Interesting industry reading over the weekend came from the British newspaper The Telegraph, which carried an article on the lobbying investment being made by UK groups interested in helping to shape American legalization on Internet gambling.
The newspaper reports that online payment services company UC Group, which is apparently advised by former Home Secretary David Blunkett, is one of several British companies spending millions of pounds lobbying American politicians. The firm has spent some GBP 3.2 million ($5.23 million) on lobbying fees in recent years, and is just one of several companies deploying millions to influence gambling legalization in the US.
The major online gambling groups Sportingbet, PartyGaming and Pokerstars have all hired high profile lobbying firms in the US to represent their interests as they prepare for the likely opening-up of the US online gaming market, the Telegraph reveals, joining a range of other UK-based commercial groups lobbying for change in different sectors of the US economy.
While lobbying in the US is legal and a recognised part of Washington's political culture, many people will be surprised by the extent of British companies' involvement in the process, claims the newspaper.
Companies in the UK – especially those in potentially controversial sectors such as online gambling, drinks and tobacco – spend significant amounts lobbying British politicians but there is no requirement to disclose the scope of that spending.
The payments in the US have come to light because the American system requires all lobbying to be disclosed on a quarterly basis. However, experts say the amount companies spend on shaping legalization in the US is far higher than the lobbying fees suggest because of other ancillary costs which do not have to be accounted for.
UC Group acts for 10 gambling companies offering back-office and anti-money laundering operations, and hopes to profit from any opening of the market. The group has worked to promote Senator Barney Frank's efforts to overturn the ban on online gaming.
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The size of the company's lobbying expenses – which stretch to $2.31 million since last September alone – are particularly eye-catching given it made just GBP 3 million in pre-tax profits last year.
Kobus Paulsen, UC Group's chief executive, suggested it was part of the group's long-term strategy. "We are certain that our efforts will yield an open market for non-US based gaming operators," he told the Telegraph.
Ruth Parasol and Russell De Leon, the founders of PartyGaming, have spent up to GBP 929 000 on lobbying fees since last September to influence online gaming legalization in the US. It remains unclear whether any of those fees have been channelled towards lobbying over issues related to their potential prosecution for allegedly breaking US laws banning internet gambling.
Lobbying records for Sportingbet, the online gaming firm that also faces potential charges, show the company has paid $60 000 over the last year in relation to the "settlement of potential criminal charges related to online gambling".
The Telegraph also looks at the Camelot Group, operator of the National Lottery in the UK, which registered as a lobbying company in the US in November 2008. The group spent $20 000 in fees lobbying on issues on "federal regulations regarding private companies managing state lottery systems" before terminating its contract with O'Neill and Associates, the lobbying firm, in April this year.
The strategy appeared to pay dividends in June when the California State Lottery Commission approved the release of up to $13.5 million to pay consultancy fees to outside advisers, with Camelot expected to be the chief beneficiary.
Successful British companies in America appear to regard lobbying as a routine expense in their US operations. One executive at a company operating in the lobbying market said: "You simply have to put your money to work in that way at times. If we opted not to lobby, legalization would not be promoted."
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