Full Tilt Poker's New Brand Identity: Ponzi Scheme

"Didn't you work for that poker ponzi scheme company?"

This was the first line of an email I received today from an old friend, a Hollywood veteran but a total civilian when it comes to poker, online gaming, and the casino industry. I don't fault him for wondering. It's a valid question, and one I'm sure to be asked again and again. He only knew about it because it was on the front page of the New York Times. And if the Times calls it a ponzi scheme, well, it must be.

"No. I freelance for the one that gave all the players their money back. I did have almost two grand in an account on the other site that I'll never see again. Gross mismanagement, yes. Pyramid-like qualities? Yes. Ponzi scheme? No."

After living with my boyfriend, an ex-Wall Streeter, for 5+ years and having my eyes opened wider to the financial world by the day, I can confidently say that Full Tilt Poker was not a ponzi scheme. Ponzi schemes do not generate revenue, as Full Tilt did for several years. No, Full Tilt fucked up in a million other ways, most notably the utterly brain-dead decision they made in late 2010 to continue crediting player accounts with deposits before actually receiving them. Not segregating player funds was another biggie. And paying out close to half a billion in dividends and continuing to send giant monthly checks to their owners even when management knew the company was insolvent does indeed take the cake. But that doesn't make it a ponzi scheme.

In this case, "ponzi scheme" is the DOJ's PR strategy. It's a sexy phrase. It's in the public consciousness. People might not know exactly what it is, but they know IT'S BAD. It's like that thing Bernie Madoff did! That greedy, rich, sick fuck. Marry "ponzi scheme" and "online gaming" and you've got a front-page story the public will lap up. You have a small group of owners who paid themselves $443 million and tens of thousands of ordinary poker players out $390 million worldwide. It plays well on the evening news. In this economic climate, any story where little guy gets fucked over while a select few make out like bandits is a mouth-watering cupcake topped with populist frosting.

That's why I'm getting emails from people who could give a fuck about online poker but know I have something to do with it.

By using this phrase in the opening salvo of their amended complaint, the Department of Justice effectively rebranded Full Tilt Poker as a ponzi scheme, regardless of whether or not that assertion is true. Much like no one will ever be able to separate Ultimate Bet or Absolute from "cheating scandal" (and that one was true), Full Tilt will inexorably be linked with those two words. U.S. Attorney Preet Bharaha made sure of that and won the PR war in the process.

Poker biz folks have spent the last 48 hours cringing at those two words. Not because they're Full Tilt sympathizers or condone the company's alleged crimes, but for the pall it is casting over an already-battered industry. The whole "this shouldn't reflect badly on everyone" argument doesn't exactly hold up when such a massive slice of the market is either under indictment or underwater. The question now is whether the industry can possibly recover from the nightmare it's facing. In other words, you thought the UB thing was bad? Get a load of this.

Full Tilt Poker will be liquidated. The DOJ made sure of that too when they released the amended complaint on the same day the Alderney Gaming Commission held its hearing on Full Tilt's suspended license. Not 24 hours after the DOJ dropped their bomb, rumors began circulating that the AGC would permanently revoke Full Tilt's gaming license. There will be no white knight. No one is going to touch this mess. Full Tilt's remaining assets-- the software itself, Rush Poker, and a bunch of office furniture in Dublin-- will all be sold off. And the inevitable civil claims against the owners' personal assets will drag through the courts for years. It won't stop until all those dollars are emptied from the owners' offshore bank accounts, and even then, it probably won't stop.

Is there a future for online poker in the U.S.? Not immediately. This Full Tilt mess just set us another two steps back. And with online poker now branded as a "ponzi scheme" in the public consciousness, politicians will be even warier about getting behind regulation and legalization. American land-based casino entities ultimately got what they wanted-- a "level playing field" (aka "no more Stars or Tilt, ever")-- but if they don't step up with some serious, SERIOUS lobbying dollars and bring the banking industry along with them, they'll never get anywhere with the feds. Online poker will never be politically popular enough to fly on its own.

