Has the AGA Been Honest About Their Motives, or Just Very Selective as to its Prey?


On March 4, 2012, the American Gaming Association (AGA) filed a petition in New Jersey to request permission to participate in oral or written arguments that determine whether PokerStars will be granted an Interim Casino Authorization. This temporary license is necessary to own and operate the Atlantic Club Casino, the brick and mortar facility that PokerStars is in the process of purchasing, pending a formal permanent licensing sometime in the future. The petition, along with the AGA petition with their claims that the license should not be granted, was filed with the Casino Control Commission and forwarded to the Division of Gaming Enforcement for review. The DGE will advise the Commission of their recommendation, but the final decision rests with the Commission. Attorneys for PokerStars filed their own brief on why the AGA lacks standing to be heard. The matter was not heard during the regular monthly meeting in March, but was adjourned until some future date.

 AGA Petitions are Riddled with Inaccuracies about PokerStars

The AGA’s petition for standing claims to represent the interest of its 62 members (consisting of casino companies, gaming equipment manufacturers, financial services companies, professional services firms, suppliers and vendors, state gaming associations, publications and labor unions) in “promoting and insuring the integrity of the commercial casino industry” and that the outcome of the licensing hearing for PokerStars directly affects those interests. It is on this basis, and their proclaimed “need to insure that only individuals and entities of established integrity are licensed”, that AGA asserts their standing. The AGA does not say which or how many of its members have sanctioned this action, but sources have confirmed that the vote to proceed was not unanimous. The AGA  does point out that some AGA members own/operate gaming establishments in New Jersey.  They claim to have assembled substantial materials as to the backgrounds of the individuals and entities named in the PokerStars application, including criminal proceedings, and that submitting these documents to the Division and the Commission will further their interests in “maintaining the integrity of the industry”.

Despite the claims AGA make, neither PokerStars, nor any affiliated entities named in their application for licensing, have ever faced criminal proceedings. Furthermore, none, not one, of the four individuals named for PokerStars in their application, have ever faced criminal charges.   

In their brief, the AGA admits that they have never before sought to intervene in a licensing proceeding. They claim to do so now because the gaming industry, according to their petition, will be “gravely compromised” by the approval of a “business built on deceit, chicanery and the systematic flouting of U.S. law”.

They claim that Isai Scheinberg is the co-founder of PokerStars and its CEO and that as part of the PokerStars settlement agreement in their civil forfeiture case, that Scheinberg was “required to withdraw from involvement in the business”. They also make claim that Scheinberg is a fugitive from the American courts.

Scheinberg is not now, nor was he prior to Black Friday, the CEO of PokerStars. He was not required to leave the business as part of the settlement agreement, but was required to step down from a managerial or directors role in the company, a stipulation in fact, that could specifically be revisted at a future date. As to fugitive status, it does not apply. He is not a US citizen, he has not fled the jurisdiction and his whereabouts are now, and always have been, known to the authorities. The AGA petition to deny the license does later say that Scheinberg was required only to withdraw from management and control of the company, but does nothing to correct it’s earlier allegation that he was mandated to leave the business.

Those are some of the things that AGA did say. In consideration of those allegations, what should also be considered, are some of the things that they have not.

The AGA Membership Might Think Twice Before Throwing Stones

The AGA has not ever intervened before in licensing proceedings in any state.

In New Jersey specifically, in 2009/2010, because of concerns of its affiliation with an “unsuitable” person, namely Pansy Ho, MGM’s application for a qualification as a holding company in Borgata Casino was slated to be denied. In a settlement agreement, MGM withdrew its application for qualification as a holding company in Borgata, agreeing not to apply for any license in New Jersey for a period of 30 months and in fact placed its 50% ownership of Borgata into a trust pending the divestiture of its interest in the casino. In 2011, MGM asked for, and received, an 18 month extension to sell their interest. Just last month, MGM and Boyd Gaming asked the Commission for a chance to resubmit an application for compliance, based on the material changes in its ownership in its Macau casino. The commission granted them the opportunity to submit their application, which will undergo substantial review, while their interest in the casino remains in trust. To date, MGM has been debarred for three years based, in part, on their business affiliation with an “unsuitable person”. MGM and Boyd Gaming are both members of the AGA.  If it’s the AGA’s position that MGM’s application should have been approved back in 2009 despite their affiliation with Pansy Ho, they never sought to intervene while it was being reviewed.  If they believe it should have been denied, they have not filed any attempt at participating even now, when it’s possible that the debarment could be lifted.

As already stated, the AGA has also referenced their opinion that PokerStars “flouted U.S. law”. It is not clear anywhere on its website, nor in any of its papers or appearances to date, which laws the AGA wants to help promote with respect to gaming.  For example, Caesars Entertainment, another of AGA’s members, and likely its largest, is said by sources to be the driving force behind this AGA action.

