The Distortion of Truth in the Lederer Files, Part III

This is the third installment in a series of articles designed to bring attention to some of   the contradictions and misrepresentations contained in the Howard Lederer interviews, specifically those conducted with Pokernews.com, now dubbed the Lederer Files and a follow up interview on TwoPlusTwo’s Pokercast. The series will, in each installment, point out key comments that should be remembered. All of those comments will come together in the final chapter of the series to paint a better picture of the story that the facts really tell. The first installment can be seen here, and the second here.

The year leading into Black Friday was one that was not really discussed at all with Howard during his taped interview, but it was a critical time frame. It included payment processor seizures, hints of SDNY investigations, and the beginning of ACH problems.    

As mentioned briefly in the last installment, unlike areas where he claimed to not know or not remember, Howard deliberately avoided the subject of the payment processors:

“This is really all I want to say about that particular issue, I didn’t know you would be asking me to speculate at this point, I can tell you what I do know, that is that I was always told by the company that they thought that these transactions were transparent to the banks.”

“I never met with a payment processor during my entire time at the company, or after I left… short of, I remember one time at a party, Ray saying ‘meet so-and-so, he’s processing with us’, and I said hi. That wasn’t what I did,  I didnt’t meet with any of these people, I didn’t have any relationship with any of them.”

I would have liked the opportunity to clarify stories I have heard from multiple sources, about incidents that went farther than an introduction and where, in some cases, the conversations lasted for hours. More details on this subject will be discussed later.

The Account Services case in particular makes his description of his “hands-off” role seem especially odd. That 2009 case was one of the very rare occurrences in which a payment processor actually fought the seizures brought by the USAO, and then further fought criminal charges against its principal, Douglas Rennick. Howard had to be aware of the case, if not as a Board member of Tiltware, then in his role on the board of the Poker Players Alliance. The PPA filed an amicus brief in that case, took an active role, and it was probably the most important item on the PPA agenda that entire year.

Along with the Rennick case, there were multiple seizures and thefts that had been happening between 2008 and Black Friday that were so significant that anyone remotely following Full Tilt Poker would have known about them. To suggest, as Howard did, that he didn’t have a handle on what was happening to over $100M that the company lost in that time frame feels disingenuous.

The Financial Times published an article on April 4, 2010 that they had information that a grand jury was convened to investigate Full Tilt Poker and some of it’s more well known members. The Financial Times had based its article on information in a subpeona stating that “a software company with ties to Full Tilt” was included in the investigation. This could only be Tiltware.

On April 15, 2010, Daniel Tzvetkoff (Intabill) was picked up by US authorities. Note that this was less than two weeks after the Financial Times article. This arrest was well publicized, not only on poker forums, blogs and poker media outlets, but in mainstream media as well. The fact that he was out on bail shortly after his arrest, with sealed documents in the case file, would lead any reasonable person to consider that he was cooperating with authorities.

In September 2010, it became public information that former Full Tilt employee Jason “JDN” Newitt had been subpoenaed by a grand jury as well. Although Newitt had filed a wrongful termination suit against Tiltware in 2009,¹ a reasonable person would likely know that that wouldn’t in any way precipitate, on it’s own, any grand jury subpoenas, UNLESS, again, FTP/Tiltware were being investigated.

To recap, by the fall of 2010:

• Lederer and others in charge at Full Tilt Poker are keenly aware that the U.S.A.O., SDNY may have the company under investigation.
• Quite possibly Daniel Tzvetkoff might be cooperating in any such investigation
• The company has taken hits from multiple seizures and thefts in the previous 2 years
• The U.S. e-check portion of their business is not healthy due to lack of payment processors. The “backlog” has already begun.

There are sources that advise that Full Tilt began talks with the U.S. DOJ during Fall/Winter 2010. These talks would likely have been about floating possible scenarios back and forth to potentially settle any investigations that were being conducted regarding Tiltware/Full Tilt.  With little doubt, these “talks” would have been known to the Board of Directors of Tiltware, of which Lederer was then, and always had been, a member. Sources among the owners have confirmed that there were not any member calls or other meetings amongst the owners in 2010/early 2011 to advise that such “talks” were taking place. Members do agree now though, that they are aware this had been happening. One example is Andy Blochs’s answer to the question I asked in our interview:

DF: So in 2010, you were not aware of any investigations or any discussions that may have been taking place between FTP and SDNY?

AB: No, not at all.

DF: Now, of course, you do know that there were some talks going on then though, right?

AB: Yes

Furthermore, after Ray Bitar surrendered to U.S. authorities in early July 2012, a superseding indictment was unsealed with additional charges against Bitar and Nelson Burtnick. During Bitar’s arraignment and bail hearing, U,S Attorney Arlo Devlin-Brown confirmed to the court that the government had been having discussions with Full Tilt lawyers in late 2010, including information that charges could be filed and an indictment may be imminent, and that Bitar and FTP would likely have learned of such from those attorneys at that time.  Lederer, as a member of the Board of Directors, would have been privy to this information as well.

There are burning questions that were never asked of Lederer were regarding those talks. For example:

• Was there an opportunity to avoid Black Friday from happening if FTP agreed to leave the US market?
• Was the government insisting that a $ 1 billion fine be paid regardless?
• Did Howard know that these talks would not go on indefinitely without some action being taken?
• Why did he not share information about these talks with other owners?
• What steps was FTP taking that could have avoided Black Friday from happening?
• Why did the company not stop accepting echecks from the US marketplace, or  at least the states that had laws that could be referenced with charges?
• If the company had agreed to leave the US market, did Howard think that there was enough liquid funds available to immediately pay off U.S. customers and keep the company functioning in the rest of the world? If yes, when and how did he check on those numbers? If not, what steps did he take to begin to procure enough capitalization to make repayment possible?

These are just a few of the questions that were never asked.  More of this information will be tied in later to help put the pieces together.

Next Installment: A Closer Look at April 7,2011