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Emily D. Swoboda

Sportingbet Chairman Detained in New York

7 September 2006

Peter Dicks, a non-executive chairman for London-based online gambling operator Sportingbet Plc, was detained by Port Authority police late Wednesday night at JFK International Airport in New York while visiting the United States on non-Sportingbet-related business.

Dicks, 64, was arrested on a warrant from Louisiana, according to Pasquale DiFulco, a spokesman for the Port Authority, which runs the airport.

"He was picked up at 11:30 p.m. at JFK Airport on an active out-of-state warrant," DiFulco said. "He's being held by Port Authority police awaiting extradition."

Louisiana State Police spokesman Dwight Robinette said the State Police Gaming Enforcement Division filed the warrant in May 2006 and that the action was part of an investigation into illegal Internet gambling. He added that the police have issued warrants for other individuals within Sportingbet, but he could not say whom. The investigation has been underway since January 2006.

Louisiana is one of eight U.S. states with laws expressly forbidding Internet gambling.

According to Article 14, Section 90.3 of the Louisiana State Code, Internet gambling, or gambling by computer, is defined as

the intentional conducting, or directly assisting in the conducting as a business of any game, contest, lottery, or contrivance whereby a person risks the loss of anything of value in order to realize a profit when accessing the Internet, World Wide Web, or any part thereof by way of any computer, computer system, computer network, computer software, or any server.

The law also states:

Whoever designs, develops, manages, supervises, maintains, provides, or produces any computer services, computer system, computer network, computer software, or any server providing a Home Page, Web Site, or any other product accessing the Internet, World Wide Web, or any part thereof offering to any client for the primary purpose of the conducting as a business of any game, contest, lottery, or contrivance whereby a person risks the loss of anything of value in order to realize a profit shall be fined not more than twenty thousand dollars, or imprisoned with or without hard labor, for not more than five years, or both.

By enacting Section 90.3 late in 1997, Louisiana became the second U.S. state to prohibit Internet gambling (although the state also has a more recent law allowing one of its race courses to take bets online). (Click here for the details of this legislation.) Nevada started the club earlier that year, followed by Louisiana and eventually Michigan, Illinois, South Dakota, Oregon, Indiana and Washington.

Wednesday's bust is believed to be the first arrest of a foreign operator made for violating a state Internet gambling probation laws.

Ken Dreifach, who formerly worked for the office of New York Attorney General Elliot Spitzer and now counsels clients in the private sector on their rights under proposed I-gaming laws, pointed out that the arrest could mark the expansion of the U.S. government's anti-Internet gambling efforts beyond the realm of sports betting. His concern is that the government is mounting a case against others sectors of the industry.

"This certainly isn't an isolated incident," said Dreifach, who is now an attorney with New York-based Sonnenschein Nath & Rosenthal. "The question is, "Which piece of the industry is next? Will they go after payment processors? Financial institutions?

He added, "Another issue is what the effects, short-term and long-term, will be. The short-term is not good. Stocks fall 20 percent. But in the long term, we have to wonder to what extent the U.S. government can go to keep payments from moving to these companies."

At Sportingbet's request, trading of its shares was suspended today on the London Stock Exchange.

Meanwhile, shares in other I-gaming stocks plummeted following today's news.

At 1:15 p.m. (GMT), shares in PartyGaming were down 7 pence to 110.75; 888 Holdings dropped 24p to 147; Leisure & Gaming dropped 23p to 50.5 and World Gaming plc, a company that Sportingbet is thought to be in the process of acquiring, fell 23p to 69.

By the end of trading, Party Gaming was down 11.50p to 105.75; 888 lost an additional 3p to close at 144; Leisure & Gaming ended at 48, down 25.50p, and World Gaming closed at 64.50, with a total loss of 27.50p. Software companies felt the pinch as well. Excaspa, dropped 11p to 49.50 and Playtech shed 25p, closing at 247.50.

But the biggest losers on the day were payment processors Neteller, which fell 94p to 336, and Fireone Group, which fell 29p to 192.50.

"It's very, very unfortunate for the entire sector," Altium Securities analyst Wayne Brown told Reuters. "You can actually safely assume now that the DOJ are going after every single online gaming company."

Brown advised against any online gaming executive visiting the United States following today's development.

"I don't think any online gaming director or employee will be going anywhere near the U.S. ever again," he said.

Calvin Ayre, CEO of privately held online gaming and entertainment company Bodog, agrees that all I-gaming execs should consider themselves prime targets of law enforment.

"The recent arrest of Peter Dicks, non-executive chairman of publicly traded Sportingbet Plc, while traveling in the U.S. on vacation should come as no surprise to anyone," Ayre said. "The U.S. has clearly stated that they want to stop international companies from accepting Internet wagers from US residents."

Ayre voiced his thoughts in July, following the arrest of then BetonSports CEO David Carruthers on federal gambling-related charges, on traveling to the States, and today he reiterated his warning to fellow I-gaming execs.

"The only surprise is to find a director of a public company that accepts wagers from the U.S. to be traveling in the U.S. at this time," Ayre said. "Sportingbet will likely mount a formidable defense to this and in the medium term this will be good in the higher level of certainty this will provide over what the rules are in this area. Being the director or senior officer of a public company accepting wagers in the U.S. has become a much more uncertain occupation in the near term and the fate of the future of public companies in this space is now open to question. This should also have a near-term negative effect on all share prices in the sector."

Dicks was due to be arraigned this evening at the Queens Criminal Court in New York. Robinette had no information on when Dicks would be extradited to Louisiana.

Sportingbet generates around half of its revenues from U.S. customers.

Sportingbet Chairman Detained in New York is republished from
Emily D. Swoboda
Emily D. Swoboda