Bwin's chief questioned; expect scrutiny

19 November 2012

News that your company's chief executive officer has been arrested, detained or questioned by law enforcement is not the type of headline that pleases stockholders.

If the company in question is Bwin.Party Digital Entertainment plc - the world's largest online poker company - this is certainly not the news you want to share with Nevada gaming regulators.

Reports surfaced early last week in Belgium that Bwin.party co-CEO Norbert Teufelberger was questioned by police in Brussels.

News quickly churned its way through the poker blogosphere, including stories on pokernews.com, pokerfuse.com and calvinayre.com. Teufelberger was either arrested or detained by authorities.

Bwin.party, which is publicly traded on the London Stock Exchange and produced more than $1.06 billion in revenues in 2011, quickly moved to defuse the uproar.

In a statement on the company's website, Bwin.party said Teufelberger was "requested to attend an interview with Belgium authorities."

A day later, Bwin.party said the co-CEO "complied voluntarily with a request to attend an interview with representatives from the Belgium Gambling Commission." The meeting lasted two hours.

Later that day, Bwin.party was in full damage control mode, hitting back at Belgium gaming officials.

Bwin.party transmits its Internet gaming signals into Belgium, but the company is not licensed in the country. Belgium provides online gambling licenses only for companies that have traditional land-based casinos.

Belgium gaming regulators have a blacklist of operators without a Belgian license. Bwin.party is on the list.

However, Bwin.party officials said Belgium violates laws set by the European Union, which requires member states to open gaming markets to competition.

"We believe Belgian law does not comply with European law and the European Commission made it clear last month that it wanted Belgium to address its concerns," Bwin.party spokesman John Shepherd told the Financial Times of London.

A spokesman for the European Union told the newspaper that opening "formal infringement proceedings" against Belgium was under consideration.

So why would Nevada gaming regulators have concern?

Bwin.party has applied for an interactive gaming license with the state.

A year ago, Bwin.party signed agreements with MGM Resorts International and Boyd Gaming Corporation to jointly own an online business that offers poker to U.S. customers under the companies' various brands.

With federal online poker legalization up in the air, Bwin.party, MGM Resorts and Boyd plan to launch in Nevada under the state's interactive gaming regulations.

Boyd and MGM Resorts have been licensed. Bwin.party's application is still pending and may not be reviewed by the Gaming Control Board until spring.

Board Chairman A.G. Burnett said he was aware of issues in Belgium. With the application now under investigation by state gaming agents, the events in Brussels will be scrutinized.

Bwin.party was created in March 2011 when Bwin Interactive Entertainment and PartyGaming PLC merged. But there is an overhang.

PartyGaming operated online poker in the U.S. before the Unlawful Internet Gaming Enforcement Act became law on Sept. 29, 2006. That day, PartyGaming ceased its American operations.

Three years later, PartyGaming settled with the U.S. Department of Justice, paid a $105 million fine and was cleared from ever being prosecuted for its pre-act online gaming business.

A few potential online gaming competitors in Nevada believe Bwin.party's past discretions should preclude the company from entering the state.

Last week, the Nevada Gaming Commission gave its final approval to MGM Resorts' interactive gaming license. The Belgium incident wasn't mentioned but Bwin.party clearly concerns some of the commission members.

"The action today has nothing to do with Bwin itself," Commission Chairman Pete Bernhard told MGM Resorts representatives. "We all need to be educated about Bwin. Two long-standing good licensees have done a lot of that through compliance. But you didn't look at them from a regulator's perspective. That's our job."

Sitting in the audience during the MGM Resorts' licensing was gaming attorney Frank Schreck, who represents Bwin.party. Schreck also attended Boyd Gaming's online licensing hearings last month.

Outside of the commission meeting, Schreck said the events surrounding the questioning of Bwin.party's co-CEO in Brussels were a mix-up.

Teufelberger was sent a letter asking to meet Belgium gaming authorities. But it didn't arrive at Bwin.party headquarters in Gibraltar until Tuesday.

On Monday, he delivered the keynote address at "Responsible Gaming Day," which was organized by the European Gaming and Betting Association, of which he is chairman. He was approached by plainclothes police officers following a networking session and asked to come in for questioning.

"He wasn't arrested and he wasn't detained," Schreck said, adding his opinion that Belgium clearly violates European Union law.

Teufelberger reportedly has until Dec. 17 to answer questions about the legality of Bwin.party's operations in Belgium.

That's probably not the only time he'll respond to those queries.

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