PartyGaming Plc’s founder and former director, Anurag Dikshit, pleaded guilty to illegal Internet gambling and agreed to cooperate with the US Justice Department in an investigation of the Web-based gaming company.
Dikshit, 37, the biggest shareholder of Gibraltar-based PartyGaming, entered the plea to one count of online gambling in violation of the Wire Act on Tuesday and agreed to forfeit $300 million.
“I came to believe it was in fact illegal under US law,” Dikshit told US District Judge Jed Rakoff in New York, referring to PartyGaming’s activity. “I have taken full responsibility for my actions.”
The maximum penalty for the gambling offense is two years in prison and a year’s supervised release. Rakoff set a sentencing date of two years from Tuesday, allowing Dikshit to remain free on a $50 million personal-recognizance bond.
The native of India and resident of Gibralter and the UK previously paid $100 million and will pay another $100 million in three months, lawyers for both sides said. The final installment is due next September.
The company probably won’t plead guilty as a result of talks with the Justice Department, it said in a statement earlier today. Federal authorities are examining the company’s past activities in the US, where offshore Web gaming is illegal.
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Discussions began last year as industry concern spread about the possibility of legal action against companies that took bets from Americans before a crackdown on Web gaming. The Unlawful Internet Gambling Enforcement Act of 2006 bars credit-card companies from collecting payments for bets.
Shares of PartyGaming and its competitors, Sportingbet Plc and 888 Holdings Plc, lost $7 billion of market value after the vote in Congress. PartyGaming, whose Web site says it has games including poker, blackjack, roulette and “virtual dog racing,” stopped taking wagers from its 900,000 American players.
PartyGaming was founded in 1997 by a group including Dikshit, who created its software platform. The company’s 2005 initial public offering made him the 207th richest person the following year, according to Forbes magazine.
At the time of the IPO, PartyGaming said in its prospectus that the Justice Department “considers that companies offering online gaming to US residents are in violation of existing federal laws” and that investors might lose their money if the company was barred from US business.
Dikshit, who is married with two children, voluntarily travelled to the US to enter his guilty plea.
His lawyer Mark Pomerantz of the firm Paul, Weiss, Rifkind, Wharton & Garrison in New York told the judge his client had “a growing awareness of the illegality of the conduct” before PartyGaming dropped its US customers.
The gambling was a Wire Act violation because clients used the Internet to pay gambling charges and fees, prosecutors said.