The Lederer Files Part Five: The Summary

Howard Lederer✖Howard Lederer was asked why the company continued accepting depositS from international customers – up to approximately $8.9million per week. He was still unable to give a straight answer to this question and just admitted they had “thought about it a lot” before explaining they “got lawyers on the phone” that were bankruptcy experts and asked them whether they were bankrupt. The answer was no but there “was clearly a big hole” that needed plugging and without a plan on that front they would “end up bankrupt”

✖In terms of keeping the company operating he admitted he thought it was “Alderney’s job to determine whether a company should continue operating”. Howard’s job was to “preserve the assets”, “find a buyer” and “get our customers paid”.

A deal with PokerStars was “potentially in the mix” as early as June 2011 according to a text message sent to Chris Ferguson. Ray Bitar “didn’t think it was a good idea”, Full Tilt Poker’s lawyers “had a lot of reservations”. When asked if it was a decision being driven by Bitar’s ego, Lederer admitted he didn’t know the answer to that question.

“Devastating” was how Phil Ivey suing the company was described by Lederer. The issue of Phil trying to break free from the ‘Golden Handcuffs’ was one that had been “festering for some time”.

✖The ‘Golden Handcuffs’ were put on strategic investors that put money in at the very start, of which Ivey was one. It meant you were bound to company and had to endorse it publicly as a result. If you ever wanted to leave you had to give up the shares. Until then you were bound to the company.

✖Phil wanted to approach other companies to represent him whilst at the same time keep his shares in FTP. When it was brought up in the spring of 2011 Lederer thought it was “horrific that he was even talking about it”.

✖On a call with Ivey and his representatives, Lederer said: “The company is in peril right now. The assets will get our customers paid and you’re asking us to weaken our assets. You’re asking for something that has no value to you”.

✖Lederer added that he thought there was “little chance” he could represent anyone else in the online gaming industry prior to the issues at Full Tilt being resolved. Lederer added: “He was the face of Full Tilt Poker. Who is going to hire Phil Ivey? There was no way we would allow him to intentionally devalue the company at this time. I also explained that if and when a deal happened that he could reassess. That’s the nature of the ‘Golden Handcuffs’”.

✖When asked about poker players commending Ivey at this point, the questioning struck a visible nerve with Howard. He said that it was “outrageous” and he took “offence” to anyone that thought it was the case. Lederer said: “He wasn’t speaking out for anyone except himself. Period. He had a moral obligation to the poker community to do everything he could to at the very least not damage the company that he had so greatly profited from.”

✖Ivey’s lawsuit never identified what he was going to do with the $150million and he knew they couldn’t give him it, according to Lederer. He summed it up by calling the suit “absurd”.

✖Lederer added: “Clearly the lawsuit hastened the company’s demise as a going concern and greatly complicated the company’s ability to affect a deal. Did it prevent a deal before June 29th – I don’t know.”

He did add that he wasn’t sure that Ivey ever cost them anything – in terms of deals being signed.

✖In subsequent members calls there were people that wanted Ray removed but Howard “disagreed”.

From April 15until the company was sold Bitar was paid a salary. Lederer urged him not to but had no control over what Pocket Kings did.

✖Next up there was a group led by Phil Gordon and attorneys that were certain the board played a part in the shortfall and approved distributions. Lederer described it as “ridiculous”.

✖It resulted in a member-wide meeting called by Gordon’s group where a member written consent was delivered. It called for the four board members and Ray to be removed as CEO. It got the majority needed and would have seen a board made up of Gordon, Ivey and Andy Bloch. At the same time JK Scheinberg turned up in Dublin and caused confusion by announcing that he was CEO – he was supposed to wait ten days.

Lederer was “horrified” that the new board would pay themselves $20,000 per month, each, to perform the job. The original board hadn’t paid themselves for the privilege. When Lederer asked why they said they needed to “incentivize people to take board seats”.

✖He admitted his greatest mistake after Black Friday was not “putting a stop to the silliness”. Howard admitted he could have “killed that board in five minutes” and conversed with people that said they were just going along with it as they thought it was the right thing to do. Lederer added: “I think our customers deserved more fight from me. First off it made no sense Ivey being on the board after the recent suit. Gordon had shown he was ‘out for blood’. Bloch was a compromise or they wouldn’t have got over 50 percent.”

✖It began to unravel soon after. Their choice of CEO, JK Scheinberg, asked for a one-way ticket home from Dublin.

✖Lederer asked their main regulatory attorney to lay out all the concerns they had if Bitar was removed abruptly. There were “12-15 bullet points” among them “losing the French licence and never getting it back”, ‘the AGCC had to be informed before he’s removed and another CEO be lined up immediately”, and a number of companies Ray “was sole beneficiary of” had to have a smooth transition to someone new.

Andy Bloch then said he “didn’t think it was a good idea” and was out.

✖Howard then said they were “in trouble” and the interviewer laughed. Lederer immediately amended it to “disastrous territory” that they were in. It was because the three current board members would go, the new members were unlikely to take up those seats and, as Lederer described it, they would “literally have been a ghost ship”.

✖Bloch was asked under what circumstances he’d take his board seat. The list of things included creating an Escrow account with $30milion from all current members to show commitment as well as crossing all the points off the Bitar list above. Then the board could take control. Needless to say it never happened.

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