Haley's Poker Blog

No bad beats, but still a poker blog... hence the anguish.

Monday, June 18, 2012

Just Conjecturin', Volume 44: The Dirty Birds

"You seem to be in some distress," said the kindly judge to the witness. "Is anything the matter?"

"Well, your Honor," said the witness, "I swore to tell the truth, the whole truth and nothing but the truth, but every time I try, some lawyer objects." -- classic lawyer joke

I love me some lawyer jokes, as do most sane people, even as I know that most funny jokes have roots in reality. This time out the topic is lawyers, and the only way to deal with such a stinky topic is to tackle it head on.

If you wondered if there'll be lawyerly tales in the upcoming book, the answer is yes, but in some ways the shocking part is not that there are lawyers involved in the UltimateBet and Absolute Poker cheating tales, but rather, how many. Several ongoing storylines connected to these matters circle back toward perhaps the most famous of all gaming lawyers, Montreal-based Morden "Cookie" Lazarus, of the firm Lazarus Charbonneau, and Cookie's fingerprints spread from these sites' earliest days all the way into the the Norwegian tax matter that we touched on last time out. It's safe -- even "legally safe", har har -- to say that Cookie is one of the secret legal puppetmasters of the online gaming world.

And yet this isn't about Cookie... yet. This time out it's more a matter of introducing some new legal players into the growing roll of folks affiliated with Excapsa or UB. They've all been familiar to me for some time, and all seem to have things to answer for.

There have been plenty of lawyers affiliated with the UB operations, some as staff counsel, and others as consultants. Boil it down and leave out some of the high-priced freelancers for the moment, and the real Excapsa lawyers of interest number just three.

First, there's Sanford "Sandy" Millar, a California-based attorney who served as Excapsa's day-to-day tax and payroll attorney, knowingly doing all this for a US company (that being Excapsa) that was clearly violating US gaming laws as it operated out of Portland, via a pretense of a sham Toronto office that was little more than a secretary and a dropbox. Millar was there virtually from the start, and was a significant Excapsa shareholder.

Second, there's Stuart Hoegner, a hired gun who arrived on the Excapsa scene around the start of 2006 to assist in the company's London Stock Exchange IPO, and to help with possible sales of the company that were also being discussed. Except the UIGEA was thrown into the mix late in 2006, and it was Hoegner who played a key role in designing the complex shell sale to Absolute Poker that involved bringing former Kahnawake Grand Chief Joseph Norton on as a nominal frontman. Hoegner remains on legal distribution lists on Excapsa matters to this day, despite his relatively late arrival on the Excapsa scene.

Hoegner pops up on Twitter often under his @GamingCounsel tag, and I get an exceptional kick out of him trying to redefine himself as a legal media expert while avoiding utterly all discussions of Excapsa, in light of his previous role. It's fun antagonizing the guy on Twitter, knowing that the things I allude to are true and supported by documentation and that he could never withstand a discovery process if he was to get serious about suing me.

In leaving Stuey (for the moment), it's worth noting a recent paper he delivered at a Las Vegas gaming conference that examined several prominent online poker networks' relative legal protections, strengths and weaknesses as pertained to various jurisdictions, including the US. To which I say, "Of course he's the expert -- he just spent the better part of a decade learning exactly which fine lines to dance and which grey areas to skirt!" You can visit Stuey at the website for his "boutique" law practice here.

But even Hoegner pales to one Daniel S. Friedberg, one of the true secret bad people behind the Excapsa facade. Friedberg was there from the very start, and his role in online poker matters follows a strange route indeed. Friedberg graduated along with Phil Hellmuth from the University of Wisconsin in Madison, and seems to have served as Phil Hellmuth's personal attorney -- kind of an agent for Phil's interests, back when UB was born. Friedberg soon became Excapsa's general counsel, with all that involved, even relocating at one point to Toronto to help put a little real meat behind that otherwise-sham office.

Friedberg, though, is a Wisconsin/Seattle person, and these days he keeps about as low a profile as one could possibly imagine for a corporate attorney. No public Twitter or Facebook feeds for an attorney or his practice... really?

