Part 1
1. Before we get to the heart of what I’m sure everyone is dying to know, why have you decided to speak publicly here today with Pokernews? Why has it taken you so long at this point to acknowledge the problems that have prevented Full Tilt customers from getting the money owed to them off of the site?
a. Well, first of all I want to thank you for having me, I look forward to this opportunity. I just think now is the time for the poker public to get some answers to questions they deserve to have answered. For them to get some facts that have obviously not been shared with them over the last 15 months. There were, as we’ll discuss going forward, very good reasons, why the company and the principals were not discussing the issues in public during the 15 months. Now that the deal has been completed, I think this is the time.
b. I would like to say one thing though before we get to the interview, I am one person, in what was a very complicated situation, so I don’t have all the answers, and I don’t have all the facts. I’m going to try my best here to offer the facts that I know.
The Birth of Full Tilt Poker
Howard commentary: Ray and Chris met right around 2000, maybe in 99. Chris did some day trading, Ray managed a day trading office in LA, they were very close friends. Chris understood how important it was to not just bring an investor not just with a checkbook, but that there would be value to the company if you brought in strategic investors, people that in his opinion that would become poker celebrities, that sort of mythical creature that maybe didn’t even exist yet, but that he could see was coming.
2. What were your first impressions of Ray Bitar?
a. Not, you know, he was Chris’ friend, I met him you know, in that capacity, we didn’t hang out I didn’t know him that well so I can’t say I had much of an impression either way. I didn’t know him either way. Certainly by the time I invested, Phil Ivey was already involved, he was invested, Rafe Furst, Phil Gordon, Perry Friedman, who was actually doing some programming for the site, I think he was working full time, and Andy Bloch. The idea was at this early stage only Ray’s money from the strategic investors, they were the only one’s allowed to invest in the company on September 4th, I was allowed to increase my stake, Ivey was allowed to increase his stake, Eric and John came in, I think on September 4th the company had 700k. With that money, the company was to try and move as far along in the development process of the software as it could get, just on that money before it saw any more.
3. Did players, people might make the right or wrong assumption that team full tilt were the original investors? With the members of team full tilt that were in fact investors, did they receive compensation as player reps or was it part of the investment deal to represent the site?
a. There was certainly, it was intended that 5% of company profits would be set-aside for the key endorsers, sort of a separate pool to recognize that they were something extra. The major new investors got a discount to buying-in, and they would be able to buy a share. Again, attract and certainly in the early years economically promote the company.
b. The company was formed as a California LLC, there are members (another name for owners), they own shares, I’m not share if LLC can have class A or, everyone has shares, very clearly it was controlled by all the people who owned the company. Anything about the company could be changed by a majority vote. There was at least one place were 2/3 vote was required, to remove a board member abruptly, during a duly elected term, board members were supposed to be elected to 1 year terms. But everywhere else, electing boards on an annual basis, that was by majority vote, anything about the operating agreement itself, if there was anything about how the company was structured, duties, it took a simple majority vote.
c. The original elected board:
i. Ray Bitar
ii. Chris Ferguson
iii. Perry Friedman
iv. Phil Ivey
v. Howard Lederer
4. “Early on it was clear it’d be hard to get Ivey on the phone for a meeting, so he stepped down.” Rafe Furst take a board seat the next year, and Perry Friedman stepped down before 2006. Although the operating agreement called for a new board to be elected each year, elections did not take place due to a lack of shareholder interest in taking board seats. – notes
5. Did you receive a salary specific for your role as manager or President of tiltware?
a. I think for the first couple of years I didn’t receive a salary, there was a promise of equity if the company did well. We saw our role in the company as an advisory board, we are not professional board members, we are not professionals or CEOs like the board of Apple, our job was to get on the phone with management, discuss the company, there was no expectation the board would be operating day-to-day. There was nowhere in the operating mandate, that the board should, ever conduct outside independent forensic audit of financial figures that management provided.
6. Poker is a game based around cash, objective of one player is to win his opponent’s money. The player sitting at the table, the cash is there, there is security, starting an online poker room, the idea must have been prominent of the company finances, the safety of player deposits, the industry is in its infancy, the idea of what we know now may not have existed. Talk to me about the early financial discussion, the processes, the people hired to license and run the financial side.
a. First was to get a license, so we got the first license from Kawanakhe. Ray was CEO so he was the one who really dealt with all the licensing. It was a lot of work, anytime you’re going through a licensing process. It was something he and the company counsel handled. We haven’t even launched yet, until July of 2004 (right after World Series). We had brought in some new members into the LLC who had invested and raised more money. When we launched, we had over 2 million in cash, you know to launch marketing, to start development team, maybe 2.5 million. CFO hired was Alan, he was really good, I liked him. There were, you know, Kawanakhe was regulating the site, there was certainly no talk of distribution or anything like that. I think Alan would provide financial statements on occasion the board would go over with Ray. They hadn’t been seizures, this was 2004, the company was starting to go public, (2005), rumblings that the company is moving toward that. Didn’t seem like that there were going to be these types of issues, seizures.
7. Were their multiple bank accounts, how were player funds held in these first initial stages? Player deposit coming through, do you recall procedure, the break down
a. Nope. I just don’t know. It just wasn’t, company was strong, reports looked good, there was not this idea of segregated trust accounts, it just wasn’t anything of a real concern.
8. How vested did it seem the other shareholders were in the operations, the problems, any potential concerns, did anyone kind of have reason or bring in problems that they wanted to be included or be heard?
a. There was always, you know the company, the members didn’t always get along, certainly there was a group of owners that didn’t like Ray, didn’t think he was doing a good job, would have liked to see him removed, there was never a serious attempt to do this at the member level, which was certainly possible. We would get emails from members about strategy, there’s this great new bonus strategy at this other site, we were getting suggestions, was not smooth sailing of member relations.
