An expert on the American gaming scene, Maurice “Mac” VerStandig is well-versed in areas of casino management from common issues of fraud and theft prevention to the Unlawful Internet Gambling Enforcement Act and Indian Gaming Regulatory Act. With a background heavy in bankruptcy work, VerStandig is also skilled in the strategic valuation and monetization of complex assets, and applies that knowledge to all areas of his practice, from fraud recoveries to traditional insolvency proceedings. Here, Verstandig offers his expert opinion on PokerStars' recent acquisition of Full Tilt Poker.
As news of the fire-sale acquisition of Full Tilt Poker — and the government’s generous hand in facilitating that purchase — spreads beyond niche poker circles and into national news rundowns, a palpable sense of déjà vu ought to take hold. The story of the United States leaning on a robust private entity to swallow the tattered ruins of a competitor is hardly new; rather, it is the involvement of the Department of Justice and the world of online gaming in this story that makes Full Tilt Poker’s final demise so intriguing.
Indeed, barely four years ago, J.P. Morgan Chase — seen as an icon of Wall Street with a pristine reputation — “elected” to acquire Bear Stearns, a once-revered financial industry player whose books had become the subject of sour rumors. The deal was made following lengthy negotiations in which Henry Paulson — the then-Secretary of the Treasury — reportedly occupied the same back rooms as the banks’ leaders, and the Federal Reserve agreed to sweeten the pot by assuming $40 billion in various potential liabilities carried by Bear Stearns.
Here, of course, Full Tilt Poker is not a failed bank — it is a failed card room. Yet, neither coincidentally nor unimportantly, Full Tilt Poker’s true descent from gaming grace came about only when its bank-like functions were alleged to be fraudulent. The Department of Justice would likely care little about the gaming-centric distinctions between PokerStars and Full Tilt Poker, if those were all that served to distinguish the two former behemoths. Yet the persistent allegation that the latter entity comingled and dissipated player funds — those precious dollars considered sacrosanct in a world where few things are — somehow united the ante-paying public and the Department of Justice as the common enemies of Full Tilt Poker.
Moreover, should bestowing upon PokerStars the gift of continued existence not prove a sufficiently stark indicator of Uncle Sam’s sentiment, the language of relevant court filings serves to eliminate any ambiguity. Indeed, in a sweeping deal that serves to reopen Full Tilt Poker for business abroad, few matters of minutia or detail are addressed. Yet, as provisions are made for the foreign players who fell allegedly victim to Full Tilt Poker’s fraud, the United States feels apparently obligated to sternly exclude one class of individuals: “To the extent that Raymond Bitar, Howard Lederer, Rafael Furst, Christopher Ferguson, or Nelson Burtnick are non-U. S. players of the Full Tilt Group, PokerStars shall not make available for withdrawal the online poker account balances for any of these five individuals, and will not reimburse them in any way.”
Yet if this “deal” evidences the Department of Justice’s refusal to confuse PokerStars with Full Tilt Poker, it also evidences the same entity’s unwillingness to group United States online poker players with their colleagues abroad. As PokerStars cannibalizes its longtime rival, the relevant court-approved agreements call for the new online giant to make good on “the online poker account balances of all non-U.S. players of the Full Tilt Group, as of June 29, 2011, which are believed to total approximately $184 million.” As for those individuals who played on Full Tilt Poker in the United States, a different future awaits. Those players “will have the opportunity to file petitions with U. S. Department of Justice, Asset Forfeiture and Money Laundering Section (‘DOJ’), for remission of forfeiture.”
The contrast is palpable — foreigners will be able to sign online, just as they once did so regularly, and make a standard withdrawal of their Full Tilt Poker funds. Americans, on the other hand, will be permitted to petition the Department of Justice for their money back. There is no guarantee the Department of Justice will grant such petitions, and civil forfeiture spoils are often closely guarded by the United States Marshalls. Yet more pertinently, perhaps, is the reality that the scores of Americans who played nickel and dime games on Full Tilt Poker will be unlikely to voluntarily navigate the red tape associated with a remission of forfeiture petition. Others still, even those who played for considerably greater sums, may be reluctant to turn to Uncle Sam and confess their online gaming “sins.” The legality, or lack thereof, of playing a cash game on Full Tilt Poker was long the stuff of conflicting card room lure — it is understandable that members of the public at large may not be willing to recount their gaming exploits to the Department of Justice, of all government institutions.
Still, even in these settlement agreements — documents meant to mark the beginning of the end of online gaming’s most vulnerable episode — there is cause for those favoring legality to find a certain modicum of reserved optimism. Specifically, the carefully polished legalese provides, “Nothing in this Stipulation and Order of Settlement is intended to or shall limit the PokerStars Companies and their present or future affiliates from offering real-money online poker to individuals within the United States (including under the PokerStars or the Full Tilt Group's brands) if and when it becomes permissible to do so under relevant law.”
Peculiarly, if legality were not now seen as something between a probability and an inevitability, these deals would make little sense. By most accounts, the Department of Justice had a stellar civil forfeiture case again Full Tilt Poker and PokerStars. And the “deal” now inked does little more than compromise the United States’ potential recovery in that case, to the apparent benefit of only foreign poker players, whose tax dollars do not directly support the American court system in which this matter has so meticulously unfolded.
Yet, if legality is to soon visit one or more regions of the United States, this deal does evidence some domestic benefit. Just as the Department of the Treasury saw an upside in allowing J.P. Morgan Chase to cleanse the allegedly soiled remains of Bear Stearns, the Department of Justice may see an upside in allowing PokerStars to do the same to Full Tilt Poker. One may well theorize that the public benefits when doing business with large merchants of repute, as fewer risks are assumed and greater security is felt.
Then again, it never occurred to most Bear Stearns clients and Full Tilt Poker players that their security was at risk.
Maurice “Mac” VerStandig is an attorney with Offit Kurman, P.A., where his practice focuses on the litigation of various commercial and private disputes, including claims of fraud and financial insolvency cases. He has considerable knowledge of the numerous legal issues encompassing the American gaming scene, and is licensed to practice law in Maryland, Virginia and Florida.