by Wendeen H. Eolis
Over the past two weeks the American Gaming Association and PokerStars have sparred over the future of the online gaming company’s activities in Atlantic City. There is no end in sight for a battle that has AGA pressing the New Jersey Division of Gaming Enforcement (DGE) on behalf of its members into a long methodical examination of the merits of PokerStars’ entry into the United States casino market.
While the plot thickens and the legal issues unfold, more than a dozen lawyers are responding to my call for help to dissect in plain English what is happening. Lawyer sources for this article have intimate knowledge of the online and live casino industry. Many have represented one or more of the following: PokerStars, MGM, Caesars, other brick and mortar casinos and online gaming companies and/or the AGA. They weigh in today on a few of the questions they have brought to the table for discussion.
Author's disclosures: The writer is a a legal consultant but not a lawyer and therefore does not offer legal advice and does not express any legal conclusions in the matters presented in this article.This acknowledges without specific reference that the writer and/or EOLIS companies have had business dealings at one time or another with most of the businesses mentioned in this article and necessarily, have retained confidences provided in the context of those relationships.
Please also note: For the avoidance of doubt, readers are advised that no spokesperson for either PokerStars or the AGA was solicited for comment with regard to this article and none of the responses reflect authorized comment by either organization
The questions and the summarized answers provided as a result of consulting with a wide variety of gaming law experts and white collar crime specialists follow:
1. Why did Poker Stars conclude affirmatively that their online poker fare was legal in America after enactment of UIGEA?
AGA: They went lawyer shopping and adopted the stance they liked; a stance that suggests they deluded themselves or willfully ignored common sense.
PokerStars: They consulted the most erudite lawyers in the most respected firms in America and were thusly persuaded to their position that they were on the right side of the law and would ultimately win the legal battles.
2. If PokerStars concluded that their activities were legal post 2006, why did they treat poker player deposits as anything other than ACH deposits for online gambling?
AGA: PokerStars engaged in activities that resulted in misidentification of deposits of player funds to avoid detection of their true purpose, knowing that these fabricated descriptors were violations of law. Poker Stars later obtained cooperation in processing deposits, as such, by the payment of “special fees” to procesors and/or floundering banks that would accept the deposits knowing their true purpose.
Poker Stars: To date PokerStars does little to explain what is wrong with the DOJ’s charges and evidence except for statements that makes clear the Company was unable to do business it had a right to do, and therefore was left no alternative but to circumvent the system in order to do business that should not have been prohibited.
3. Why does PokerStars refer to the DOJ as authorizing, permitting or otherwise blessing its efforts to obtain a casino gaming license anywhere in the United States?
AGA says that PokerStars engages in convenient truth-telling by quoting words out of context so as to create the erroneous impression that the DOJ harbors no ill will or continuing suspicion toward the operations of the Company.
PokerStars quotes specific statements made by the Government that support the Company's position that the DOJ has made itself clear as to PokerStars' right to apply for a license. The Company suggests that whining casinos fear losses as a result of proving themselves weak in economic warfare not as a result of becoming victimized by criminal activity in competition.
4. Has Isai Sheinberg’s mandated departure from the management of Poker Stars actually occurred?
AGA: While falling short of an accusation that PokerStars has violated its settlement with the Government, the Association raises collective eyebrows on PokerStars' compliance with the spirit of that agreement, noting specific meetings in which Isai Scheinberg participated after the date he was supposed to shed management functions.
PokerStars: While making no specific references to this issue, PokerStars slams the AGA as making false and defamatory statements.Many insiders at PokerStars defend Scheinberg's known sensitivity to accusations against his character, insisting that the man believes his own story and they do, too.
Note: the lawyers queried for this article agree virtually unanimously; this is a burning question on both sides.
5. Do the ongoing criminal charges against Isai Scheinberg reflect on the current suitability of the Company-- particularly on its leadership which includes his son Mark Scheinberg?
This is perhaps the ultimate question. It is discussed with more passion than any other question raised by lawyers with deeply opposing views that reflect their varying relationshikps and the level of their knowledge about the companies with skin in the game. Their comments in response to this question will be discussed separately later in the week.
The summarized positions here are backed up in the next piece that will appear online at this website with quotes from lawyers that have been in the trenches, as the effort to legalize online gaming has progressed and prosecution of online gaming has continued in America over the past two years.
Meanwhile the protagonists soldier on. The AGA, represents brick and mortar casinos (as well as casino equipment and services providers) who ostensibly seek to level the playing field. The goal seems obvious; slow down the imposter if you cannot exclude him. Why? "Because the would be competitor is determined to play by his own rule book rather than rules of law," says one frustrated casino executive—referring to a broad range of criminal charges brought by the U.S. government in U.S. v Scheinberg and its companion civil case against PokerStars. The Company took online bets from players in America after the enactment of the Unlawful Internet Gambling Enforcement Act (2006), in defiance of Government warnings that it was prohibited from doing so.
A Bit of Licensing History in New Jersey
Casino licenses are hardly the automatic end result of filing a license application with the New Jersey authorities. Caesars was denied a permanent license in Atlantic City in the early 80’s until it divested itself of its chairman and vice-chairman, the brothers Clifford and Stuart Perlman. The Perlmans could not convince the regulators that they were not tainted by supposed connections to a well-known mobster who resided in Florida.
Note: Eolis International Group was retained by the Perlmans to select counsel for its bid to be heard before the U.S. Supreme Court after New Jersey refused to act favorably on their license application. As anticipated, certiori was denied.
