Dikshit: In trouble

London, Dec. 17: 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 Gibral
tar 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 share
holder with a 27 per cent stake. He has become rich in the process with Forbes mag
azine 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 cur
rently 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 be
tween 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 plum
met 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.

PartyGaming’s online gambling operations are run from Gibraltar where it is
licensed and regulated while the proprietary technology behind its games is developed in India.