Washington Post Article (Update)
Published: Monday, December 01, 2008 Online-Casinos.com
WASHINGTON POST ARTICLE (Update)
Investigative writer takes an in-depth look at Internet gambling's two biggest cheating scandals
The Washington Post has published its full five page article on Internet poker, titled "Players Gamble on Honesty, Security of Internet Betting" and written by Gilbert M. Gaul, who worked with Sixty Minutes television producers in preparing Sunday's program on the same subject (see previous Online-Casinos.com/InfoPowa reports)
The full article can be read here: http://www.washingtonpost.com/wp-dyn/content/article/2008/11/29/AR2008112901679.html
In the piece, Gaul describes the detection and resolution of the Absolute Poker scandal as "...a huge victory for the players and the self-policing nature of the Internet. Yet just weeks later, rumors of a new scandal rocked the world of online poker, this time at AbsolutePoker's sister site, UltimateBet.com. The stakes were dramatically higher: more than $20 million cheated from players over four years. The alleged culprits included a former world poker champion and UltimateBet employees who had hacked into the site."
Gaul characterises the two events as the biggest cheating scandals in online gambling" and claims that this has raised fresh questions about the honesty and security of "...a freewheeling industry that operates outside of U.S. law." He goes on to claim that the online gambling world has little regulation and even less enforcement, with many sites scattered over dozens of countries with no reporting requirements.
"The licensing agencies there essentially operate as pay-as-you-go boutiques, generating millions of dollars in fees while showing little interest in policing rogue sites," he comments, estimating that revenue has more than tripled over five years, to $18 billion annually, including about $4 billion from virtual poker.
Yet players have little way of knowing who is watching their bets or where their money is going, Gaul writes Often, owners hide behind multiple layers of limited partnerships, making it difficult to determine who controls the sites or to lodge complaints about cheating.
In the AbsolutePoker and UltimateBet cheating scandals, players decided to investigate the matter themselves after managers and regulators did not respond to their complaints, Gaul reports. "No one would listen to us," Serge Ravitch, a 28-year-old lawyer-turned-poker pro who played a key detective role told the writer.
Gaul describes AB and UB thus: "AbsolutePoker and UltimateBet operate out of a shopping mall in Costa Rica, run their games on computer servers housed on an Indian reservation near Montreal, and are licensed by a Mohawk tribe that has no background in casino gambling and does not answer to federal or provincial regulators."
He goes on to identify Joe Norton's Tokwiro Enterprises as the owner of the two sites, and spends some time recapping the already well known details of the Kahnawake hosting and licensing set-up. But he comments that Norton only admitted buying the sites a year after the deal was closed - and that even some of the most powerful members of his tribe had no idea Norton owned the poker sites.
"I was as surprised as anyone else," Mohawk Grand Chief Michael Delisle told the Washington Post writer. He added that he had not spoken with Norton about the cheating. "I have had no opportunity," he said in an interview, "and honestly I don't think it's any of my business." But it is his tribe's business, Gaul points out.
The Kahnawake collect millions in fees each year by licensing Internet gambling companies and hosting the Web sites on servers inside a high-tech building. Recently, they took a 40 percent stake in another Internet server firm on the Isle of Man, in the Irish Sea called Continent 8 Technologies. They collect more than $1 million a year from that investment, which aims to expand and protect their Internet gambling footprint.
Gaul writes that Norton, a former ironworker, purchased AbsolutePoker and UltimateBet in 2006 and folded them into a newly created holding company, Tokwiro Enterprises ENRG. The company says it is "properly registered as a proprietorship in Canada." However, Norton declined repeated requests to be interviewed for Gaul's article, but has denied he knew about the cheating, the writer claims. Managers at AbsolutePoker and UltimateBet also declined interviews, as did the Kahnawake's licensing and regulatory body, the Kahnawake Gaming Commission.
The Washington Post piece goes on to report the $2 million in fines levied on AB and UB by the Kahnawake Gaming Commission following the cheating scandals, but comments that the apparent victory by the player-detectives quickly soured when the Kahnawake declined to name the cheater in the Absolute Poker debacle or turn his name over to prosecutors.
