Poker site cheating plot a high-stakes whodunit

‘Unauthorized software code’
Tokwiro issued an “interim statement” on March 6 stating that it had determined that NioNio’s results were indeed “abnormal.” Then, on May 29 — nearly five months after the first poker forum post —the company acknowledged that NioNio and other player accounts “did in fact have an unfair advantage” obtained through “unauthorized software code that allowed the perpetrators to obtain hole card information during live play.”

The company blamed the intrusion on “individuals … (who) worked for the previous ownership of UltimateBet prior to the sale of the business to Tokwiro in October 2006.”

Tokwiro’s chief operating officer, Paul Leggett, in a Two Plus Two Poker podcast on June 2, said that the cheaters were able to evade UltimateBet's anti-fraud protections by “setting up these accounts so they appeared as VIP poker professionals. Because these players had this kind of status, they were able to get fast withdrawals and basically bypass our security.” He also said that the company was “pursuing our options, both criminal and civil.”

(Tokwiro spokeswoman Anna Molley told msnbc.com that Leggett had stopped giving interviews at the request of the Kahnawake Gaming Commission pending completion of an independent investigation.)

The explanation is similar to that given by Tokwiro after the Absolute Poker cheating scandal, which it blamed on a “high-ranking, trusted consultant … whose position gave him extraordinary access to certain security systems.” The alleged cheater in that case has never been publicly identified because Tokwiro, in a private settlement, agreed to withhold his or her identity. The site did repay the players who lost money, however.

By blaming employees of a prior owner, Tokwiro might have resolved the mystery had UltimateBet not been the rubber ball in an international shell game.

A murky corporate pedigree
Published accounts indicate that the poker software used by UltimateBet was developed in the late 1990s by ieLogic, a Portland, Ore., company. After that, things quickly become murky.

An undated and unbylined article on the TotalGambler.com Web site, titled “The history of online poker,” alleges that ieLogic founders Greg Pierson and Jon Karl created the UltimateBet site at the end of 2000, along with “some secretive high stakes poker players.”  The article did not identify the players, but it stated that Russ Hamilton, winner of the 1994 World Series of Poker Main Event and a well-known Las Vegas gambler, was employed as a consultant and began recruiting some big-name poker players, including Hellmuth, to promote the site.

An UltimateBet spokeswoman boasted about the presence of the poker pros in a May 2001 interview with winneronline.com, saying, "UltimateBet is lucky to have so many world poker champions choose to be a part of our project. ... (They) have helped us develop a site that is true to the game."

Barry Greenstein, a respected professional poker player, has publicly stated that some of the players involved in the development of the site were given an ownership interest as compensation. “They are all very concerned that with these bad things happening, they’re not going to get their money,” he said in an interview on Poker Road Radio on July 16.

IeLogic never acknowledged any ownership interest in UltimateBet, saying only that it licensed its “multiplayer online games” software to the site. Then the company sought to disassociate itself from the Internet gambling business entirely by selling its gambling software to a newly incorporated Canadian company, Excapsa Software Inc., in the spring of 2004.

Pierson and Karl held onto the other portion of ieLogic’s business — “a system for predicting online fraud” — and changed the name of their company to Iovation, according to a January 2005 article in the Portland Business Journal, which first reported the sale of the gambling software.

But it is unclear to whom —and even whether — the software business was sold. 

Excapsa Software, incorporated in April 2004 in British Columbia, eventually went public, making an initial stock offering on the London Stock Exchange’s Alternate Investment Market in Feb. 16, 2006, that gave it a market capitalization of approximately $393 million. Documents filed in connection with the offering listed nearly 40 percent of the shares as being held by insiders — CEO Jim Ryan and five irrevocable trusts that provided no clue as to the identity of the beneficiaries. (A spokesman for Ryan, who is now CEO of Party Gaming, operator of the Party Poker Web site, declined msnbc.com’s request for an interview, saying questions should be directed to Excapsa.)

In an earnings announcement on Aug. 16, 2006, Excapsa stated that it had a 20-year license agreement with UltimateBet’s owner, which it identified as eWorld Holdings Ltd. of Antigua.

Lines not clearly drawn
But the lines between ieLogic, Iovation, Excapsa and eWorld Holdings were not always clearly drawn.

When UltimateBet issued a news  release on July 25, 2002, announcing a joint venture with another poker site, it for the first time identified eWorld Holdings as the owner of the site and listed Jon Karl, co-founder of ieLogic, as the person to contact for further information.

IeLogic also was the first company to register the UltimateBet trademark with the U.S. Patent  Office in June 2000. A little more than a year later, the company abandoned the mark and it was re-registered by eWorld Holdings.

And Melissa Gaddis, identified as the public relations manager at ieLogic in a May 2001 article on winneronline.com, also is identified in papers filed in connection with Excapsa’s liquidation proceedings in Toronto as a “director of Excapsa since November 2006” … and a “beneficial shareholder.”

IeLogic co-founders Pierson and Karl, and other officials at Iovation, did not respond to msnbc.com’s repeated phone calls seeking comment and refused to meet with a reporter who visited the company’s Portland headquarters. Gaddis did not return a phone call to her home.

Excapsa’s run as a public company was short-lived, as it sold all its assets to Blast-Off Ltd., a privately owned Excapsa licensee based in Malta, on Oct. 12, 2006, and was delisted from the AIM exchange.  Blast-Off Ltd., had previously been listed in filings as an Excapsa license holder for Elimination Blackjack, a tournament version of the popular card game invented by Hamilton, the ieLogic consultant.

U.S. legislation prompted sale
The sudden sale of Excapsa’s assets for $130 million, with $120 million deferred, was prompted by President Bush’s looming signature of the so-called Safe Port Act, which contained a provision barring U.S. banks and other financial institutions from doing business with Internet gambling operators. That effectively put to rest the argument that companies could legally provide Internet gambling to Americans because federal law on the matter was ambiguous, and heightened the legal risks faced by owners of gambling Web sites.

Nearly a year later, Tokwiro claimed ownership of both Absolute Poker and UltimateBet. It later said it had acquired UltimateBet in October 2006 — the month Excapsa announced the sale of its gambling software to Blast-Off Ltd. — but it has never explained how or under what terms it had acquired the site.

Krakower, the court-appointed liquidator overseeing Excapsa’s bid to cease to exist as a corporate entity, said that Blast-Off and Tokwiro “are somewhat one in the same,”  but added, “Blast-Off … that’s the key name.”

The tangled corporate trail has persuaded some players that Tokwiro is a false front created to obscure the true ownership of both UltimateBet and Absolute Poker.

“(Norton) may be the plurality owner, he may be the majority owner, but there’s no way he owns 100 percent,” Arem said of the former Kahnawake Mohawk grand chief, who did not respond to requests for an interview.

The ownership question could be cleared up at the conclusion of an outside investigation of the UltimateBet cheating ordered by the Kahnawake Gaming Commission. On July 27, the KGC announced it had asked Frank Catania, a former New Jersey state gaming regulator, to conduct “a full forensic audit/investigation” of Tokwiro to ensure that UltimateBet’s games are fair and anyone connected to the alleged cheating ring is removed from the company.

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