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UK
Casino Times
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News
12 June 2005
Legal Ambush Could Slash Party
Gaming's £5bn Jackpot
Leading
American senators plan to attack online
casinos by banning
credit-card companies from dealing with them in a move that
would seriously hinder Party Gaming's (Party
Poker) access to
most of its online customers as the company prepares a
controversial £5.5 billion flotation on the London
stock market.
The proposed law is being
sponsored by Arizona senator Jon Kyl, a long-time opponent
of online gambling, and will be discussed by legislators
after the summer recess.
US authorities remain
hostile to online gaming and there have been several
attempts to block Americans from participating in the
burgeoning arena.
Frank Fahrenkopf,
president of the American Gaming Association (AGA) and
former chairman of the Republican party, said this bill was
the most likely to get approval.
The US has no jurisdiction
over offshore companies such as Gibraltar-based Party
Gaming; the bill would tackle the industry by blocking banks
and credit-card companies from allowing US customers to use
their accounts for online bets.
The AGA is a powerful
force in Washington and represents American gaming giants
such as MGM Mirage and Wynn Resorts. It was instrumental in
blocking a similar bill drawn up by Kyl because it carried
exemptions for horse-racing and casinos run by American
Indians. Fahrenkopf, who has seen an early draft of the
bill, said Kyl's new attack was more broadly worded and
carried no exemptions. "We would not oppose it, if it stays
the way it is," he said. The US Department of Justice
considers internet gambling to be illegal, but there have
been several legal challenges to that position.
Party Gaming, which will
mention the legislative threat in its listing prospectus,
has told analysts that it is not concerned.
The new bill is being
supported by Richard Shelby, the Senate banking committee
chairman, who has called online gambling "uniquely
evil".
Shelby and America's
attorneys-general, the states' chief law enforcers, are also
trying to force credit-card operators to stop doing business
with online gambling companies. Pay Pal (owned by Ebay) and
Chase have agreed not to allow transactions. The justice
department is also cracking down on advertising for online
gambling: Esquire magazine was recently forced to pull ads
for one poker site, Bodog.com. Sports giant ESPN, Yahoo! and
Google have stopped accepting such ads for their American
sites.
Google claim not to accept
online casino advertising for their UK search portal
(google.co.uk). However, at the time of writing the site
still carries numerous blatant online casino advertisements
via their AdWords program. All attempts by CasinoTimes.co.uk
to contact Google to query this issue have resulted in a
wall of silence.
The illegality of online
poker in America and the backgrounds of Party Gaming's four
billionaire founders will be scrutinised when the prospectus
is published this week. So too will the role of the
financial advisers, led by Dresdner Kleinwort Wasserstein.
They stand to make as much as £44m if the
£5.5billion float price is reached. DKW, which is
helping to raise £2.3 billion from selling a 23% stake,
will take the lion's share of this fee. Sweden's Enskilda
and Cheuvreux of France have supporting roles. The big
American and European investment banks have already turned
down the mandate.
Party Gaming's five
non-executives, who include the chairman Michael Jackson,
are sharing $5m in one-off bonuses should the float go
ahead, a move that is seen as highly unusual. They are
expected to use the money to buy stock in the
group.
Pirc, which monitors
corporate governance, said such payments were "not best
practice". Jackson, who is also chairman of Sage, a FTSE 100
software group, has come under attack by some of his
investors for taking the job. At Party Gaming he will be
paid a £500,000 annual salary.
Party Gaming's founders,
who will retain a 77% stake in the business, include Ruth
Parasol, who in the early 1990s was heavily involved in
internet pornography. She has since sold her interests in
this industry. Parasol and her husband Russ DeLeon list
their address as being in Gibraltar but it is not clear
whether it is an office or home address.
Despite the regulatory
uncertainties surrounding the game, Empire Online is set to
become the first online poker group to float in London. It
has raised £123m, including £19m of new money, and
will have a market value of more than £500m.
Related pages:
William
Hill Poker Room
US
Gambling Laws Threaten £5.5bn
Float
UK
Poker Firm Set For Listing
Party
Gaming Deals Its Hand To Play For Market
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