Friedberg can be found, however, at a small Seattle legal firm, Crest Law Group. Here's his corporate page, and what's so damned odd about is that all the personal highlights just stop in 2006. The final highlight, listed first on his official bio, is this:

• Corporate counsel for $100 million IPO on the London Stock Exchange AIM (2006)

That's a reference to Excapsa's failed London Stock Exchange IPO, and after that, Friedberg's history -- or so he'd like the world to believe -- just goes dark.

And now, just a bit more of the story....

It appears that Friedberg joining Excapsa at its inception was part of the complex package that also ensconced Hellmuth as the site's frontman, and for the first part of the '00s, UB's corporate history is pretty well known. Friedberg did quite well for himself, garnering several million shares of Excapsa stock in addition to his pay, with said shares distributed across several different ownership entities.

Then the UIGEA happened, the IPO collapsed, and the hasty "sale" to Absolute Poker was arranged, with terms of sale very unfavorable to Excapsa's rank-and-file shareholders. Amid all this, Friedberg switched sides, going to work for Absolute Poker and becoming Scott Tom's attorney as well. You read it right: Friedberg kept himself tied to the money stream, wherever it went, and the Excapsa shareholders whose rights he was suppose to protect were instead just a disposable commodity. The general shareholders screamed about the blatant conflict of interest, but to no avail. A few of the key UB insiders remained tied to Cereus, either through software deals or the endorser packages offered to UB site pros Hellmuth and Annie Duke. But the proletariat shareholders were given a highly dubious promissory note, and pretty much dumped by the attorney who was supposed to be protecting them.

Even for an attorney, that's disgusting behavior.

Having already jumped ship, it's no surprise Friedberg's bad behavior continued on the AP side, when the rank-and-file shareholders at Madeira Fjord were later jettisoned in a similar manner. There's even a tale that circulates among AP ranks of Friedberg unilaterally withdrawing a stock option previously promised to AP spokesman Mark Seif, leaving Seif much worse off and with a smaller ownership stake than his original performance contract intended.

The whole Scott Tom thing, too. Circles within circles, but some of them are pretty damned tight.

But wait, there's more! Last year, listeners over at Bryan Micon's Donkdown Radio site were treated to an impromptu interview with Travis Makar, who is generally described as Russ Hamilton's computer guy. Among other things, Makar, his wife and his mother also had their names on cheating accounts controlled by Russ. Makar went on Donkdown to discuss a few things and hinted at a secret recording that was made of UB execs once the UB cheating scandal erupted.

Makar won't talk about this recording, which I had previously learned of anyway, and which was made by Russ Hamilton himself. The added tidbit coming from his Donkdown interview is where he accidentally let slip one of the participants in the meeting -- Daniel Friedberg. Among the topics relayed as being discussed in that meeting were that several people cheated using God Mode, that they had to discuss what percentage of cheated funds they'd had to give back, and decide who could be left off the refund list.

This means that at the very least, Friedberg actively participated in the cheating coverup at at least one site, UB, if not also over at AP. This is one dirty attorney. Maybe that fact should be added to that Strathmore's "Who's Who" listing Friedberg seems to be fond of.

Was Friedberg one of the actual hole-card cheaters? It seems odd that corporate counsel would have access to the cheating tool, but stranger things have happened. Nonetheless, sources have indicated Friedberg may have indeed been involved, and while the actual hand histories that would prove or disprove Friedberg's involvement remain sealed, he is confirmed to have played on the site from 2000 onward. Friedberg had at least three UB accounts -- "SEATTLE", "DANRAYN" and "BIGLOULEO" -- that date from UB's earliest days, and all readers are free to research those accounts to check win rates and look for suspicious hands. There may have been other Friedberg accounts as well.

Should the real hand histories ever be made public, they could prove Friedberg's innocence (or guilt). This writer makes no definitive accusation, beyond the scummy lawyerly stuff, but merely notes that the wall of smoke surrounding Friedberg remains firmly in place.