Can anyone get the industry out of this mess in Washington? Well, it's certainly not the PPA. A limp-dicked lobbying operation almost wholly funded by Full Tilt and PokerStars, the PPA claimed to represent the interests of players, but in actuality, they only represented the interest of their two biggest donors. Why else would they come out against the Reid bill last December? Um, because it would put them out of business in the U.S. since they were in violation of the UIGEA? Ding ding ding! Doesn't that 15-month blackout period sound positively dreamy right about now? We'd already be nine months into it. I'd be gunning for a 2012 WSOP Main Event seat from my living room in San Francisco on Harrahs.com come spring, instead of wondering if I'll ever be able to play another hand of online poker. The PPA will forever be haunted by the specters of their former board members Howard Lederer and Chris Ferguson, and the hundreds of thousands in dirty dirty Full Tilt player-owner money they took in donations over the years.

Wait wait wait... hundreds of thousands? These donkeys took almost half a billion in dividends and only spent about $1 million greasing the legislative wheels? Did they learn nothing from the real ponzi schemers on Wall Street who are almost never prosecuted? Instead the industry was left hanging like Stringer Bell in The Wire after he gave that suitcase of cash to Clay Davis. And you all know what happened to him two episodes later.

What's left of the industry is moving on without the United States. PokerStars' traffic levels have almost completely rebounded from Black Friday. Young, mobile online players of means are leaving the country, a few hundred more each week. They're setting up shop everywhere from Vancouver to Malta and shipping tournaments just like old times. They post photos of their "grind cribs" and twitter ironic things about how much more freedom they have in Mexico than the U.S. Sure there will be the inevitable downswings and visa problems and deportations, but for now, like always, they'll just grab that money while it's there. It's what we all did in the poker industry. Grabbed as much as we could before the party was shut down, hardly pausing to consider what would happen later.

Later is here, everyone. And it's not looking good. Not for Americans, anyway.

**Update**

11:50pm: OK, so the PPA didn't exactly *oppose* the Reid Bill per se. Their abysmal efforts in getting it passed just made it seem that way.

Chris Ferguson photoshop by 2+2 user chytry

Follow the Money, Part 2: Where Online Sites Spend Lobbying Dollars

I had some more fun poking around Open Secrets last night, searching out where online poker dollars landed in Washington. Again, this isn't breaking news or intended to be any sort of dramabomb-- it's all publicly available information.

Over the last two years, PokerStars spent $1.26 million on lobbying. They were the seventh-largest donor in the casino/gambling sector in 2010. #1 was Caesar's/Harrah's with $3.9 million and surprisingly, The Poker Players Alliance was #2 with $1.8m. Coming in at #3 with $1.66m was the Interactive Gaming Council, a Vancouver-based trade group representing offshore online gaming entities including PokerStars and Full Tilt.

$900,000 of PokerStars' $1.26 million went to a lobbying outfit headed by former House Majority/Minority Leader and Democratic presidential candidate Dick Gephardt. Beginning in Q3 2009, the Gephardt Group was paid $150,000 per quarter to represent PokerStars on Capitol Hill. They were no small client either; Stars' lobbying dollars represented 9.1% of their $6.59 million take in 2010, tying them for first place with Peabody Energy among the Gephardt Group's clients when it came to reported billing dollars in 2010. Despite the hefty paychecks they received over the last six quarters, the Gephardt Group has never commented publicly on their work for PokerStars, nor do they explicitly list PokerStars as a client on their company website next to their other "stand-up" clients like Goldman Sachs, United Healthcare, and the Government of Turkey. Instead, Rational Entertainment Enterprises, the name of Stars' holding company, is listed. PokerStars is also referred to as "Rational Entertainment Enterprises (on behalf of PokerStars) in the Gephardt Group's lobbying disclosure paperwork filed with the House and the Senate.

So...although Dick Gephardt doesn't mind taking PokerStars' money, he sure seems ashamed to be in business with them. For $150,000 a quarter, he should be wearing a .net patch every time he does a stand-up on CNN.

The remaining $360,000 of Stars' lobbying dollars went to the St. Louis-based law firm of Stinson, Morrison & Hecker at the rate of $60,000 per quarter. Based on the information available on OpenSecrets, PokerStars appears to be their largest client when it comes to government affairs. Of the $1.21 million they reported from clients for lobbying in 2010, Stars represented almost 30% of their receipts. Second-largest was a New Zealand-based dairy company called Fonterra. The firm's other clients primarily lie in the energy, agriculture, and oil & gas sectors. The only lobbyist listed was Jane E. Duecker. Her bio on the firm's website reveals that she is a former assistant attorney general for the State of Missouri and served as the Chief of Staff to the Governor from April 2003 to December 2004. Although it lists her work in a variety of industries, gaming is not mentioned.

