Bitar the fall guy for six years of ambiguity6th July 2012 7:36 am GMT
The arrest of Full Tilt Poker founder Ray Bitar means the Black Friday indictments and their aftermath are slowly reaching a conclusion
When Ray Bitar landed at JFK airport he would have known that more charges were coming. The US government wants him to take responsibility for what has happened since Black Friday as much as it wants him to take the hit for what happened prior to April 15th last year.
More importantly, his lawyers would have known that there was more to come. His counsel John Baughman of Paul Weiss is one of Wall Street’s premier litigators having made his name defending Citigroup successfully in the Parmalat and Terra Firma cases.
Baughman has already managed to get his client bail (Bitar’s $2.4m house in Los Angeles) despite the government arguing Bitar might scarper because of the severity of the superseding indictment.
The severity of that superseding indictment has been overplayed in some quarters with people adding up the different charges to conclude that Bitar might spend decades behind bars. That’s faulty logic. Of far greater relevance is the fact that former Sunfirst banker John Campos got just three months last week for his part in processing online poker payments.
Despite the government’s rhetoric with its language about Ponzi schemes and fraud, Bitar has every chance of a similarly lenient sentence. And let’s not forget that he is pleading not guilty.
Since 2006, the DoJ has shown a very strong reluctance to fight the online gaming industry in court. Given what one lawyer described as “the hugely confused status of the law” surrounding this issue, that is no surprise and remains the case. It is interesting then, that Bitar’s superseding indictment focuses on the fact that he lied to players about the security of their funds.
That is a much easier legal argument to make than anything to do with the legality of online poker. The indictment is modelled on charges that are typically brought against the directors of public companies, who have lied to the public to encourage them to make an investment. It is a serious charge but it is not a totally satisfactory comparison.
For a start poker players are not making an investment and secondly, there has to be some damage caused to the players by the misrepresentation of the facts.
“It’s probably legal enough to be a material misrepresentation of the facts,” said a lawyer close to the matter, “but there is no reliance by players on those statements. If money is lost on April 15th and the company says they are safe and segregated on the 18th, it stops the players bringing a suit but what else is there? What is the damage?”
If Baughman sounded a little over-confident when he said “we hope that we will be able to resolve Mr. Bitar’s remaining legal issues in a way that is satisfying to all parties”, he has good reason to be.
It is not just the shakiness of the legal arguments either. Despite it’s tough guy rhetoric, the DoJ has been remarkably pragmatic throughout these cases. It has maintained open lines of communication with Bitar’s lawyers throughout the case, despite official protocol demanding that federal prosecutors do not negotiate with fugitives, which is what Bitar essentially was.
Of course, he will argue he is not a fugitive. Since the Tapie deal was signed, Bitar has insisted he would go home and face the criminal charges against him once Full Tilt’s issues have been sorted out. The fact that he has now done that indicates that he believes the PokerStars deal is almost done.
In fact, it had been hoped that it would be tied up by Independence Day but it’s no surprise that another deadline has passed. Bitar’s surrender should not be interpreted as a pre-condition of that deal being done. The government would never never give him that much leverage, but it should be seen as a signal that it will get done soon.
Despite all that’s been said above, the government has certainly gone after Bitar with some gusto. He may get off relatively lightly (although the government and/or judge could surprise us again) but ultimately Bitar is being made the villain of the piece. The government’s indictment mentions “co-conspirator” CC-1, who the government considers a “co-manager” but is not being prosecuted.
CC-1 is understood to be poker pro Howard Lederer, who along with 20-plus other pros were Full Tilt’s shareholders. This includes the likes of Phil Ivey, who is thought to have made more out of this debacle than anyone.
It’s probably appropriate to say now that this column does not believe that anyone should be imprisoned for running an online poker website. And if you have detected a slightly over-charitable attitude towards a man who many would see as a crook then that might be the reason.
Some very wealthy US citizens are sitting pretty while their former partner is facing jail time. One has to presume they have cooperated fully with the DoJ’s investigations while Bitar has been trapped in Ireland trying to sort the whole mess out. The wheels of justice turn in mysterious ways…
Well, one way or another it will be sorted out soon. PokerStars will pay back out-of-pocket players and Bitar will pay some sort of price for screwing up when the feds closed in. This saga started with UIGEA in 2006, an ambiguous law that has cost an entrepreneurial industry billions of dollars. Perhaps online poker can now move on and we can get some sort of clarity regarding its legal status.
Next up will be the Bodog and the Calvin Ayre show. The arguments will flare about online sports betting, which one suspects, is less legally hazy for the DoJ. But with Governor Chris Christie and New Jersey moving to legalise an activity that many would think of as normal, and nobody being defrauded/left out-of-pocket, there will probably be a few people asking why these entrepreneurs keep getting indicted?