There's also the strange departure of Hellmuth from Cereus at the end of 2010, which to my knowledge has never been adequately explained. Annie Duke was already off contract and was being paid a monthly retainer, and she and Scott Tom hated each other's guts anyway; no surprise she was jettisoned. Yet Hellmuth's contract, according to AP insiders, lasted at least another year, and Hellmuth seems to have invited AP to void his deal by showing up at a December '10 poker tourney wearing "Aria"-branded gear. Doing so was probably a million-dollar decision and seems decidedly unlike the dollar-focused Hellmuth, unless he was tipped off to something bad in the works, which generally describes the Norwegian tax mess then just beginning to swirl around Absolute Poker. With back-looking perspective, one possible explanation now emerges: Did Friedberg tip off Hellmuth that it was time to get out?

Saturday, June 02, 2012

Just Conjecturin', Volume 43: AP's Chairman Janusz Targeted by Norwegian Bankruptcy Attorneys; $250 Million Corporate Theft Alleged

Back to the Just Conjecturin' grind, with a hat tip this time out to an anonymous commenter who alerted me to a unfolding legal action in US District Court, right here in my home state.  This involves the former chairman, Ron Janusz, of Absolute Poker's one-time parent/holding company, Norwegian Fjord Madeira Fjord AS. 

Madeira Fjord declared bankruptcy last year, and was subsequently hit with a 180 million kroner (about USD $30 million) tax bill for its transference of corporate assets through the Norwegian financial system.  All that plays into the Norwegian court's bankruptcy process, which continues to attempt to unravel AP's investment Gordian Knot.

In the latest legal developments, the Norwegian court-appointed bankruptcy attorney, Thomas Steen Brandi, has sought a detailed laundry list of documents and a deposition from Janusz (full-name Robert Ronald Janusz.  Janusz has been described in othe reports as a Canadian national but has lived in the US for at least 15 years, and appears to have entered the Absolute Poker sphere of influence through an extended business friendship with Floridian Hilt Tatum III, the father of SAE fratboy/co-founder Hilt Tatum IV. 

Steen's firm retained the sources of Illinois law firm Seyfarth Shaw LLP and attorney Jordan P. Vick, filing an application for subpoena against Janusz after Janusz ignored months worth of Norwegian efforts to supply documentatiom regarding Madeira Fjord and a related Portuguese entity, Avoine - Servico de Consultadoria e Marketing.  Janusz currently lives in West Chicago, IL.  Janusz also served as the public chairman of Avoine, which has been alleged to be the true hiding spot of the Americans who really controlled AP in the years following its acquisition of UltimateBet and its flight from America's UIGEA.

The filing against Janusz was made in the Northern District of Illinois' US District Court on February 29, 2012, with the motion quickly granted on March 12, 2012.  Janusz quickly retained attorney Leonard A. Rodes of New York firm Trachtenburg Rodes & Friedberg LLP, and to date has not appeared to answer the subpoena, with the next hearing in the matter scheduled for June 14, 2012.

The purpose of the Norwegian pursuit appears to be two-fold.  First, Madeira Fjord issued an unexplained "loan" from Absolute Poker coffers to Janusz in 2007 for $3.125 million.  The loan agreement was signed on December 17, 2007, with $2.5 million known to be transferred to one of several businesses owned by Janusz, Universal Business Management Group, four days later, and that loan remained on the Madeira Fjord ledgers.  According to a letter sent to Janusz last June:

"The loan is still registered in Madeira Fjord AS' annual accounts and has not been repaid.  A copy of the loan agreement is attached.  The estate considers the loan agreement to be illegal, cf. the Norwegian Companies Act Section 8-11, and UBMG has an obligation to repay the loan immediately."

It is not known if the additional $625,000 called for under the original loan agreement was ever transferred to Janusz, but the request for repayment added $473,083 in interest charges to the known $2.5 million on the books, for a total of $2,973,083 as of June 22, 2011.  That total is believed to have climbed to roughly $3.1 million today.