PokerStars wasn't the only major online site that engaged in lobbying activities. PartyGaming spent $2,155,000 on lobbying over the last four years: $1.65 million in 2007, $170,000 in 2008, $60,000 in 2009, and $240,000 in 2010. Here's where it really gets colorful-- $1.35 million of Party's 2007 lobbying dollars went to a company called Avatar Enterprises based in Collinsville, IL. Avatar was run by Gary Frears, a man who has been in trouble with various state, municipal, and federal agencies since the early 1980s. After a stint as a fixer for the Illinois Department of Transportation, Frears worked for the Democratic Party's national finance committee before moving into his own business deals. After securing a $13.4 million from the State of Illinois to build a Holiday Inn in the city of Collinsville in 1982, Fears defaulted on the loan and never repaid it, leaving the state hanging on $31 million in outstanding principal and interest by 1995. The state ultimately sold the property at a loss in 2007. Fears moved to Florida in the mid-1990s and began investing in Indian casinos. Almost every deal was fraught with drama and ended acrimoniously.

Frears turned to lobbying in the mid-2000s, acting as the registered foreign agent for the Moroccan government in addition to his work for PartyGaming. Avatar also received a payment of $606,048 from Russel DeLeon, husband of PartyGaming founder Ruth Parasol. The IRS is also after Frears, seeking over $300,000 in income taxes dating back to 2001 from international currency transactions he made with Deutsche Bank. More information on his tangled web can be found in this article: Fears and Lobbying in Collinsville.

So, to recap--along with the (completely toothless) PPA, two of the major forces repping online poker interests on Capitol Hill over the last few years were Dick "Don't tell anyone I'm working the pro-gaming lobby" Gephardt and a notoriously shady motherfucker in trouble with the IRS.

Still like our chances for legalization/regualtion?

Black Friday Fallout

It's lunchtime in Los Angeles and I'm ready to pour a cocktail since I was just able to cash out my life savings PokerStars account. Although perhaps I should put down the shaker until the check clears. Now that the reality of Black Friday has sunk in for me and future plans are being hastily assembled, one other stream of fallout is beginning to come to light.

I miss playing. I really do. Watching sporting events just isn't the same without six-tabling Super Turbos. I was just starting to get decent at Badugi. And opening up the Womens' Sunday tournament was really a mistake. I'd personally vowed to win that fucker at least once by the end of 2011.

Anyhow, here's a few of the things I've been reading and some info on how to get your money out of PokerStars.

PokerStars cashouts now available for Americans: We're obviously not out of the woods yet, but I let out a huge sigh of relief when I heard PokerStars was starting to process cashouts from U.S. players. I first heard about it from Kevmath, and a quick listen to the Two Plus Two podcast confirmed it. The cashout methods available to Yanks depends on the balance you have on the site. If it's $2,500 or less, you can get a paper check. $50,000 and over requires a wire transfer. With $2,500-$49,999 the only option available is something called a "direct bank transfer." You'll need to provide both your bank account number as well as the ABA routing number, which is typically found on the bottom left of your paper checks. Some folks have already reported that the DBT worked for them. Count me among them-- after a brief hiccup where I couldn't enter my entire account number the transfer finally went through. My remaining T$ and step tickets were also converted to cash at 100 cents on the dollar.

No 'mo rodeo: File this under inevitable. News started leaking today that former WSOP commissioner Jeffrey Pollack is stepping down from Professional Bull Riders, Inc. (PBR) to focus on his new role as Chairman of Annie Duke's Federated Sports & Gaming league. FS&G looks like it might be one of the few beneficiaries of the events of Black Friday, now that Full Tilt has done away with the competing Onyx Cup.

Forbes op-ed by Gary Loveman: Yup, he's the sad-faced suit telling you to seek help for your gambling problem in those commercials aka the CEO of Harrah's. He did, however, pen a pretty solid piece in Forbes today that put forth a far clearer argument for legalization and regulation than the PPA ever has. Say it with me-- tax revenue, job creation, game security, consumer protection. Sure there was a bit of underlying "Haha! We gotcha Stars and Tilt! Here we come!" bubbling beneath the surface, but did you expect anything less?