Caesars has a subsidiary known as Caesars Interactive Entertainment (CIE). The CEO of CIE is Mitch Garber. Garber was the previously the CEO of Party Gaming, and was so at the time that UIGEA was passed in October 2006.  Party Gaming did leave the US marketplace post UIGEA, but they also settled with the same division of the Department of Justice that PokerStars just did.  It was in fact, though, quite different than the settlement the DOJ made with PokerStars because Party’s was  a non-prosecution agreement, not a civil settlement. Finalized in 2009, they forfeited $ 105 million, and Party Gaming admitted to using the same types of payment processors that the AGA now faults PokerStars for using.  Party admits to having used payment processors that were miscoding credit card payments thru U.S. banks, and to using ACH processors for purposes of accepting e-checks from their players. In many instances players deposits were sent to particular individuals at an international remitting company in Gibraltar and then simply transferred to the players accounts at Party. Party further admitted to masking outgoing payments to its customers in the U.S. by using intermediaries that used bank accounts in the U.S. in the name of “Advanced Marketing Solutions”, not Party Gaming.

The agreement signed by a Party Gaming officer and approved by a Party Board Resolution, admits to a statement of facts that Party engaged in conduct that resulted in violation of U.S. criminal laws, including 18 USC 1955, 18 USC 1343 and 18 USC 1344. Those codes represent The Illegal Gambling Business Act, Wire Fraud and Bank Fraud. Such are the same statutes that AGA claims PokerStars violated, making them unsuitable, but PokerStars never admitted to any wrongdoing in their civil settlement in 2012, nor did the DOJ demand that they do so.

While PokerStars offered only online poker to it’s customers, it also should be noted that Party Gaming did not offer only online poker to its U.S. customers, but casino style games as well. At no time prior to their exit from the U.S. market did Party apply for any licenses in the U.S.  Their IPO prospectus in 2005 included the statement that:

“[t]here is uncertainty as to the legality of online gaming in most countries and in many countries, including the United States, the Group’s [Party Gaming’s] activities are considered to be illegal by relevant authorities“.

Party’s presence in the U.S. market accounted for approximately 89 % of its business at the time it went public on the London Stock Exchange.  Party Gaming, now bwin.party, admitted to criminal acts to avoid prosecution.

It has yet to become public where the documents are that AGA petitions any licensing authority to stop Party/bwin.party from obtaining any licenses in the U.S. because of a criminal background, which they admitted to doing as public record.

One of the payment processors used by Party was Firepay. Before Mitch Garber went to Party Gaming, he was the CEO at Firepay and  Firepay during that period of time, serviced U.S. customers, processing payments for online poker, casino style games and for sports betting.  While AGA makes notes in its petition about the clarification of the Wire Act as specified in the D.O.J. opinion released in 2011, not applying to other than sports betting or games of chance, it makes no assertion that any persons involved in violating the Wire Act for purposes of transmitting for sports betting should also be considered “unsuitable” in New Jersey. For purposes of complete transparency, this author makes no claims that Firepay accepted payments from U.S. customers post UIGEA, but certainly did so prior to that time, when the illegality sports betting was not in question in the U.S., and the CEO of Caesars Interactive was at the helm.

It is also interesting to note that CIE recently formed a partnership with Optimal Payments in anticipation of their online gaming business together in Nevada.  The head of Optimal Payments is Joel Leonoff and Leonoff worked with Garber at Firepay and later was also a party to the deferred prosecution  agreement reached between Optimal (which had acquired Firepay and Terra Payments)  and the U.S. Attorneys Office, SDNY in 2009.

As part of the agreement, Optimal admitted that it recognized that the merchants that their subsidiaries processed for violated certain U.S. criminal statutes, namely: 18 U.S. C.  1084 and 18 U.S.C.  1955,  The Wire Act and IGBA, respectively.

Furthermore, Optimal is the owner and operator of Neteller.  Neteller, is the e-wallet responsible for handling the vast majority of  monetary transactions related to  online gaming for U.S. customers prior to their ceasing operations in the US following the passing of UIGEA.  After being tagged by the U.S. DOJ , Neteller eventually agreed to a deferred prosecution agreement, forfeiting over  $ 136 million and admitting it had operated in the United States as an unlicensed money transmitting business and had participated in the performance of financial transactions for the purpose of promoting unlawful transactions between internet gambling merchants and persons located in the U.S.  The co-founders of Neteller, Steven Lawrence and John Lefebvre were both arrested and charged criminally in the U.S. Courts.  Both defendants pled guilty to charges of conspiracy to conduct illegal Internet gambling transactions.