9. Story published by wicked chops, where contacted number of full tilt employees, one of the stories was centered around John Juanda bringing concerns of customer service to both you and Ray. Former business associate said that and I quote “John you can’t tell us how to run this company, you are an owner and nothing else, you don’t run the company, so just **** off”. Conversation ray and you had with Juanda, but no attribution. Any recollections of this encounter?
a. Well I mean, John was a vocal owner in the anti-Ray Bitar camp, so I have no reason to not believe that conversation happened. One conversation long time ago, I have no recollection, certainly John Juanda was not a Ray Bitar fan.
10. You are an owner and nothing else, there is something about the way that was presented?
a. Well there is also an implied, if you want to be an owner, toss Ray Bitar out by getting a coalition of 51%. Owners had one responsibility, to elect a board, if they didn’t like the direction of the company or who was running the company, they had a remedy.
11. Speaking of ray, within the same article, some of the full till employees associates say that (Ray was) not experienced, no leadership aura, basically illiterate, did you feel that ray was qualified to be the ceo of full tilt poker
a. Qualified, not in any traditional sense, he had passion for the company, he didn’t have an MBA degree certainly not, from education level bringing experience, didn’t bring education, but he was also an owner, very invested in the company, brought in to run the company by Chris, Chris’ friend, and in a lot of areas, he was doing a good job. A lot of people didn’t like him, a lot of people liked him, not hard to write a story like that
12. You talked about John and the coalition that didn’t like Ray, source that Perry was raising some red flags that the company was getting too big and too complex and that at the end of the year meeting in 2006, and called for a vote for to remove Bitar. Was there ever a vote to remove Ray as CEO?
a. Its certainly accurate that Perry more than any other member did not get along with Ray, he had left the company as his role as a programmer, due to his clashes with Ray, soon thereafter he resigned, certainly accurate that he wanted some members removed.
Shareholder Distributions
1. 443, 865, 529,89. That’s a pretty staggering gross total number. For the folks who don’t know what that means, that’s the whole number reported by DOJ of distribution to shareholders. Where the inception of the shareholder distribution talk, the first talk of distributing profits to shareholders? First person to request distribution.
a. Membership was very patient initially, and, I think there may have been discussions, I am speculating now, maybe 2006 maybe 2005, the company was growing and re-investing, so I don’t think we ever really got close to distributions until they got started which was spring of 2007 april I believe, so I don’t know if it was any one person’s particular idea, the company had a lot of excess cash, a good 20-30 million in excess cash, that it did not need, good member discussion, board determined it was time to consider and talk to members about distributions. I can tell you that there is one person amongst the membership who was always very anti-distributions, never wanted them in the first place, always argued that every single distribution made would weaken the company, and that was Chris Ferguson. He didn’t use for or care for the money. He is the opposite of greedy. Once the money started rolling in, I remember visiting him in his house, 1500 sq ft house in a regular vegas neighborhood, wasn’t a big spender that way, ultimately his African charity, he thought distributions were a really bad idea, in hindsight, he was absolutely right.
2. Was there a clear distinction and a need to be careful w operating capital, the accounts of distribution, accounts of salary, accounts that player deposits are being held in? Is there a conversation or methodology for differentiating between accounts?
a. I would say no. again, it wasn’t my area, I am not a financial guy, I am not an accountant. I was shown a general balance sheet, such that I was very confident that we had cash excess of customer deposits when distributions were being paid. I don’t thing regulator was demanding that, poker community wasn’t demanding that, company wasn’t, I know looking back on it it sounds bad, but from every owner down, people were pushing for distributions, but no owner would have wanted distributions if the cash was in excess of player balances. Completely unfair to characterize owner’s as, you know, greedy, just wanted a money grab and to take the player’s money, absolutely not true.
3. As far as you knew, all shareholders were informed that their distributions weren’t coming from accounts that held player fund
a. No. I wouldn’t say at any time in the company’s history, that these were the player accounts, this is the processing account, this is the account, if these accounts had more money than the player accounts it was okay. Regulator was okay for it, it seemed reasonable to the owners and the board.
Full Tilt Poker Moves to Dublin, Ireland
“The decision to move had nothing to do with potential legislation, and everything to do with our intention to float on the London exchange somewhere…”
1. Once the company moves to Dublin, and once you mention that you spend a significant time there, is there any way that Ray being in Dublin, without you, not in the same time zone as you in Vegas. Thoughts of isolating him in running the company
a. When we were 100 strong in LA, I was there 60-70% of the time, I had a good influence of company culture, I lost control of that in Dublin. I wasn’t happy about it, I couldn’t have prevented it, because when you move to a new country, you have to abide by the morays of that society in terms of how hard you can push certain employees, the hours you can expect, your management style. How employees are hired and fired. Something weird happened, I don’t think that I have ever had this conversation, but at same point an employee said I had to talk to you. Boy, I really think there are some problems here, there are frictions between US and Irish, you know, I just hadn’t seen any it, maybe I was losing touch, maybe it was too big to me, in terms of number of employees, I was so laser-focused on software and marketing, that was an overwhelming amount of time, whole another part of the company that was now becoming really hard work and that was sort of game and promotion part, internal marketing, that features you offer and customers want, promotions, like Iron man, coming up with promotions like that that people enjoy, I was so wrapped up in stuff like that, I lost touch, I lost total sense of the whole thing. On the other hand, Ray had a pretty good handle on it.