Initially, the media flares of July 31, 2012 put out by PokerStars, Full Tilt Poker (FTP), and the United States Department of Justice (DOJ), announcing a deal amongst them that would allow PokerStars to acquire the assets of FTP, ignited only a modest amount of fanfare; the poker community had already learned that the parties were poised to close the deal.
DOJ Stance on Settlement Agreement
Within hours of the formal announcements, however, an assortment of lawyers, news analysts, protagonists, and pundits, began to weigh in on all that was left silent in the settlement agreement of the DOJ’s civil forfeiture claims against PokerStars and FTP.
Poker Media Learns Lessons
Except for those who had been more taken by Curiosity’s trajectory to a Mars-based landing, Poker Player Newspaper (PPN) created a furor within the poker community when it broke the news of the impending deal the prior Friday, with additional updates until the formal press releases surfaced. Following the PPN breaking news item, a swirling tornado of poker media reports ensued.
One poker media reporter who chimed in shortly after the first PPN bulletin with her own update erroneously proclaiming the date for a definitive announcement, learned a sharp lesson, as did some other poker media, who in hasty efforts to get into the fray, misstated important facts, only to find that their misstatements revealed themselves.
The waiting game for the formal announcements created challenges all around. But no poker media report matched the frustration and concern produced by a careful read of the DOJ’s press release.
While the settlement agreement provides for PokerStars’ repayment of player account balances in full to the rest of the world (ROW) players, it left unclear the specific amount of funds that will be refunded (and the process by which refunds will be released) to American-based players.
Thus, a day after the DOJ’s press release, and a story in Forbes Magazine headlined: The Big Question For Full Tilt’s U.S. Players: Will They Get Their Poker Winnings Back?, I pondered further, my own recent reports which were silent on the DOJ’s long fencing match with participants in the negotiations, regarding the process for refunds of FTP player balances under different deal scenarios.
Forbes writer Nathan Vardi exhibited the guts to put a pin in the celebratory balloon, following the deal’s approval by Judge Leonard Sand, showing deep insight into the potential for a major fracas over the monies due to FTP players in America. The DOJ has yet to reveal its hand.
FTP Story Is More Complex Than Meets The Eye
Throughout the year-long discussions that were focused on a bailout of FTP, there was substantial legal wrangling over the treatment of American-based players’ deposits and winnings. FTP representatives— including Ray Bitar, Howard Lederer, and their legal advisors—apparently pleaded with the DOJ for full repayment, based on a settlement that would allow for such reimbursements, according to multiple sources closely connected to these matters.
Much of the poker world has viewed FTP, and its board members, Ray Bitar (CEO), Howard Lederer (the Big Man on Campus), Chris Ferguson (a disappointing “Jesus”), and Rafe Furst (the board member rarely referenced), as villains, rather than advocates for the returning to players their FTP funds. But various gaming lawyers as well as friends of the FTP directors insist that the personal circumstances of the FTP board members, vis-a-vis the DOJ, motivated them to do everything possible to bring about a “sale” of FTP, with the goal of obtaining the best results for players. The leverage of all but the DOJ, deteriorated over time.
Anne Madonia, the corporate lawyer with Cozen & O’Connor who facilitated the transfer of the FTP assets to the DOJ confirmed in an interview today her previous public comments explaining the reality of limited leverage on behalf of her client: “We were representing a client who had very little to no leverage in negotiations.” Madonia worked on the FTP legal team led by nationally recognized white collar specialist, Barry Boss. Cozen and O’Connor’s team was well versed in the limited options at FTP’s disposal.
Madonia noted that there were alternatives available to consider; bankruptcy, or contesting and defending the civil forfeiture complaint were among them. This allowed FTP’s advocates to make clear FTP would not summarily fold its tent into a forfeiture.
The corporate settlement, notwithstanding, the personal troubles facing Bitar and Lederer are anything but over. That said, their circumstances today seem starkly different from each other.
Lederer and Bitar: More Differences than Similarities
Ray Bitar is indicted. Significant monies and other assets of his have been seized. He was arrested in July, posted bail, and is now under house arrest in California, with travel restrictions in place—pending further actions in his criminal case.