The second purpose of the hoped-for deposition of and documentation from Janusz appears to be further uncovering of the two $125 million promissory notes at the heart of the AP/UB acquisition and subsequent transfer trough two different faked frontmen, first Joseph Tokwiro Norton, then Blanca Games placeholder Stuart Gordon.

Unfortunately, the rank-and-file shareholders of Absolute Poker received only a few pennies on the dollar in investment return, with the deposition by Norwegian attorney Steen detailing one of the first step-by-step descriptions of the legal and business machinations of the corporate ripoff made public to date. 

In 2007, Absolute's core executives and shareholders executed a "mirror image merger" in which all the original Absolute Poker investors, which had been bundled together in original holding company SGS (BVI) Inc., were shunted over to Madeira Fjord, while the operations of AP went through Avoine and several other related entities.

Avoine's assets were then sold back to Absolute Entertainment SA, while SGS was dissolved and, as it was sold to the shareholders, removing the American corporate tie-back.  It was all promised to be returned to the general shareholders through the $250 million in combined promissory notes, plus promised minimum monthly payments of $1.7 million.  But the theft waited in the details.  According to the Steen deposition, this happened next:

"Then, in December 2008, Madeira/Avoine initiated a purported 'rescission' of the $250 million sale and assets and shares from Avoine to AE.

"Thereafter, it appears that Avoine executed an instrument called an Exercise of Secured Creditors Rights (the 'Exercise Agreement') by which Avoine instructed Tokwiro to transfer the assets and shares in AE (and thus the 'Absolute Poker assets') to an entity called Blanca Games Inc. ('Blanca'), subject to Avoine's continuing security in the assets.

However, according to Steen, and which has been verified to me independently by other AP investors, promissory note payments and dividends were never paid.  As Steen summarized it:

"... the significant assets of Avoine -- which were valued in 2007 at $250 million and which were developed with capital supplied by about 250 innocent US shareholders -- have simply been misappropriated by those persons controlling the involved entities."

Janusz is believed to believe to be in possession of several key documents related to the shuffling of corporate entities, and copies of many of the early non-answered documents were also sent to Floridian trust-fund baby Shane Blackford, third of the four original University of Montana SAE fratboys generally credited as Absolute Poker's co-founders, along with Scott Tom, Garin Gustafson and Hilt Tatum IV. 

Several AP officials and execeuitves are mentioned in the filing's attached documents, including Richard Borgner, who like Blackford and Janusz served briefly on Madeira's board, and US-indicted AP principals Scott Tom and Brent Beckley.  The lack of mention of additional individual shareholders, but the inclusion of such ownership entities as Greencat Holdings, alleged by one AP shareholder -- but unproven as yet -- to be affiliated in some form with Scott Tom's father Phil Tom, points to the information coming from a 2010-era, general-ownership registry for Madeira Fjord known to be in legal circulation.

Earlier unofficial documents, authored before the creation of the Avoine/Madeira shells, show many more of the true owners of Absolute Poker.  At least seven of those individuals, US citizens working as AP executives, received ownership stakes in Avoine, with an ownership registry for that company not yet within easy reach of the Norwegian bankruptcy effort.

Correspondence with at least two dozen legal and corporate firms affiliated with Absolute Poker was also targeted by the subpoena, including a couple of entities new even to this researcher.

*   *   *   *   *

Book update.  Work continues... slowly.  As you all can see, the story refuses to end.  In addition to all the hundreds of e-mails and hours of tapes and sifting of stories that I continue to do, there's thousands and thousands of pages of court documents to work with.  The pile keeps on growing.

Sometimes, I dig deep and hit a dead-end.  That's happened a few times lately, but I never expected this would be an easy tale to tell.

The above needed to be reported because it's news-news-news, but I have backstories that go along with much of the above.  That work continues to help build the second half of the book, which deals mostly with AP.  The UB stuff I thought I had finished up, until a new wave of information about the company's early years forced me to go back and rewrite virtually everything.

Will it be good, when it's finally done?  Hell, I don't know, but I keep plugging.