The L Files - part one

The L Files - part one

Saturday, 27 October 2012

In mid-September and in the aftermath of the sale of Full Tilt Poker to PokerStars, Howard Lederer surprised the poker community by finally breaking his silence and requesting an interview with

PokerNews editor Matthew Parvis was the man set with the tough task of representing the bloodthirsty players, meeting with Lederer at a Vegas hotel for a seven-hour discussion (later edited to three and a half hours and released in seven installments), with topics ranging from Black Friday to Groupe Bernard Tapie to the eventual sale of the company.

What resulted were the Lederer Files: a rather tortuous stagger down memory lane that felt like a cordial chinwag rather than the fiery interrogation that many had hoped for. While the exchange was far from Frost and Nixon, the footage did at least shine some light on the history of Full Tilt Poker and the trials and tribulations that led to its ultimate downfall.

Some questions were flawed: they invited speculation rather than facts, and Lederer quickly developed a penchant for the words “I don't know” and “I can't recall”. As such, follow-up questions were required, but rarely delivered, and Lederer was let off the hook on multiple occasions when further grilling was called for.

While the guns remained glued to their holsters, Parvis can be praised for prising out a scandal or two for the Heat Magazine lovers out there, most notably the now infamous misclick in which Team Pro Erick Lindgren was granted a two-million-dollar loan but was accidentally sent four (oops). Despite numerous requests, the money never found its way back to the company and Lindgren's budding reputation as both a gambling degenerate and slippery customer was further cemented.

The big question that emerged from the interview was Lederer’s apparent ignorance on so many topics and his insistence that he was totally unaware of the dire financial state of the company. How much of this was genuine? His defence is that he doesn't possess a business or accounting background and that he had no reason, or authority (according to the operating mandate), to doubt the figures being presented to him by the finance team.
However, Lederer is a sharp man and it’s hard to fathom how the news of phantom deposits that was circulating the forums from November 2010 went unnoticed until April 2011. After all, this is a man who requested a regular answer to the question “do we have enough cash to cover player funds?” and was highly concerned by a customer email that enquired about segregated account. Would mumblings of such severe and potentially catastrophic processing errors really pass him by during such a tumultuous period?

What was also considered peculiar was Lederer’s lack of anger towards Ray Bitar, the man who he admits dug the very hole from which they were trying to escape. Instead, Howard is more focused on chastising those owners who failed to assist post-Black Friday, and he’s particularly scathing of Ivey and his subsequent lawsuit, which may or may not have impeded potential deals – either way, his disdain seems inexplicably misguided.

Even if we were to accept Lederer’s words as gospel, as an owner, board member and former CEO, he has to take responsibility for failing to implement the processes required to efficiently run and regulate the company – at the very least, this is a case of piss-poor mismanagement and extreme negligence when responsible for the funds of so many people. As blogger and former employee Bill Rini states: “Ignorance of the law is no excuse,” and a similar maxim should certainly apply to the owners of Full Tilt Poker.

For proof of the startling incompetence and lack of infrastructure, one only needs look at their nonchalant attitude towards loans, which involved tens of millions being handed out to players left, right and centre while being recorded on little more than an Excel spreadsheet. Of course, most of these loans never found their way back when the proverbial shit hit the fan, yet it was funding that could have helped massively in their hour of need. If loans were required to fill the “big games”, then surely an advance on the monthly distributions would have been the sensible and the more risk-averse approach.

You also have to wonder how Ray Bitar, a man with no traditional training in this area, maintained such a pivotal role in a company that was growing by the day. Not only did the board fail to adjust and adapt to the increased size and functionality of the company, but they also protected the one man who could bring it all to a standstill, despite his deteriorating relationships with some of the owners. It’s easy for Lederer to say that they could dislodge Bitar by accruing 51 per cent of the vote, but Bitar’s main allies held large chunks of the business, and contesting the CEO of a company that was providing millions in distributions every month could be considered political suicide.

Above all, although I feel that the poker community can forgive certain errors and oversights (although Bitar receiving a $200,000 per month salary after the events of April 15 is a tough one to swallow), there are three factual elements to the story that have truly left a bitter taste in people’s mouths, starting with the decision to continue operations post-Black Friday.

It’s obvious that they had a choice and that, despite his nitty persona at the poker table, Lederer and his cohorts decided to gamble on keeping the company alive, regardless of what was in the kitty, in the hope that they could seek out new investors without having to reveal the true financial situation of the company. In hindsight, they should have ceased operations immediately, rather than take the unethical decision to inaccurately inform players that their funds were “safe and secure”, while continuing to accept deposits from unwitting rest-of-the-world players.

Secondly, many find it very tough to get their heads around the distributions and the failure to return a single dime from those that were received in error. Although it’s always going to be hard to convince everyone to return what they received during the demise, the money simply didn’t belong to them, and one has to make an individual ethical decision rather than look to excuse or justify greed by saying, “Well, if he doesn’t pay, then why should I?” As a board member who was supposedly working tirelessly every day, perhaps Lederer should have led from the front and been the first to make that vital step. He never did.

Finally, and what perhaps really lost the trust of the community, is the silence that followed Black Friday, not just from Howard, but all the owners. “No comment” and, more arrogantly, “When we’re ready” were the answers that left players in limbo, believing they were the victims of an outright theft from a group of players who many once looked up to or even idolised.

I can understand the legal implications of “revealing all” to the public, and the precarious nature of big-money deals, but this doesn’t excuse the outrageous lack of mere acknowledgement that was served to the players. It stank of a hit-and-run, when a simple message saying that “we’re doing what we can but can’t discuss the intricacies” would have gone a long way in comforting those who’d lost their bankrolls. They certainly weren’t afraid to speak openly, and publicly, about the Ivey lawsuit when that particular cage was rattled.

For this reason, it’s hard to imagine Lederer being welcomed back into the poker community any time soon, and it’s possible this was a big part of his motivation for requesting the interview when still under indictment. It may just be his nature, but he appeared insincere in the interview and lacking in humility. A seemingly hollow apology was tacked onto the end of hours upon hours of blame-deflection where he presented himself as a martyr who was battling on behalf of the players. Instead of starting with an apology, his first comment was to emphasise that he was just “one person in what was a very complicated situation”.

So, currently, and despite the many blogs, articles and forum posts that have cropped up over the last couple of months, the likelihood is that although the truth is out there, it will never fully see the light of day and we’ll be left wondering who to believe. Lederer has since evaded the one person - Diamond Flush (the Julian Assange of the poker world… well, sort of) - who may have dug that little bit deeper, citing the hardship on himself and his family as reasons for reneging on the interview. It’s just a shame that he didn’t consider the future security and “hardship” of the players when he was sat complacently on the board watching the millions roll in.

Tags: Howard Lederer, The Lederer Files, Adam 'Snoopy' Goulding