Until Bitar returned to American soil, July 2, 2012, he may have expected to pay the piper far less than now anticipated. He has since been presented with a more severe amended indictment that several legal experts say will likely cost him a significant jail sentence. Several lawyers point out things would be even worse for Bitar, but for his genuine efforts to get a settlement done that allows for player refund repayments.
Howard Lederer, on the other hand, is not indicted. He is said to be in Las Vegas, most recently partying at his house with friends after FTP’s settlement with the DOJ. According to lawyers familiar with the DOJ’s seizures, Lederer’s resources have been little touched by the Government in the FTP matters. The smart money around the US Courthouse in New York is betting big that Lederer’s, Ferguson’s, and Furst’s current worries with the Government in this matter are probably limited to the DOJ’s efforts to impose substantial financial penalties to settle the individual civil charges against them. These same commentators express confidence that Lederer, Ferguson and Furst will avoid more serious consequences from these matters.
In discussing FTP’s woes of the past year, many of Lederer’s friends and former associates emphasize that Bitar handled day to day management matters as the ship was going down. Lederer announced some years ago that he had given up day to day FTP management duties, but reportedly returned to an active role during the company’s darkest days, these past few months–purportedly to help steer the company toward a deal that will see players reunited with their funds.
Meanwhile, Lederer’s allies complain that he has been effectively and unfairly ostracized from the poker world, and they seek to help him rehabilitate his image. They demand anonymity in this article, but they are becoming increasingly vocal in this effort.
Lederer friends note he was the one player with an outstanding loan to FTP who made a substantial repayment without any prodding and prior to the embarrassing revelations of uncollectible player debt by Group Bernard Tapie during that company’s discussions of a possible deal to acquire FTP’s assets. Nobody, however, suggests that Lederer offered up any of his distributions to go back to FTP customers to repay their losses.
DOJ Has the Money
Now, through the three-way settlement among PokerStars, FTP, and the DOJ, the Government is flush with forfeiture monies— enough to repay American players in full, if so inclined. Over the past year, the DOJ has repeatedly referred to the prospect of a remission fund to compensate American-based FTP victims for “losses.” However, the DOJ has yet to state publicly its position as to what constitutes “losses” for which players are entitled to compensation.
Poker Players Alliance and PokerStars Re-Linked
The Poker Players Alliance (PPA), at one time largely a vehicle for FTP’s and PokerStars’ lobbying efforts for positive federal legislation, has morphed into a serious grass roots organization for poker players rights, needs, and aspirations, especially in online poker matters.
PPA Executive Director, John Pappas has positioned the organization to take its rightful place in a discussion of player repayment matters that will be overseen by the DOJ in Washington. The PPA is looking to its counsel, Marc Zwilinger, to provide the necessary magic that will result in US players seeing the return of their full player balances.
Zwilinger has sent a compelling letter to the DOJ asking for that consideration. His name is generally unknown in the poker community, but it is well known in sophisticated legal circles, and very well known to the DOJ—where he worked early in his career.
Back in 2009, Zwilinger, while at his former law firm of Sonnenschein, Nath and Rosenthal (now SNR Denton), where he chaired the Privacy and Security Group, was the key attorney involved in a legal opinion concerning Poker Stars operations in the United States. One noted gaming lawyer (a former partner at Zwilinger’s earlier law firm alma mater of Kirkland and Ellis) who reviewed the Sonnenschein opinion , described it as an exceptional document, notwithstanding the DOJ’s decision to prosecute PokerStars anyway.
Now, upon completion of the PokerStars-DOJ deal to acquire the assets of FTP, Zwilinger (who now runs his own boutique firm), is in high gear, advocating for poker players across America for reimbursement of FTP player funds in full.
At the top of his list of reasons to show players the money—that is, all of their money—are common sense fairness issues: ROW players are getting theirs; PokerStars players got theirs last year—with the blessings and explicit permission of the DOJ, and, he notes, FTP players were duped into believing they should leave their monies at the site, assured the safety of their player balances.
The PPA, under the leadership of Executive Director John Pappas, has reached a sufficient level of credibility that the DOJ sees fit to take a listen. That’s real progress!