Op-Ed: An Open Letter to Howard Lederer

PokerStrategy.com’s Matt Kaufman writes an open letter to Howard Lederer regarding Lederer’s interview with PokerNews.

Hello Howard,

First of all, I would like to applaud you for your courage in sitting with Matt Parvis of PokerNews for such a lengthy interview. The poker community deserves to know what happened at Full Tilt, and hearing your side of the story truly helps with that.

There are obviously widely varying opinions of your character, but there is one trait you possess which is undeniable – intelligence. Everyone from your supporters to your biggest critics agree that you are an exceptionally intelligent person.

While intelligence is a positive attribute, in the situation you currently find yourself in I do not believe it works in your favor. Specifically, your IQ makes it impossible for me to believe parts of the story you told in the interview.

In November 2010, Full Tilt began crediting player accounts with funds regardless of whether or not those funds were actually being received. At the point in time that the company began to do this, it was likely already underwater due mostly to excessive distributions to owners.

The concept that it was possible for the company’s cash to not cover player accounts was certainly on your mind before the backlog began – in response to a player email in the spring of 2008, you had the company’s accounting department produce a document on a regular basis which showed that the company’s cash on hand exceeded player liabilities.

So, what happened to those reports? They simply disappeared when the company began its plunge into insolvency?

It is ludicrous to think that there were lower-level employees who were co-conspirators alongside Ray and Gil in a plot to intentionally fake this information for you. Therefore, it must have been available - at least for you to request it. When did you really find out about the company’s problems?

On the topic of the backlog, you mention that a small number of people at some point told you that they hadn’t been charged for their deposits, and you essentially dismissed these cases as anomalies. It is enormously difficult to believe that you really reacted that way.

I believe that any businessperson of your level of intelligence would heavily investigate even just one instance of this occurring out of fear that some company process was broken and that a flood of additional instances could soon take place. After all, you already showed earlier in the interview that a single customer’s question COULD prompt you to think about the business in a larger sense.

Next, let’s jump to the first communication between Full Tilt and the public after Black Friday. The public statement assured players that their funds were safe, and you now claim that at the time you were not aware that it was not a true statement. Meanwhile, according to your own story you learned about the backlog on April 7th.

How was it possible that you thought everyone’s money was safe? At the VERY least you had to have been heavily questioning the safety of everyone’s funds at this point in time. Are we to believe that you temporarily forgot about the existence of a 9-figure backlog?

Frankly, it doesn’t really matter that you had no specific understanding of the impact of the backlog on Full Tilt’s cash coverage. It still had to be a significant amount. Your own guess was that $60 million would impact the cash coverage. Even if it WERE just $60 million, that is obviously still more than enough to impact the overall safety of player balances.

I have very little to say about your story after Black Friday. It is easy to believe that you worked hard to try and clean up the mess the company was in – after all, who would work harder than those with the most to lose if things weren’t made right? Thanks for that, by the way.

I don’t, however, believe that you could have been surprised by the state of the company in April 2011. You regularly saw balance sheets, you heard the customer stories about deposits, you knew the enormous sums of money that the owners were receiving, and you knew that the financial workings of a massive company were a secret being kept even from the company’s owners.

Howard – I simply think you’re too smart not to have connected the dots.

Sincerely,
Matt Kaufman
PokerStrategy.com