The Lederer Files Part Three: A summary

Howard LedererToday’s instalment of the Lederer Files focus on the Backlog and events surrounding Black Friday itself

✖Lederer, and other board members, weren’t made aware of discrepancies on August 31 2010 between reported cash and actual cash. He called it “sad” but couldn’t put an exact date on when the company became insolvent. He added: “It’s a mystery to me in terms of the actual timing. I know what hole was there in April but I don’t when that happened.”

✖When talking of the backlog, Lederer stated: “I would agree that a decision to embark on allowing these transactions to go on for what must have been months and to rise into the nine-figure range should have been a board decision and we weren’t brought into that decision process”.

✖Lederer added that it was “completely unacceptable” that the decision was made without his approval.

✖When the finance department warned Ray Bitar of problems on February 1 2011, Ray made “no” indication there was a problem and “he didn’t let on that any of this was going on”, according to Lederer.

✖Lederer called it “horrible” that distributions to shareholders were still being authorized at this late stage. He added that if the board had an “inkling there was this kind of hole in the balance sheet, we would have responded in the same way we tried to after April 15”. If the board had been aware then the “discussions would have switched to ‘we need to find an investor’ and ‘we need to try and fix this problem.’”

✖Bitar first let on that there was a problem on April 7. Lederer had travelled to Dublin for a board meeting while on his way to a USO Poker Tour. After the meetings he went to Bitar’s house where he was told there was a “nine-figure backlog” and the amount he was given was “big…over $100 million”.

✖Lederer reacted by calling Chris Ferguson down and both were shocked, upset and angry that Ray had kept it from them. It felt as though Ray had been keeping it from them for some time and he felt he must now tell them.

✖Looking back, Lederer said: “At first I was more annoyed that decision was made without board approval. It didn’t register that it was a serious financial situation at that stage.”

✖Bitar also told Lederer on April 7 that the backlog had originally been larger and was coming down or “being cleared”.

✖Lederer then left to go on the USO tour and was due back on April 19. He added that he “had no idea what was behind the backlog in terms of another big hole”. Lederer didn’t feel it was “an emergency” and felt like it was “just bad”. If he’d returned on April 19 he would have “gotten to the bottom of the backlog and understood it”. He also thinks he’d have found out about “all the problems” and that “Ray wouldn’t have carried on as CEO”.

✖He found out about Black Friday via email when he was out at a restaurant in Dubai with Huck Seed. It was “obviously a shock” but the names inside the indictments didn’t come out for another 30 minutes.

✖When the indictments were unsealed there was a “board call” which definitely included Ray, Howard and “top management”. Lederer wasn’t sure whether Chris and Rafe Fyrst were on the call.

✖A lot of decisions regarding GeoFencing the US market now had to be made and the thought crossed Lederer’s mind as to whether Bitar “should go”. Lederer admitted that he “didn’t know” when thoughts about the backlog re-entered his thinking.

You can read part one here and part two here as we go through the interview part by part here on