The last few weeks have brought Caesars Interactive CEO Mitch Garber media attention in a way that’s very different than what most executives consider good public relations. Last month, the Massachusetts Gaming Commission released a report citing why they had concerns that Caesars Entertainment may be found unsuitable for licensing in their state. One of those reasons, was the gaming history of Caesars Mitch Garber, who came to the company in 2009 after leaving Party Gaming.
Before ever going to Party, Garber was the CEO of the Canadian Company Firepay and Firepay was later acquired by Optimal Payments, where he held the title as well. Both companies were known to have processed payments for online gaming, including poker, sportsbetting and casino style games. 1. This was commonplace during Garber’s tenure at the company. After being the subject of DOJ seizures, Optimal settled with the US attorneys office (SDNY) in 2009, stating in part that:
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.
Optimal also went on to acquire the ewallet Neteller, the preemminent source for handling monetary transactions in the US related to online gaming. Again after significant seizures by the US DOJ, Neteller agreed to a deferred prosecution agreement with SDNY, forfeiting $ 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.
UIGEA was a Gift to Party Gaming and Garber, not a Curse
When Garber came to Party in April 2006 the company was still operating in the U.S., offering online poker and casino games. While he (and Party Gaming) tout now that his mission was to get party out of the US market post UIGEA, he actually was trying to accomplish that even before October 2006 when the law was enacted. Sources have confirmed that the real reason for doing so was because Party’s public shareholders were all up in arms about the potential liability, criminal and otherwise, that the company could face because of party’s “admission” of operating illegally in some jurisdictions. Such admission came n 2005 when Party went public and in fact, in their IPO prospectus, the following statement was included:
“[tlhere is uncertainty as to the legality of online gaming in most countries and in many countries, including the United States, the Group’s [PartyGaming’s] activities are considered to be illegal by relevant authorities.”
(That same statement was later quoted by the DOJ and made part of the record of Party’s settlement with the US government).
The shareholders (not company directors) felt vulnerable and sources have said that that group of shareholders were threatening to sue the company if action was not taken. The only recourse for Party would have been to leave the USA market, thus avoiding the revolt. The only problem with doing that was that there could be no feasible reason given publicly for doing so. What kind of announcement do you give publicly that justifies dropping over 80% of your business base without it being obvious that doing so meant that they knew their business was operating illegally. They needed a good public reason. In October 2006, they got one. UIGEA!
By using UIGEA to exit the market and quell the shareholder uprising, they had to take the stance that UIGEA made online poker illegal. It didn’t of course, and I have yet to find a credible gaming attorney that believes that, but that was the story needed at the time for the reasons stated above and that same fallacy continues to be espoused today.
By using that reasoning, Garber and Party, now bwin.party, have been able to make strides in getting approved in some US legal jurisdictions while using the same fallacy of a magic 2006 date, to keep others out.
Once again, very convenient.
Party eventually signed a non prosecution agreement with the U.S. Department of Justice, admitting 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
Garber has been able to move into the top job at various gaming companies, more than one of which have admitted wrongdoing including violations of federal laws. His suitability is currently being reviewed for that same job in New Jersey, a hearing for which is being conducted today. The scuttlebutt is that he gets rubber stamped and continues as CEO of Caesars Interactive, helping to bring online gaming to the state. Perhaps he deserves to have that license, but it shouldn’t be because he and Party have rewritten history, especially at the cost of slighting other companies who never admitted to any wrongdoing.
We expect to have that New Jersey decision sometime today.
- Accepting wagers for sports betting in the US was always considered illegal by virtue of the Wire act, a matter now believed settled by the Legal Opinion of the U.S. DOJ in December 2011. ↩