In my “
Poker in American Film and Culture” class we frequently talk about “the culture of poker.” In fact, I have one unit called just that -- “The Culture of Poker” -- in which we take look at how the game was played in certain times and places and consider some of the various characteristics associated with poker as it was played in those contexts.
For example, we go back to the 19th century and read some authors writing then who explain how much cheating was prevalent or part of the “culture” of the game. We then look at later authors showing how in the 20th century the game became relatively less plagued by cardsharps and blacklegs.
We look at places like Las Vegas and California and talk about how poker rooms operated there. We talk about the “masculine culture” of poker and how through much of its history poker has been primarily thought of as a “man’s game.” And so on. We even occasionally talk about the online version of the game and its “culture,” if the schedule permits.
Like a lot of you, I’ve watched the first four half-hour long parts of the PokerNews interview with Howard Lederer in which he has thus far offered a kind of sketchy narrative of how Full Tilt Poker was started, its early days and rapid rise, the move of FTP headquarters to Dublin, the UIGEA and eventual troubles with transactions that led to the massive “backlog,” and Black Friday.
In that narrative, Lederer presents us with what might be called the “culture” of Full Tilt Poker as it evolved from 2004 to 2011. He even uses the word “culture” near the end of Part 1 when he talks about having had “a good influence over company culture” back when FTP was still being run from California, and how he felt as though he lost such influence at some point after the move to Ireland in 2006.
Lederer also makes a few references along the way to the larger “culture” of online poker, particularly in that first part when talking about the early days of FTP.
For example, there’s a moment about halfway through that first video (around the 13-minute mark) when Lederer suggests the idea of keeping segregated accounts -- i.e., keeping operating expenses separate from player balances -- wasn’t really part of the culture of online poker, generally speaking.
This comes up when PokerNews’ Matthew Parvis asks Lederer about the early days of FTP and whether or not there were “multiple bank accounts at this point for operating versus player funds.” To that question, Lederer has a couple of responses.
The first is “I don’t know.” As he repeats frequently throughout the interview, despite being a major owner, a member of the Board of Directors, and (theoretically) a primary decision-maker at FTP, the “Professor” professes ignorance when it comes to financial matters. Indeed, according to his version of the story, it wasn’t until about a week before Black Friday -- when the nine-figure “backlog” was finally spelled out to him -- that he seemed ever to concern himself at all with the financial side of things. (And even then “it didn’t seem like an emergency” to him [!])
Lederer then adds what I find a curious claim. Regarding the idea of segregated accounts, he suggests that not only did FTP not really consider that important, he thinks perhaps the industry as a whole -- i.e., the “culture” of online poker -- was such that keeping operating expenses separate from player funds wasn’t really an issue.
Here’s that second response to the question...
“It just wasn’t... you know, the company was strong, the reports looked good. I just... it just wasn’t, uh, this idea of segregated trust accounts [shakes head “no”]. That... I don’t think it was anywhere even in the industry. I don’t think people were even thinking about it. I just... it just wasn’t anything that was of a real concern, you know?”
More than a little strange, really, that Lederer would characterize the culture of online poker this way. Because it was a concern -- perhaps not a widespread one, but not completely off the radar (as Lederer suggests).
I realize it is easy with hindsight to point out how fundamentally important the idea of keeping player funds separate from operating expenses truly is. And I understand how it may have taken the “culture” of online poker some time to appreciate this importance. But I don’t think it was as alien an idea as Lederer suggests, not by a long shot. And particularly for those online poker sites who were moving to the forefront in terms of popularity and ambition.
In fact, less than a minute before Lederer says this he alludes to PartyPoker -- or, really, PartyGaming (the parent company) -- having gone public (in June 2005). Other poker sites were edging in that direction, too. As Lederer says, they were “hearing rumblings that it’s happening, that companies are starting toward that.”
Obviously Party had to ensure it had its financial situation well under control before making such a move. At that time PokerStars was also apparently looking into the possibility of going public (and thus was also ensuring its accounts were in order). Lederer implies FTP might’ve been considering going public, too, although obviously those ideas weren’t pursued very far if they never inspired the company to begin thinking about the importance of segregating accounts.
There’s a lot more to the story of the rise and fall of Full Tilt Poker, of course. And of Howard Lederer’s role in both. But it’s this weird blind spot about segregating funds (and about paying attention to the books, generally speaking) that seems central to all of it, kind of the fatal flaw that pretty much ensured from the start the story would end badly.
Perhaps the culture of Full Tilt Poker didn’t see it as important back in the early days, but it certainly was not the case it wasn’t a “real concern” to others in the industry. And it wouldn’t be long -- March 2008 -- before FTP was addressing the matter directly. That’s when CEO Ray Bitar drafted a response to customer inquiries stating that “Players’ funds at Full Tilt Poker are kept in several deposit accounts throughout the world, all of which are separate and distinct from our operating accounts.”
That response appears in the superseding indictment against Bitar and Nelson Burtnick, which also explains how such a declaration (repeated ad infinitum by “FTPDoug” and others over the next three-plus years) was in fact never true: “at no time in its history did Full Tilt Poker protect player funds in separate accounts.”
Going back to the “culture of poker,” we might remind ourselves how Full Tilt Poker was an online site conceived and operated by poker players. I wrote a post here almost a year ago called “The Perils of Learning as You Go” that addressed what we already knew well before “The Lederer Files” -- the guys making the decisions at FTP were in way over their heads.
In that post I talked a little about how professional poker players necessarily learn the game by playing it, contrasting that with most other professions which require some sort of study or classroom work or training that isn’t necessarily “on-the-job.” I suggested that perhaps Chris Ferguson, Howard Lederer, and the other poker players who helped launch FTP approached that venture similarly -- they’d learn as they went, make “reads” and react accordingly, etc.
Some of the FTP owners also appear to have been influenced by other elements of the “culture of poker” in their management of the company, too. Things like self-interest, a willingness to take risks, and greed.
Obviously, it didn’t work out. As Lederer variously puts it in the interview, “something weird happened” and “clearly things got out of hand.”
It appears the “Professor” should’ve studied the culture in which he found himself a little more carefully.
Labels: *the rumble, Full Tilt Poker, Howard Lederer, PokerNews
