “These events show that the outgoing U.S. administration and Department of Justice have demonstrated a total disrespect for the legal rights of European online gaming companies and those associated with them.”

The RGA has filed a grievance with the European Commission concerning the UIGEA’s discriminatory practices. The investigation is ongoing. Congressman Robert Wexler (D-FL) added, “The retroactive and discriminatory enforcement against E.U. parties, who ceased operating in the U.S. a long time ago, has directly led to an escalating trade dispute with the E.U.” The Florida Congressman authored HR 2610, the Skill Game Protection Act, which would have exempted poker and other games of skill from both the Wire Act and UIGEA. However, it must be re-introduced in January when the new Congress takes office.

Party Gaming’s stock can be found under the symbol “PRTY” on the London Stock Exchange. Its share price has swelled this week as a result of Dikshit’s $300 million agreement, which could help pave the way for the internet gambling site’s return to the U.S. market should the industry ever be regulated. In addition, it allows the company to pursue business agreements outside of the U.S. without a cloud hanging over its head. Party Gaming recently released a statement which revealed that talks between the company and the U.S. Department of Justice are ongoing.

PRTY stock was trading at £127.50 during the day on Friday. By the close of business on Wednesday, it was trading at £190.75. It rose 26% on Tuesday alone as investors took the settlement as a positive sign for the company’s long-term future. Americans accounted for 85% of the company’s revenue four years ago, prior to the passage of the UIGEA, and two years after the Moneymaker boom began. The stock tumbled after it withdrew from the U.S. market.

Dikshit is Party Gaming’s largest shareholder. Ruth Parasol and Russ DeLeon, neither of whom has made any agreement with the U.S. Government, own 14% of the company each. A U.S. Department of Justice press release stated that Assistant United States Attorneys Jonathan B. New, Arlo Devlin-Brown, and Sharon Cohen Levin are handling the case.

* Image: Westchester County Courthouse, White Plains, NY

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