The AGA has been sure to use proceedings following Black Friday as it’s argument against the licensing of PokerStars, but why use only that date, or why rely only on cases that followed the passing of UIGEA in 2006?  The above cases of Neteller, Firepay, and Party Gaming are only some, but not all, of the run-ins that various companies and individuals have had with the U.S. Department of Justice.  PokerStars never admitted to any wrongdoing nor pled guilty to any offenses charged, unlike those companies and individuals mentioned above, and more.

The AGA cannot use the 2006 and forward dates for deciding who should be “unsuitable for licensing” because relying on the passage of UIGEA is contrary to their own position.  One white paper, published on the AGA’s own website after Black Friday states:

In 2006, Congress adopted the Unlawful Internet Gambling Enforcement Act (“UIGEA”), which prohibits financial transactions in support of illegal online gambling, but does not define illegal online gambling.

Congress has enacted no legislation that squarely addresses the legality of online gambling.

Why did the AGA decide to take a stance at this particular time?

Further using Caesars as an example,(representatives of Caesars, MGM and Boyd are all Board Members of AGA) it was recently reported that, according to PokerStars, a representative from Caesars contacted PokerStars offering to sell to them the Rio Casino in Las Vegas and the WSOP brand. Reportedly the reason given by Garber for PokerStars to consider such an acquisition would have been to would give PokerStars a better relationship with Caesars and would help PokerStars gain a license in Nevada. Caesars has made no public comments about the claim, but sources have confirmed to Diamond Flush Poker that such a call did take place on February 8, at approximately noon Eastern time. The conversation took place between, again, Mitch Garber, CEO of C.I.E, who are majority owners of the WSOP brand, and the acting CEO of PokerStars. Sources have also confirmed that a senior member of Caesars Entertainment was on the call as well. The asking price for the Rio alone was said to be $ 400 million. No price was relayed for the price of the WSOP brand.

Nevada’s Governor Sandoval signed the revised internet gaming statute into law on February 21, shortly after the above call took place and PokerStars declined the offer.  Questions will always remain as to what might have happened had PokerStars “taken the bait” for such an acquisition, since the law going into effect includes a “bad actor’s clause” barring anyone that conducted online gaming business in the U.S. after December 2006 from taking part in Nevada online gaming for a period of five years. Sources very close to the situation have advised Diamond Flush Poker that Caesars was aware of the insertion of the 5 year ban in January 2013, weeks before the offer was made to PokerStars. It is unclear whether Sandoval knew of Caesar’s attempt to lure PokerStars to Nevada.

The AGA has been quiet on this subject since submitting its petitions to the Commission. Its twitter account (@AGAupdate) is active, but not even one sentence regarding this action.

Since the applications for online gaming have not yet begun in New Jersey (formal regulations still being formulated but expected soon), the only question that will be imminently before the Commission will be whether to allow PokerStars their interim license to own and operate the Atlantic Club.  It’s inconceivable that the brick and mortar establishment on it’s own represents any monetary harm to the other casinos in town, some that are members of AGA, as another operating entity, because it already is operating and has been for years. Perhaps there could be an argument if an additional new casino was being proposed in an already suffering marketplace, but such is not the case here.

The AGA made no public outcry months ago when it was announced that PokerStars was acquiring the Atlantic Club. They made no petitions in December, January or February to voice the strong opposition that they do now.  The timing of their petitions for standing and for arguing that PokerStars should not be licensed can only be tied to Governor Christie’s recent signing of New Jersey’s own internet gaming law and the fear of some of its members fear of competition in the online market.

Taking into consideration the claims made by AGA to deny PokerStars application in New Jersey in which PokerStars never admitted to any criminal wrongdoing, the AGA surely should be making even more vehement claims against the companies and affiliated individuals that have, at the very least, pled guilty to criminal acts in the gambling industry in U.S. courts of law.

And there would be no reason to limit such an effort to New Jersey nor to limit such actions to what is only an application for a brick and mortar casino license.

If the AGA is sincerely interested in now making part of its mission to be involved in licensing of individual entities, even on the state level, perhaps they can look to every entity in every state, and every individual related to each entity, beginning with Nevada, for both brick and mortar and online gaming licenses, and use the same microscope that they are claiming to use now.

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2 Responses to Has the AGA Been Honest About Their Motives, or Just Very Selective as to its Prey?

  1. Peter Coster says:

    Something here doesn’t pass the smell test. Was the Caesars offer a sucker deal for PokerStars, knowing PS might not even get a license in NV? Why the Rio? Was/is Caesars just trying to dump it for cash?

    It also sounds like there a conflicting interests in the AGA. If back round tests on all parties are applied, who is left that is clean? Anybody? Is that the norm in the industry?

  2. Armadillo says:

    I liked Gambling a lot better back when the Mafia controlled everything and we all knew it. Now, they hide behind their legal commissions and still make decisions on who gets to have a casino and who doesn’t. These guys were the ones who were really involved when PokerStars was shut down to U.S. players and it really pisses me off!