July 19, 2006 Competitors Concerned After the Arrest of a Major Figure in Internet Gambling By HEATHER TIMMONS NY Times
http://www.nytimes.com/2006/07/19/business/worldbusiness/19gamble.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1153318237-DGChqKNVtszudD+mmlxrag&pagewanted=print LONDON, July 18 The multibillion-dollar online gambling industry was thrown into turmoil Tuesday after the United States government arrested a top executive from a London-based betting company, leaving his competitors wondering whether they could be next. Stock prices of the industrys biggest names, including PartyGaming and SportingBet, plummeted on Tuesday on fears that they could fall under the Department of Justices spotlight next after prosecutors in St. Louis charged the London company, BetOnSports, with criminal racketeering and wire fraud on Monday. In addition to arresting the chief executive of BetOnSports, David Carruthers, when he touched down in the United States on a flight from Britain to Costa Rica, prosecutors charged the company and 10 others who worked with the company. Investors and executives are concerned that the charges reflect a new get-tough posture on the part of prosecutors as well as legislators. The House of Representatives passed a bill last week that would ban Internet gambling sites from knowingly accepting money from United States citizens. The Senate has not voted on the bill. This is clearly sending a message that Washington is paying attention, said Sebastian Sinclair, president of Christiansen Capital Advisors, an industry research company. The arrest of Mr. Carruthers, whose 10-year-old 2,000-employee company is one of the top sports betting Web sites, is a sign of how serious prosecutors are about cracking down, Mr. Sinclair said. The industry has some real cowboys and some real shady characters, but David is not one of them, Mr. Sinclair said. The BetOnSports Web site continued operating on Tuesday, though trading in its stock, which fell 17 percent on Monday, was suspended. Stock in PartyGaming, which is based in Gibraltar, fell 17 percent on Tuesday on the London Stock Exchange; its decline even dragged the exchanges FTSE index lower. SportingBet, which is also based in London, fell 36 percent Tuesday after falling 13 percent on Monday. Analysts in London said that investors overreacted. The indictment seems to be very BetOnSports specific and the market seems to be treating all online gaming companies in the same manner, said Wayne Brown, an analyst with Altium Securities in London. Companies and analysts combed through the 27-page BetOnSports indictment Tuesday, trying to predict where the Department of Justice could be headed next. The indictment listed charges against executives stemming back to 1992 and focuses on the companys sports betting operations, which it says violate a federal wire act that prohibits making sports bets across state lines. That gave some companies that have only casino games hope they could be left alone. On Tuesday, some online gambling executives challenged the idea that their business would be affected. Others conceded they were consulting with lawyers and not planning any trips to the United States. None, though, wanted to speak on the record for fear of drawing the attention and ire of the authorities in the United States. This has nothing to do with us whatsoever, insisted an executive from one of the largest online gambling sites listed in London when asked about the BetOnSports situation. Still, the company would not comment on the issue, he said. Online betting has grown to an industry that generates $12 billion profit a year, a figure that is expected to double by 2010. In addition to attracting customers from the United States and Europe, companies are turning to Asia for growth. Some forms of online gambling are illegal in countries outside the United States. Playing online casino games for money is illegal in Australia, for example. But the United States has been the most aggressive about prosecuting the operators. It is illegal to operate an online gambling site in the United States, but many lawyers say that the legality of a Web site that is based elsewhere, but attracts American customers, is up for interpretation. An American bookie, Jay Cohen, who ran a gambling Web site out of Antigua, served jail time after being convicted in 2000 of violating the wire act. The Federal Bureau of Investigations actions come as sentiment against United States prosecutors is running high in Britains business circles. It follows the extradition last week of three British bankers to a Houston court to face Enron-related charges; their extradition prompted protests in Britain. Now, the concern is that the same controversial extradition treaty could be used to force British online gambling executives to stand trial in the United States. ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 antunes at uh dot edu Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list [email protected] To unsubscribe send an email to: [EMAIL PROTECTED]