I also enjoyed Matt Matros' op-ed in the Washington Post. Looks like the two of us have similar plans for the immediate future.

dmoongirl sounds off: I'd just started reading dmoongirl's CardRunners blog a few weeks ago. She's a 26 year-old married mom of a toddler who has been an online pro for 6 years, playing $25/$50 6-max NLHE. A week ago she was comfortably supporting her family and filming interviews for the upcoming poker documentary Boom. Now she's out of a job.

Moving Forward, Not Starting Over: Shamus wrote about the Pregame.com podcast I did discussing Black Friday and mused on his own future plans.

And finally, Pauly checks in from Peru, where he penned this stunner about his spiritual journey at Machu Picchu. Check out Cusco - Ollantaytanbo - Aguas Calientes - Machu Picchu.

Follow the Money: Online Poker and Political Contributions

So much money...where did it get us?

Back when I worked in the film industry, a favorite pastime among junior D-people was to play around on OpenSecrets.org, running names of producers, directors, executives, and A-list actors to see where they were spending their political dollars. In the wake of Black Friday, I pulled up the site over my morning coffee and decided to check out how much lining-of-the-pockets the American members of Team Full Tilt did over the last four years (2006-2010). Although this is nothing close to breaking news (it's all publicly available information), the results are pretty interesting.

Howard and Susie Lederer (NV): $355,635

Andrew Bloch (NV and MD): $176,992

Chris Ferguson (NV): $109,100

Phil Ivey (NV): $92,470

Erik and Ruah Seidel (NV): $91,800

Phil Gordon (NV and WA): $49,900

Jennifer and Marco Traniello (NV): $40,800

John Juanda (CA): $17,200

Erick Lindgren (NV): $12,000

Allen Cunningham: $0

Mike Matusow: $0

Tom Dwan: $0

Couldn't find anything on those last three, at least on Open Secrets. But for the nine individuals listed above them, that's a grand total of $945,897 of dirty dirty Full Tilt money over three election cycles.

I expected as much from the FTP pros with percentages. But what about the other industry big-guns/sponsored pros/guys with deep pockets? Here's a few more names I looked up:

Leon Black, Founder, Apollo Management (NY): $296,250

Barry Greenstein (CA): $76,100

Joe Sebok (CA): $51,700

Rafe Furst (CA): $50,050

Daniel Negreanu (NV): $41,200*

Doyle Brunson (NV): $40,800

Dennis Phillips (IL): $30,700

John Pappas, Executive Director, Poker Players Alliance (DC): $25,250

Tom McEvoy (NV): $18,700

Ray Bitar (CA): $17,500**

Vanessa Rousso (FL): $17,450

Annie Duke (CA): $15,000

Joe Cada (MI): $13,500

Mori Eskandani, Producer, PokerPROductions (NV): $10,400

Phil Hellmuth and Katherine Sanborn Hellmuth (CA): $10,000***

Perry Friedman (NV): $10,000

Greg Raymer (NC): $7,300

Barry Shulman (NV): $4,000

Steve Wynn (NV): $3,000

*= although he's a Canadian citizen, he has permanent U.S. residency (aka a green card)

**= yup, THAT Ray Bitar

***= two checks @ $5,000/ea. to the PPA in July/August 2009

And here's a few Hollywood names for good measure from the same three election cycles:

Alan Horn, COO, Warner Bros. Pictures (CA): $312,296

Steven Spielberg (CA): $243,650

Tom Hanks (CA): $74,700

Jerry Bruckheimer (CA): $53,400

Jeff Bewkes, CEO, Time Warner (NY): $48,900

Sumner Redstone, CEO, Viacom (CA): $33,400

Les Moonves, CEO, CBS Corp. (CA): $17,400

Oprah Winfrey (IL): $2,300

Dr. Pauly, Internet Physician (NY): $420

Pregame.com Black Friday Podcast

Happy 4/20 America! Smoke 'em if you've got 'em!

Last night I recorded an episode of Pregame.com's Today in Sports Betting with RJ Bell discussing online poker's "Black Friday" from a media perspective. Lord knows poker players love themselves some sports betting (look who I live with)and the reverse is certainly true. RJ himself plays some $5/$10 NL at Bellagio and we discussed the impact Friday's events will have on the media, online grinders, sponsored pros, and live games.

Check it out here-- TiSB: Poker Journalist Recaps the Fallout