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PartyGaming is a Scary One-Eyed Monster With Little Bite

Written by:
C Costigan
Published on:
Dec/29/2008
PartyGaming

PartyGaming, once the world's largest online poker firm with more than half the market and a darling of the London Stock Exchange, has gone into free fall in recent years.  Amazingly, despite losing nearly 80 percent of its market share following passage of the Unlawful Internet Gaming Enforcement Act in October 2006, the company's marquee PartyPoker brand sits comfortably in the number 4 position and no other room looks to catch up for at least the next three months.

That's the good news.  The bad news is nobody from a business perspective wants to touch PartyGaming.

"The scary monster has been muted of late," points out Roger Blitz of the Financial Times.  "Once the most talked-about investment after storming into the FTSE 100 when it floated in 2005, its share price in mid-November barely surfaced above £1.

"The online gambling company has spent the last two years in survival mode since it was effectively turfed out of the American market by US lawmakers, costing it three-quarters of its revenues, mainly derived from poker, and forcing it to regroup around European markets."

Blitz suggests there could be a light at the end of the tunnel following one of its co-founder's entering into a plea with US law enforcement as a means of avoiding future prosecution and potentially opening the doors up for Party to become an attractive acquisition target.

Anurag Dikshit agreed to forfeit $300m (£203m) to US authorities. He may serve up to two years in prison, though most agree Dikshit is not likely to step foot in a jail cell as part of this settlement agreement.

Gambling911.com legal experts warn Dikshit and his cronies are likely living a pipedream.

"Any other federal agency, including ICE, can take a run at him and the only thing the OUSA-SDNY will do is say nice things about his cooperation," one of our experts pointed out.

In other words, once the legal process gets rolling, Mr. Dikshit could be subjected to years of future prosecution regardless of this plea.  It is no secret the the US Justice Department is not exactly thrilled by what it perceives as "bullying" by European online gambling agencies such as the Remote Gaming Association and even the European Union. 

"This deal appears to be intended to facilitate future testimony by denying the lawyers defending other targets ammunition with which to impeach Mr. Dikshit-‘In fact, you're here today because the government gave you a sweetheart deal for you own crimes, isn't that true!!??,' might be what the government wants to avoid," our legal expert points out.

Dikshit's plea automatically casts a dark shadow of the struggling company.  PartyGaming is now the online poker company - some would argue the first - founded by "that guy who potentially is going to serve jail time".

Then again, maybe Dikshit should be thanking Martha Stewart, who seemingly made owning up to "criminal activity" and serving time behind bars a sort of "vogue thing to do".

The problem here is that Dikshit wasn't charged with any crimes.  Many in the industry fear he is going to start a new trend:  Cop a plea for past improprieties that may have occurred to avoid the possibility of any future prosecution, whether it's going to happen or not.  We should all go to our local police precincts today and advise of that time we drove 90 MPH in the 75 MPH zone three years ago just in case someone took down your license plate and a speeding ticket is forthcoming.  Hey, you never know.

As for Party itself, the new CEO, Jim Ryan, told the Financial Times that any turnaround with the company will likely take up to three years.

"This is a marathon, not a sprint. We have been chasing quarterly profits, but the market has become so competitive you've got to know where you're going," he says. "We're not so much slowing down but keeping ourselves focused."

Christopher Costigan, Gambling911.com Publisher 

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