This past July David Carruthers, the now ex-CEO of Betonsports.com was arrested while on a flight stop-over in the United States. At the time the internet gambling industry reaction was between a frightened quiver and a shrug. Some internet gambling establishment owners vowed to avoid the US completely. Calvin Ayre from Bodog.com cancelled the conference scheduled for Las Vegas and postponed it for a later date at a venue outside the US. Others felt that while Betonsports did something wrong by US laws their sites were ok. Betonsports was clearly in violation of the 1961 Wire Act by allowing US residents to bet on their website via phone. The internet didn't exist when the Wire Act is written so online casinos, sports books, and poker rooms consider this the fine legal line allowing them to accept bets via the internet. Furthermore, why would Congress work so hard to make internet gambling illegal if it was already illegal? As such a few online sports books simply took away their phone betting option for US players and kept on with their work.

Sportingbet plc was one of the online sports books which now only allows for bets to be placed via the internet. They do have customer support via phone, but no betting.

Peter Dicks is a non-executive chairman of Sportingbet who has no operational interest in the company. While traveling last week to NYC on business unrelated to internet gambling Dicks was arrested due to his internet gambling connections. He spent two nights in Rikers and was granted bail for $50,000. As he's not an American citizen he was forced to surrender his passport in order to lower his flight risk. Dicks must remain in New York City until his extradition hearing, set for September 14.

This time it isn't the federal government going after an internet gambling company, but a state. The state of Louisiana wants to extradite Dicks so that he can stand trial in St. Landry Parish, where the warrant for his arrest was signed. Frank Trosclair, a St. Landry Parish assistant district attorney, is helping his office prepare the extradition paperwork. Dicks was thankful for the bail in NYC and was gracious about the freedom given to him by the judge saying it was "...more than adequate.''

Here's the obvious question everyone is probably asking themselves: Why would Dicks come to the United States at all after what happened to David Carruthers? The answer is fairly obvious; he didn't think he was doing anything wrong. After all, Dicks didn't have anything to do with the daily operations, he was just a chairman. Plus Sportingbet didn't allow for phone bets, so why should they bother with him?

Sportingbet.com is still up and running, however they have stopped trading on the London Stock Exchange. I guess a state suing you isn't as scary as the US federal government.

Talking about Peter Dicks arrest, an online gaming analyst at Dresdner Kleinwort in London, Andrew Lee, told Bloomberg: "Unless the chairman is being held on charges unrelated to online gaming, we can probably assume the Department of Justice has an agenda against sports-betting companies that are using telephone lines to make bets."

Sportingbet.com has issued a statement describing the situation to their investors on September 7th: "Mr Dicks was detained at JFK Airport, New York, by officers of the Port Authority of New York, whilst travelling from London to the US on non-Sportingbet related business. Mr Dicks has since attended a hearing in New York City. At this hearing he was served with a warrant for his arrest initiated by the Louisiana State Police for the alleged violation of Louisiana State laws relating to gambling by computer (LA R.S. 14:90.3(E), Gambling by Computer).

The charge is levelled against Mr Dicks by name and a further hearing is expected next week.

The Group itself has not received correspondence from any US authority regarding this or any related matter. The Company is closely monitoring the situation and will continue to operate as normal."

Peter Neiman, a former US prosecutor now with the Washington firm of WilmerHale and Dicks lawyer, isn't even sure that New York has the right to extradite him to Louisiana, "There are serious questions regarding whether New York's extradition statute permits extradition for conduct allegedly committed entirely overseas." He added that it's been over 20 years since Dicks has even been in Louisiana. I can't imagine what bearing that has on this case or why he would even mention it. Dicks isn't being charged with not visiting Louisiana within a sufficient amount of time, he's charged in regards of owning an off-shore betting website.

"This is far from the ordinary case," said Neiman. "He is not the type of person who would flee. This is not some mobster who has connections to the crime world. This is a highly reputable businessman from the United Kingdom."

One detail about this case has stood out more than the rest. No one communicated to the company that a file had been opened, yet the file for Betonsports was made public a few days before the arrest happened. At this point people don't even know exactly what part Louisiana is complaining about regarding Sportingbet.com. It could be the internet gambling or the sports book.

This is the first time a state has gone after an online gambling site owner. It's also the first time a non-executive chairman who has nothing to do with daily operations, has been charged. This could have significant implications for internet gambling stocks, as essentially all Dicks is, is a stock-owner. It will be interesting to see what the state of Louisiana has against Dicks.

As this is a state charge and not a federal one the potential repercussions are not as steep. While the charge against him is a felony the maximum punishment is up to a year in prison or a fine of up to $25,000. My guess is the state will decide on the latter and that will be the end of it.

Posted on: September 11, 2006

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