Caesars' licensing problems in New Jersey were resolved by the departure of the Perlmans. Caesars, which had been transformed from a private enterrpise into a public company by the Perlmans continued its broad scale casino and hotel operations around the country, eventually being acquired by Harrahs which took over the Caesars name. Caesars is widely regarded as the leader in the current AGA campaign to thwart PokerStars’ licensing efforts in New Jersey.
Also in the mix is MGM, another key brick and mortar casino and AGA member. MGM has had its own distasteful experience with New Jersey regulators in the past, but is hoping to mend fences in its current bid to hold on to its interest in the Borgata Hotel and Casino. Some three years ago, the MGM was forced to agree to sell its50% interest in the Borgata Hotel and Casino after deciding not to abandon its plans for a joint venture with the daughter of a reputed Asian mobster in Macau.
As the March 24, 2013 deadline for MGM to sell its interest grew near, the Company decided to make a renewed bid for a permanent license. In February, the New Jersey Division of Gaming Enforcement began its consideration and has since granted e MGM the right to maintain its interest while the regulator entertains its latest request for a permanent license. The MGM is putting forward arguments that focus squarely on showing changes that demonstrate the Company's much further distance from the Asian businessman that previously drew the ire of the New Jersey's DGE.
PokerStars Enters Through Side Door
Now, along comes PokerStars, ready to purchase the floundering Atlantic Club in Atlantic City. Among the parties who seek licenses for PokerStars operations are Mark Sheinberg, son of Isai Sheinberg and CEO of Poker Stars and PokerStars General Counsel, Paul Telford, who has acted as chief consigliere to the Scheinbergs and PokerStars and companies behind theeir operations.
PokerStars is coming ever closer to setting down stakes on the Atlantic City boardwalk with a boatload of cash and promises to provide new jobs and preserve old ones at the Atlantic Club Casino. And, the Company reportedly has plenty more funds to underwrite a substantial initiative that will promote responsible gaming — as per the legislation amended by Governor Christie, before he signed up the Garden State for licensed and regulated online gaming operations.
Public Reaction to PokerStars Overtures to NJ Regulators
Nothing could be better, say civil libertarians, about the anticipated legal option for adults to play poker in pajamas at their computers, as well as a world of poker players jonesing for the chance to play one, two, or eight poker games at a time, online. By and large PokerStars' operations are praised effusively at the online poker forums.
The Company has earned praise not only as the biggest and best cyber space poker rooms in the industry, but also as the safest and most customer-minded gaming organization to serve the poker playing universe. The praise doesn’t stop there. PokerStars is revered for its integrity among players who point out that the Company has stepped up to the plate –every time- to prove unassailable integrity in timely payouts due to their customers.
Against the backdrop of a generally acknowledged, adoring customer base, and amid respect by its most demanding current regulators (PokerStarsnow operates real money games only outside of the United Staes), what could be more reasonable than for the Company to rebuild its proven brand in the United States? Nothing at all says PokerStars in response to the recent AGA brief which pulls no punches in its accusations of pervasive criminal activities by the Company — over many years.
The U.S. Department of Justice and other law enforcement agency personnel in multiple states continue to insist that online poker companies have engaged in flagrantly unlawful activity in the U. S. since the UIGEA online anti gambling statute was put in place Defendants that have come to terms with the Government in their criminal cases emanating from the April 15, 2011 indictment U.S. v Scheinberg have landed up in prison, and Full Tilt’s founder and most active manager, Ray Bitar is expected to do extensive time according to several lawyers who have read the tealeaves. .
Two former prosecutors chide this reporter for pressing them to explain more fully the Government’s position, but they oblige: “the Government has nether reversed nor revised its position with regard to its claims of illegal activity on the part of PokerStars in its settlement agreement of civil charges against the Company.” Sure enough, they show me the legal papers that back them up!
Beyond the claims against PokerStars as made bythe DOJ in their cases, the commercial casino industry casino industry generally views the Company as having gained an unfair daunting edge over the past seven years while AGA members complied with the law. They complain that licensing PokerStars at this time would be tantamount to a reward for breaking the law.
The outrage over such a prospect is said to have come to a boil in recent weeks as AGA members became aware that PokerStars intended to apply for an Interim Casino Authorization in New Jersey. Such licensing they suggested would be at their expense.
Among casino operators queried, most were highly critical of PokerStars efforts to come into town through a side entry door of an ICA. And, few expressed an appetite to to accept their activities in America in recent years as under the threshold for a declaration of unsuitability to enter the marketplace.
The AGA Board voted unanimously or nearly unanimously (depending upon who you ask), to file the recent brief that strenuously objects to PokerStars joining the fraternity of commercial casinos that have been licensed in New Jersey. The AGA brief pounds the Company for a lack of good character, honesty, and integrity required to obtain such a license. The Association makes more pointed and damning claims, calling , describing the company as having been built on “chicanery, deceit “ and pervasive criminal activity.
For its part, PokerStars exudes confidence in the DGE's ability and obligation to decide the merits of a casino license for its Company (which it clearly believes it deserves). The Conmpany treats opposition to their becoming licensed in New jersey las outside shrill calls from would be competitors designed to exclude their most serious competition.
For the time being we are left to contemplate the future of PokerStars in the United States. Should the Company be left out in the cold or welcomed into the bosom of New Jersey’s heretofore super strict licensing authorities? Look for more analysis here in the coming days and in the next edition of Poker PLayer Newspaper.
Editor’s Note: Wendeen H. Eolis is the CEO of EOLIS,a legal consultancy that has advised casinos around the world in connection with their selection of legal counsel for "bet the ranch" matters. Ms.Eolis was also the first woman to cash in the main event of the WSOP. This article is the exclusive property of the author. Contact Ms. Eolis at email@example.com; Facebook and LinkedIn or at the website: www.eolis.com