Anurag Dikshit, co-founder of PartyGaming, pled guilty today to federal criminal charges connected with offering illegal Internet gambling services to United States citizens.
According to court documents, Mr. Dikshit copped to one count of "using the wires to transmit bets and wagering information in interstate commerce."
Appearing on behalf of Mr. Dikshit was Mark F. Pomerantz, who is in line to become the next United States Attorney for the Southern District of New York, the office that is currently carrying out an investigation into PartyGaming.
As part of the plea, Mr. Dikshit agreed to pay the United States Department of Justice at total of $300 million -- $100 million of which has already been paid.
The remaining $200 million will be paid in two installments: one half in the next three months and the other half by September 2009.
For reference, Neovia Financial, the Isle of Man-based online payments processing firm that traded formerly as Neteller, in 2007 paid the Justice Department $136 million to settle an investigation relating to similar charges.
Mr. Dikshit has been released on $15 million personal recognizance bail, but he does face up to two years in prison for the charges -- the standard for a Wire Act violation.
Upon entering his plea, Mr. Dikshit said since 1999 he had been a software developer and an officer for PartyPoker, and over that time he became increasingly aware that the activities of the company were illegal -- those activities being taking bets from the United States -- but he chose not to act on that knowledge, an observer at today's hearing told IGamingNews.
However, Judge Jed S. Rakoff, who oversaw today's case, said he would take into consideration all that Mr. Dikshit has done for the court at the time of sentencing, which is not scheduled until Dec. 16, 2010.
Meanwhile, PartyGaming, in which Mr. Dikshit has a 27 percent stake, released a precautionary statement today, ahead of Mr. Dikshit's hearing, distancing the company from its founder by saying that any discussions between Mr. Dikshit and the Justice Department were completely independent from those between the company and the Justice Department.
Furthermore, PartyGaming said it was progressing toward a settlement with the Justice Department regarding its activities in the United States prior to the passage of the Unlawful Internet Gambling Enforcement Act of 2006.
"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,” the company said. “Whilst these discussions are at an advanced stage, the terms of any settlement have not yet been finalized, and there can be no guarantee that an agreement will be reached between the company and the DoJ.”
John Shepherd, director of corporate communications for PartyGaming, was unable to comment further on the announcement when contacted by IGamingNews.
PartyGaming, which suspended all United States wagering activity on the day the UIGEA was enacted, entered into discussions with the Justice Department in June 2007 at the request of the office of the United States Attorney for the Southern District of New York.
As for speculation on whether the company is nearing a settlement with the United States government, two London analysts suggested the settlement will likely be worth $100 million -- or less.
"PartyGaming expects any settlement with the DOJ to involve a payment that is significantly lower than that reported by Mr. Dikshit," Richard Carter of Numis Securities wrote in a research note to clients this morning. "Using a similar formula to previous DOJ settlements would point to a settlement of between nothing and $100 million paid over a 12 to 24 month period. In addition, Party believe that any such settlement is unlikely to include a criminal plea on the part of the company or director."
James Hollins, an analyst at Daniel Stewart & Co. expressed a similar view in a note this morning.
"Critically, the independence of talks should ensure that a settlement can be made, and that it should only relate to funds retained in the business from ex-United States activities," he said. "We estimate, therefore, that the group's potential fine could be below $100 million relative to an H1 2008 cash balance of $149 million."
Today's developments sent PartyGaming's historically mercurial share price up 27 percent to 176 pence -- its highest close since early October.
Click here to view Mr. Dikshit's plea agreement.
Click here the view the charges against Mr. Dikshit.