New York: Anurag Dikshit, who founded PartyGaming with his IIT Delhi batchmate, Vikrant Bhargava, in 1995, yesterday agreed to pay a fine of $300 million in three instalments to the US department of justice (DoJ) after admitting he had broken American laws which prohibit online gambling. Dikshit’s lawyers did not contest the morality of the laws although America wallows in gambling and holds up Las Vegas as the symbol of the “get lucky, get rich quick” culture.
Many critics of the laws believe that the US authorities are not so much against gambling as outsiders making money from something which they consider to be exclusively their province.
“However, Anurag Dikshit has agreed to settle because he wants the DoJ off his back,” said an insider.
By agreeing to pay the fine and appearing contrite, Dikshit, who lives in Gibraltar for tax reasons, hopes to avoid a two-year jail sentence. In any case, the sentence has been put off for two years so there does appear to be a good chance he will avoid going to prison.
Although no longer a director in the UK-listed PartyGaming, probably the world’s most successful online gambling company, he remains its biggest shareholder with a 27 per cent stake. He has become rich in the process with Forbes magazine putting an estimate on Dikshit’s personal wealth last year at $1.6 billion.
He made £420 million when the company was floated in 2005 and a further £65.7 million when he sold another batch of shares the following year. He also received a dividend of $64 million that year.
PartyGaming says the decision taken by Dikshit after a two-year battle has no relevance for the company which is conducting a separate set of negotiations with the DoJ. It is hoping to settle the dispute by paying a fine but a smaller one than that agreed by Dikshit.
The department of justice seems intent on making an example of Dikshit, who covered himself metaphorically with sackcloth and ashes when he appeared in the Southern District Court of New York yesterday.
Dikshit read out his statement: “I came to believe there was a high probability that the company’s business was illegal under US laws. I acknowledge my actions and have come to believe that what I did was wrong.”
Afterwards neither a smiling Dikshit (the Financial Times once remarked he “always smiles a lot when he talks”) nor his lawyer Mark Pomerantz would make any comment.
Dikshit, who has already paid $100 million, will pay another $100 million within three months and the final instalment before September 30, 2009. He also agreed to co-operate with the department of justice.
Judge Jed Rakoff set his sentencing date for two years from Tuesday and could penalise Dikshit with up to two years in prison and a year of supervised release. US prosecutors indicated they might eventually submit a letter to the judge asking for leniency at sentencing.
In a statement to the stock exchange in London yesterday, the company said: “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.”
Online gambling was made illegal by the US Congress two years ago. Some of the reasons seem sensible.
There is concern that children will have easy access and that it is difficult to check whether the operators are always honest. There is worry, too, about whether online gambling will become addictive. However, gambling flourishes in the US and betting on horses is allowed online.
Many think the real reason for banning online gambling has more to do with the fear that the money that the US authorities make by taxing gambling will plummet if more people do so on the Net. In the industry, there is scepticism about whether the US authorities can prevent online gambling.
“They are putting the responsibility on the financial services sector who make the actual payments but 400 billion cheques are made in the US every year — you can make your payments into an account which passes on the money to the online gambling company — it’s very difficult to control,” one industry source pointed out.
Although people in India are also not allowed to gamble online, PartyGaming’s operations are run mainly from offices in India. (TelegraphIndia)
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