(Reuters) - U.S. authorities settled a massive fraud complaint against the world's most popular online poker company on Tuesday and allowed it to take control of a rival brand, setting the stage for the company to re-enter the burgeoning U.S. market.
Isle of Man-based PokerStars agreed to forfeit $731 million, including $547 million that could be used to reimburse U.S. customers of the rival, Full Tilt Poker. Full Tilt also agreed to settle and will cease independent operations.
PokerStars will be barred from employing Full Tilt Chief Executive Raymond Bitar, who is out on bail in a pending criminal case, as well as famed affiliated players Howard 'The Professor' Lederer and Chris 'Jesus' Ferguson, who were defendants in the civil case.
PokerStars and Full Tilt became the dominant sites for Web gamblers in the United States after Congress explicitly banned real-money gambling on online card games in 2006 and other companies withdrew from the market.
Federal officials in Manhattan filed the fraud and money-laundering suit last year and charged various part-owners and employees, including famous poker professionals at Full Tilt, with bank fraud and other criminal offenses.
But the Justice Department in Washington later decided that the Wire Act, one of the laws used in prosecuting gambling operations, should not apply to state-approved games--opening the door to the legalization of online poker.
Four weeks ago, Delaware joined Nevada in legalizing online poker among state residents, and California and several other states are considering similar measures.
Mark Scheinberg, PokerStars' chairman, said in a statement that the company was 'delighted' to resolve the case and that the it hoped to join its law-abiding rivals in seeking state licenses.
'The agreement explicitly permits PokerStars to apply to relevant U.S. gaming authorities, under both PokerStars and Full Tilt Poker brands, to offer real money online poker when state or federal governments introduce a framework to regulate such activity,' Scheinberg said.
Nevada has already begun reviewing applications from some of the online sites that pulled out in 2006, including Bwin.Party and 888 Holdings. Those two companies declined to comment on the long-expected PokerStars deal, but people close to both previously told Reuters that executives were angry that PokerStars was set to cash in on the customer loyalty built up in violation of the law.
888 and Bwin.Party, owner of the former top U.S. site PartyPoker, 'left the country and lost their business, and now they may be the ones that are really hurt out of this,' said Robert 'Chipburner' Turner, a poker champion who advises other casinos.
PokerStars is expected to pursue deals with land-based casinos or Indian tribes before applying for online licenses. Bwin.Party has also teamed with MGM Resorts, while 888 has a contract with Caesars Entertainment Corp. The big casinos have greater clout and more trust built up with local regulators, but they lack the expertise, software and brand recognition of the offshore firms.
Even with two powerful brands, PokerStars does not have a lock on any state's approval, others in the industry said.
Each state has its own rules and standards for determining the 'suitability' of gambling industry applicants, and legal histories are a common concern given the historic role of organized crime, the potential for cheating, and the need to keep out minors. The online gaming sites also have the ability to prevent bettors, who are not in states where gambling is legal, off their sites.
'You can be exonerated in court and still face issues with regulators,' said Michael Pollack, a former adviser to the New Jersey Casino Conrol Commission chariman, who is now managing partner of consulting firm Spectrum Gaming Group.
'Department of Justice actions will educate and enlighten regulators at the state and tribal levels, but so will other factors, including those related to fairness. These will be among the toughest decisions in the history of regulated gaming.'
(Reporting by Joseph Menn in San Francisco and Basil Katz and Jonathan Stempel in New York; Editing by Martha Graybow, Maureen Bavdek, Tim Dobbyn and Leslie Gevirtz)
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