Florida’s St. Petersburg Times has written a profile of Absolute Poker, tracking the company from its creation in 2002 by four frat brothers at the University of Montana at Missoula to the events of Black Friday. Not much is known about how AP is reacting internally to Black Friday, but perhaps we should consider the company’s reaction to the passage of the UIGEA. A former member of AP’s board told the Times that in 2006, “everyone was running with their hair on fire.” In a bid to keep their names off US no-fly lists, around 80% of US citizens working for AP in Costa Rica chose to come home. Those who stayed behind did so with the understanding that this might make it impossible for them to ever return home.
Post-UIGEA, AP’s US-based shareholders were looking for a way to legally protect themselves – not to mention their investment – from the clutches of US law enforcement. So the company sold its ‘toxic’ poker business to Tokwiro Enterprises, while maintaining operations in Costa Rica. The deal with Tokwiro – owned by Joe Norton, former grand chief of the Kahnawake Mohawks – worked well enough that the shareholders later sold their software operations to Tokwiro in exchange for notes worth $250m. The shareholders then set up a tax-favorable structure with companies based in Norway and Portugal to return the 12% annual interest on these notes.
Following the AP/UB cheating scandals of 2007-08, several powerful shareholders grew concerned that the Kahnawake regulators might shut them down. Working through their Norwegian company, these shareholders quietly made copies of the software and set up a duplicate operation in Panama. Then they shifted the poker business from Tokwiro to Antigua-based Blanca Games.
In 2009, other shareholders complained of vanishing dividends. They were granted a peek at AP’s books, which showed a $33.7m loss in 2009. The shareholders wanted to know why the company spent $10m to use its own software and a further $18m on unknown ‘consultants.’ They were also surprised to learn that for every dollar earned from US players, AP spent 29 cents disguising that dollar’s journey from the eyes of US authorities. Things got worse when Norwegian authorities presented them with a surprise multimillion tax bill on that $250m worth of notes. Weary shareholders decided to sell off the company. After Wynn Resorts announced its tentative partnership with PokerStars, the shareholders felt they were in for a major windfall. Then Black Friday hit, and that was that.
Of the original four frat brothers, only Scott Tom was indicted. Retired St. Petersburg dentist Richard Borgner, one of the original shareholders, says he once believed that “as long as no one got greedy this is something that’s a ‘can’t miss.’ ” And now? “I hope the company survives. I’m not sure it can at this stage.”