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Betfair flotation may give potential shareholders a sinking feeling 14/09/2010
Andrew Clark
London-based company accepted it used payment methods to hide the fact it was dealing with US gamblers

The gambling company Sportingbet is to pay $33m (£21m) to settle a long-running dispute with US prosecutors over its alleged flouting of America's ban on internet gaming which briefly led to the imprisonment of its chairman in 2006 during a visit to New York.

Sportingbet last night agreed to forfeit the money in return for a non-prosecution deal with the US attorney's office in Manhattan. The London-based company accepted that it used payment processing methods intended to hide the fact that it was dealing with US clients, and that it took steps to mask winnings paid out to gamblers in the US.

The settlement is the latest of several struck by British companies which have fallen foul of America's tight restrictions that prohibit most types of online sports gambling and ban games such as poker on the internet. In April last year, rival Partygaming struck a $105m non-prosecution deal over similar charges.

Sportingbet is set to announce the payment to the London Stock Exchange on Tuesday morning. A company spokesman said: "The settlement is in the best interests of the company and of all shareholders. It brings clarity. Sportingbet has drawn a line in the sand and can look to the future with renewed confidence."

Lawmakers in the US argue that internet gambling allows money to flow out of the country in an unregulated way and that it is an inappropriate circumvention of gaming licensing. During a sudden crackdown by the US authorities four years ago, Sportingbet's then chairman, Peter Dicks, was arrested during a business trip at New York's JFK airport and was briefly held at the city's Rikers Island prison complex before being allowed to return to Britain.

Several other British executives have been arrested including David Carruthers, former boss of the gaming firm Betonsports, who was sentenced in January to 33 months in prison for organising an illegal gambling racket.

In a statement last night, US prosecutors said Sportingbet had agreed to co-operate with an ongoing investigation into illegal online gambling and would maintain "a permanent restriction on providing internet gambling services to US customers". Sportingbet sold its US operation at the end of 2006 for a nominal sum, taking a £252m accounting write-down.

Keen for tax revenue to tackle a soaring budget deficit, Democrats in Congress have been pushing for a repeal on the internet gambling ban. The House financial services committee backed liberalisation of online gambling in July, although such a measure would be difficult to enact without co-operation from reluctant Republicans.