Net gambling exec arrested: CNET News.com

September 7, 2006 at 10:21 pm 4 comments

U.S. authorities have arrested a second Internet gaming executive, adding to fears it is cracking down on the lucrative industry and sparking share price falls on Thursday that wiped over $1.5 billion off the market value of the sector.

Online bookmaker Sportingbet said its chairman, Peter Dicks, had been detained by U.S. authorities, mirroring the detention in July of another online gaming CEO on racketeering charges. Dicks was arrested on Internet gambling charges as part of an ongoing investigation into Sportingbet.com, said Senior Trooper Dwight Robinette of the Louisiana State Police.

Robinette said the arrest warrant was issued for Dicks and others in May. The arrest warrants are sealed and there are no indictments, he said. Shares across the $12 billion-a-year industry fell sharply, with industry leader PartyGaming plunging as much as 19 percent before closing 9.8 percent lower at 105 and 3/4 pence. 888 Holdings dropped 15.8 percent.

Dicks was arrested in New York late on Wednesday at JFK Airport on a warrant from Louisiana, said Pasquale DiFulco, a spokesman for the Port Authority of New York and New Jersey. “This arrest highlights the U.S. Department of Justice is going after online gaming companies by arresting their board members,” said a London analyst who declined to be named.

Analyst Paul Leyland at Arbuthnot Securities said he was keen to know if the charge sheet contained anything that might allow the extradition of any other Sportingbet executives. He said the long-term impact on the sector would also depend on whether the charges related to taking sports bets from U.S. citizens or taking U.S. gamblers’ money in general, including online casino and poker wagers. Sportingbet said it sought a temporary suspension of its shares pending clarification of the situation.

Analysts said Sportingbet’s U.S.-focused sports betting business was similar to that of BetOnSports, whose CEO David Carruthers was arrested in Texas in July. Carruthers and seven others pleaded not guilty to racketeering and other charges. The Costa Rica-based company has since said it is closing its U.S. business. “Clearly the first indictment against BetOnSports was not a company-specific issue,” said one London analyst.

One industry consultant said he thought the arrests were a political move by a Republican administration fearful of losing the U.S. House of Representatives in November elections. “I think what they’re trying to do is to appeal to their conservative (voter) base,” said Frank Catania, a former New Jersey gaming regulator whose clients include the Interactive Gaming Council.

News of Dicks’ detention overshadowed strong results from PartyGaming, which said core profit rose 47 percent in the first six months of the year to $380 million and stressed it was reducing its dependence on the U.S. market. PartyGaming said it whittled down the percentage of revenues it takes from the United States to 77 percent in the first half, from 86 percent a year earlier.

PartyGaming has been trying to reduce its U.S. exposure for over a year, partly as a response to attempts by some conservative U.S. politicians to get Internet gaming banned. An anti-gambling bill was approved by the U.S. House but is stalled in the Senate, which will recess in less than a month.

“The bill continues to face opposition, but this is politics, and we are not complacent, and the outcome remains uncertain,” PartyGaming Chief Executive Mitch Garber told a conference call on Thursday.

Story Copyright © 2006 Reuters Limited. All rights reserved.

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Entry filed under: blogs, cnet, digg, gambling, internet, internet gaming, media, News, online, online casino, online community, partygaming, Sportingbet, TechCrunch, technorati.

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