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Second net gambling exec arrested in US
Shares tumble as industry gets The Fear...

By Reuters

Published: Friday 08 September 2006

US 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 more than $1.5bn off the market value of the sector.

Online bookmaker Sportingbet said its chairman, Peter Dicks, had been detained by US 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 $12bn-per-year industry fell sharply, with industry leader PartyGaming plunging as much as 19 per cent before closing 9.8 per cent lower at 105.75p. 888 Holdings dropped 15.8 per cent.

Dicks was arrested in New York late on Wednesday at JFK Airport on a warrant from Louisiana, according to a spokesman for the Port Authority of New York and New Jersey.

A London analyst who declined to be named said: "This arrest highlights the US Department of Justice is going after online gaming companies by arresting their board members."

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 US citizens or taking US 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 US-focused sports betting business was similar to that of BetOnSports, whose then 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 US business.

One London analyst said: "Clearly the first indictment against BetOnSports was not a company-specific issue."

One industry consultant said he thought the arrests were a political move by a Republican administration fearful of losing the US House of Representatives in November elections.

Frank Catania, a former New Jersey gaming regulator whose clients include the Interactive Gaming Council, said: "I think what they're trying to do is to appeal to their conservative [voter] base."

News of Dicks' detention overshadowed strong results from PartyGaming, which said core profit rose 47 per cent in the first six months of the year to $380m and stressed it was reducing its dependence on the US market.

PartyGaming said it whittled down the percentage of revenues it takes from the US to 77 per cent in the first half, from 86 per cent a year earlier.

PartyGaming has been trying to reduce its US exposure for more than a year, partly as a response to attempts by some conservative US politicians to get internet gaming banned.

An anti-gambling bill was approved by the US House of Representatives but is stalled in the Senate, which will recess in less than a month.

PartyGaming chief executive Mitch Garber told a conference call on Thursday: "The bill continues to face opposition but this is politics, and we are not complacent, and the outcome remains uncertain."