The piece is critical of the three-member KGC which it claims operates largely in secret, and that it would not disclose the size of its staff. The KGC outsources background checks to a security firm in Horsham, Pa., and uses a small company in Australia to audit its licensee's software, the article reveals.
It called on Frank Catania, former head of the New Jersey Division of Gaming Enforcement, to investigate UltimateBet and reopen the AbsolutePoker probe.
In an interview with the Washington Post, Catania said there was no comparison between New Jersey and the Kahnawake when it came to oversight. "I don't think they have -- they don't have the staff, first of all," he said. "With the New Jersey Gaming Commission, I had about 400 people there. I had CPAs. I had our big budget."
Gaul delves into the origins of Absolute Poker, which he describes as "sketchy". Records and interviews point to a poker aficionado named Scott Tom, who attended the University of Montana in the late 1990s. After graduating, Tom and several partners headed to Costa Rica and started the business, Gaul claims.
Soon, the Internet poker phenomenon gathered momentum, with scores of other sites popping up in Antigua, Costa Rica, Malta, the Isle of Man and other locations. "The Kahnawake alone license 450 sites run by 60 permit holders. By 2007, Internet gambling sites had revenue of $18.4 billion, up from $5.9 billion in 2003, according to Christiansen Capital Advisors, a New York firm that tracks online gambling," the article reports.
Thousands of those players found their way to AbsolutePoker, which has handled more than 300 million hands since it started accepting bets and at its peak accounted for as much as 5 percent of the multibillion-dollar online poker market. Hundreds of customer service employees worked at its office in a mall in San Jose, Costa Rica, and at a smaller office in Panama.
In September 2007 a 21-year-old player named Marco Johnson paid $1 000 to enter a tournament sponsored by AbsolutePoker. Johnson, who uses the screen name "Crazy Marco," reached the final against a player called "Potripper." They played 20 hands and Potripper won them all, collecting $428 520. At first, Johnson shrugged off the loss. But others watching the final games online insisted that they, too, had been cheated. Johnson requested his hand histories for the games.
A few days later, Johnson received a Microsoft Excel spreadsheet containing 65 000 lines of data and a wealth of information on hands played and IP addresses. At first, he set it aside, but it was to become the key for player-detectives to expose the rampant cheating that had been going on.
Around this time the management at AbsolutePoker released the first of several statements denying the cheating allegations, the Washington Post article continues. "While we are continuing with our investigation, we have yet to find any evidence of wrong doing," the first statement said. "A super-user account does not exist in our software," stated the second. "Absolute Poker remains a 100 percent secure place to play."
However, Gaul reports, players continued to attack AbsolutePoker in online forums, complaining that they could not get answers to their questions or tell who owned the site. A few frustrated players decided it was time to start their own investigation. Serge Ravitch was one of them.
Ravitch is a graduate of the University of Michigan Law School who realized he enjoyed playing poker more than filing legal briefs. He offered to help analyse the suspect hand histories. and was joined by Nat Arem, a former auditor in the Philadelphia office of the consulting firm Deloitte & Touche. Like Ravitch, the 26-year-old Arem is good at math and with computers. In 2006, he attended Emory Law School in Atlanta for a semester but dropped out after selling a software program that players use to track the results of poker tournaments. He now lives in Costa Rica, where he develops poker-related businesses.
In the fall of 2007, Arem and Ravitch obtained copies of Marco Johnson's spreadsheet file and started analysing the data. Arem wrote a software program to decode the information. Joined by a handful of other poker detectives, they quickly identified improbable betting patterns for Potripper and several other suspect accounts. The patterns suggested that the players with improbable win rates could somehow see their opponents' face-down, or hole, cards.
"Obviously, if you can see your opponents' hole cards, you have a huge advantage," Ravitch told Gaul. "That helped to explain how the suspect accounts never seemed to lose."
One of the first things the poker detectives noticed was that Potripper was playing exclusively in "nosebleed stakes," games with the biggest pots.
