PartyGaming Settles With U.S. Dept. of Justice for $105 Million

A settlement in a legal matter often simply means that neither side has a solid gold case, nor meeting in the middle can resolve the differences and end the dispute easily. Whether or not that is what happened between PartyGaming PLC and the United States Department of Justice is pure speculation, but the resulting settlement seems harsh – especially to the online gaming community – nonetheless, as PartyGaming has agreed to admit to providing illegal online gambling services to U.S. customers prior to 2006 and will pay $105 million in fines for the transgression.

PartyGaming thought it was being astute by withdrawing from the U.S. gaming market when the Unlawful Internet Gambling Enforcement Act (UIGEA) was passed in 2006. The publicly-traded company left millions of dollars of annual revenue behind to escape any future wrath of a Bush administration law. But the U.S. Department of Justice went after PartyGaming anyway, looking to prosecute the company and its executives for the services they provided to U.S. customers prior to their departure.

The case was several years in the making, and it was in 2008 that PartyGaming co-founder Anurag Dikshit took the first step in admitting guilt by making just such a plea and agreeing to pay a $300 million fine. While PartyGaming tried to separate from that decision, it did indicate that its own was on the horizon shortly after the release of its annual earnings in March 2009. And one month later, the plea was announced. In exchange for a reprieve from criminal prosecution, PartyGaming admitted to “providing internet gambling services to customers in the U.S. prior to the enactment of the Unlawful Internet Gambling Enforcement Act (UIGEA) on 13 October 2006.” Further, it states that the company used third-party transaction processors, which was “contrary to certain U.S. laws.” The corresponding fine of $105 million will be payable in semi-annual installments through September of 2012.

In a company-released statement, PartyGaming CEO Jim Ryan stated, “The resolution of our position with the U.S. authorities marks an important day for PartyGaming. It has been a long and complex process but we have reached an amicable solution with the USAO [U.S. Attorney’s Office] 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.”

In the eyes of PartyGaming, the settlement clears its company name with U.S. authorities, despite the admission of law-breaking, for most positive relations in the future. As hinted by the company’s finance director last month, PartyGaming is “reasonably optimistic” that online gaming may become legal and regulated in the United States in the coming months and years, in which case the company is poised for a return to the multi-million dollar market.