Former Online Poker Billionaire Avoids Jail

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Anurag-Dikshit-Party-Gaming-FounderAnurag Dikshit, the former online poker billionaire, was sentenced on Thursday to one year of probation and no jail time in a hearing that highlighted the extreme confusion over how U.S. law applies to online poker.

Dikshit, 39, had traveled from his home in Gibraltar with a one-way ticket to New York to attend Thursday’s sentencing hearing, where he faced a maximum of two years in prison. He pleaded guilty in 2008 to one count of violating the federal wire act and agreed to forfeit $300 million.

“I am persuaded that no jail time is appropriate here,” said U.S. District Judge Jed Rakoff.

As part of his original plea deal, Dikshit agreed to cooperate in an ongoing investigation with federal prosecutors, who did not seek any jail time.  “I came to believe there was a high probability it was in violation of U.S. laws,” Dikshit said of his work at PartyGaming, the online poker company that he helped build, at the court hearing when he pleaded guilty in 2008.

Indeed, Dikshit, who is married with two children, had reached out to federal prosecutors in the U.S. to initiate the negotiations that resulted in his 2008 guilty plea. Dikshit’s plea deal was originally seen as an important victory for the Department of Justice, which has long taken the position that facilitating for-money online poker in America violates U.S. law, making no distinction between sports betting—clearly illegal—and poker playing.

A few months after Dikshit pleaded guilty, his former company, PartyGaming, a Gibraltar company that was once the world’s biggest online gaming company, struck a non-prosecution agreement with federal prosecutors in Manhattan, admitting that its U.S. operations for years had violated U.S. law. To some it seemed like the Justice Department had drawn a line in the sand against online poker and set a two-year time frame to go after industry players.

At Thursday’s hearing Judge Rakoff challenged a government prosecutor wondering why there have been no other prosecutions, specifically mentioning Dikshit’s fellow PartyGaming cofounders, Americans Ruth Parasol DeLeon and her husband Russell DeLeon. “Nobody else has been indicted,” said Judge Rakoff. “It has been two years since this defendant began cooperating, what’s going on?”

Assistant U.S. Attorney Arlo Devlin-Brown said that the investigation that involved Dikshit remains ongoing, pointing to sealed papers the government filed with the court. “There are challenges in this prosecution,” said Devlin-Brown, adding that Dikshit had asked to settle the case at its very early stages. “It has been two years and there are reasons.”

Indeed, even Mark Pomerantz, Dikshit’s lawyer, said during the hearing that he and his colleagues had discussed the confusing circumstances surrounding the case “hundreds of times.” In arguing for no jail time, Pomerantz highlighted Dikshit’s $300 million payment and said Dikshit, who is a citizen of India with no ties to the U.S., had originally been told by some lawyers that it was unlikely he would be charged, and even if he was charged the chances of extradition were slim. “The acceptance of responsibility is extraordinary,” said Pomerantz. “He wanted to square his accounts with the U.S.”

It certainly would have been strange for Dikshit to wind up in jail even as other online poker entrepreneurs were not being prosecuted. Some of the most prominent are not even offshore, like the men widely believed to be behind Full Tilt Poker, the second-biggest company servicing U.S. play, poker champions Christopher Ferguson and Howard Lederer.

Dikshit’s fellow PartyGaming cofounders, Ruth Parasol DeLeon and Russell DeLeon, who live in Europe, neither have settled with the feds nor have they been charged. Dikshit’s plea bargain was seen as a betrayal by Ruth Parasol DeLeon in particular and the online poker community in general. Doyle Brunson, known as the Godfather of Poker and himself an online poker entrepreneur, blasted Dikshit two years ago, saying: “It looks like he would feel a sense of obligation to online poker, the industry that made him a rich man. Instead, he folded up like an accordion and pled guilty to breaking some kind of mystery law and is paying a 300 million dollar fine and possible 2-year jail term.”

PokerStars, the biggest online poker company, has for years insisted that legal opinions it has received from several U.S. law firms state that the Isle of Man company is not breaking any U.S. law, including the wire act of 1961 that Dikshit pleaded guilty to violating. “It’s PokerStars’ position that both the plain language and the legislative intent of the Wire Act strictly limit its application to sports wagering,” PokerStars has previously said.  Federal prosecutors have not appeared eager to actually challenge this reasoning in court.

Instead, federal prosecutors and lawmakers have focused on cutting off online poker companies from the financial system by going after the outfits that process their financial transactions. A 2006 law that went into effect earlier this year was designed for this exact purpose by Congress. The law persuaded publicly-traded PartyGaming to exit the U.S. market, leaving its riches for PokerStars and Full Tilt Poker and causing its once high-flying stock to plummet.

FORBES estimated earlier this year that PokerStars’ global annual revenue had hit $1.4 billion and Full Tilt’s annual revenue was some $500 million. FORBES also estimated that 2.5 million Americans play poker online and bet $30 billion annually. H2 Gambling Capital estimated the U.S. generated $1.4 billion of online poker revenue for companies with U.S. services.

Recent efforts by Senate Majority Leader Harry Reid to ram online poker regulation through Congress by attaching it to legislation extending the Bush tax cuts appear to have failed, much to the disappointment of casino companies in Reid’s home state of Nevada.

But whether online poker regulation ever comes to the U.S. is no longer a matter of concern to Dikshit, who refused to answer questions about his sentence. He has nothing to do anymore with PartyGaming and sold his remaining shares in PartyGaming over the last two years for some $450 million. These days Dikshit concentrates mostly on his charitable foundation, the Kusuma Trust, to which he has contributed some $75 million, according to its financial statements. With Thursday’s sentencing, however, Dikshit’s role in the online poker game may not have come to a close. One of the reasons Judge Rakoff insisted on probation was to ensure Dikshit’s continued cooperation with the government, including in any potential future trial.

(source Forbes)

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