60 Minutes today revealed a large scale cheating scandal that saw more than twenty million dollars unfairly taken from players by other players. This has not only cast a dark shadow on the industry, but it also has put fear into the online poker player's heart.
This is not the case when it comes to playing at online casinos. Online casinos are set to the same standards as Las Vegas and Atlantic City casinos as far as their mechanical games are concerned. In Las Vegas slot machines are set to payout an average of 83-88 percent of the time, while online casinos have much higher standards.
Some online casinos even set their slot machine payout percentages to as high as
97%. What this means is that for every dollar spent a slot machine will pay back 97 cents. In Las Vegas, for every dollar spent a machine will pay back 83 cents. The reason for this is because online casinos have no other form of entertainment to keep their players coming back. Therefore, they let players win more often, hoping this form of excitement will replace the excitement generated by live shows, restaurants, and socializing.
This is not something the online poker world has to its advantage. The house also benefits the more a person plays, but they only can hope that players win against other players so that they come back to play more. With cheaters now dominating the industry, or at least scaring the majority of the industry, poker players are less likely to come back for more. After all, who wants to come back to a game where they always lose?
So with the online poker cheating scandal breaking to the mainstream public on 60 Minutes, online poker sites might see a great decline in game play. However, the online casino industry, which offers slots, blackjack, video poker, and other online casino games, does not have to fear the same type situation occurring with them.
Tuesday, December 02, 2008
Monday, December 01, 2008
Kahnawake Mohawks Online Gambling Chief Norton Thrust By "60 Minutes" Cheating Segment Into Bad Light
An online poker cheating scandal has thrust the most unlikeliest of men into the spotlight. By most accounts, Grand Chief of the Kahnawake Mohawks Joe Norton is a good honest man and he is also industrious.
A Washington Post article explains just how industrious:
While in his twenties, Norton worked as an ironworker helping to build the World Trade Center in New York City. At the age of 28 he was elected to the Mohawk Council of Kahnawake, the governing body for the 8,000-member tribe located minutes from Montreal. Two years later, Norton took over as grand chief, a position he held for more than two decades.
For years, the Kahnawake had relied on cigarette sales and payments from the federal government to get by. Under Norton, they began to look at gambling as a way to lift up the tribe's economic fortunes. In the mid-1990s, Norton promoted an effort to open a land-based casino on the reservation, but the tribe voted it down. A second referendum was also rejected.
Norton and the Kahnawake shifted their focus to Internet gambling. Internet gambling may be great for the Mohawks, but this week's big revenue generator is turning into a massive headache for Norton. He's at the center of a firestorm involving a high profile insider cheating scandal at two of the online poker rooms he's in charge of overseeing. And Norton found himself profiled on CBS' 60 Minutes Sunday night. By the looks of things, the segment wasn't entirely flattering.
From the 60 Minutes promo:
"He was raising, just really, really bad hands against very good hands. He seemed to play crazy," says Todd Witteles, a computer scientist turned poker player who believed he was losing too much to the same person. "It seemed like he was giving his money away. Except the only thing was, he wasn't losing. He was playing in a style that was sure to lose, but he was killing the game day after day," Witteles, who played a key detective role, remembers.
Michael Josem, a player and a computer security expert, plotted the odds of such consistent success. "We did the mathematical analysis to find that they were winning at about 15 standard deviations above the mean...approximately equivalent to winning a one-in-a-million jackpot six consecutive times." The cheating netted more than $20 million.
According to the Washington Post, Norton played an instrumental role in helping to set up Mohawk Internet Technologies (MIT), which collects millions in fees annually online gambling licensees who must maintain their sites on the Kahnawake servers for a minimum of three years. In 2006, he bought Absolute Poker and UltimateBet, though he didn't announce the purchases until a year later. These were the two firms that are profiled on 60 Minutes Sunday night. And his purchase of the company occurred prior to the "cheating scandal" that took place at those two sites.
Paul Liggett, COO of Absolute Poker and Ultimate Bet, insists that Norton is in no way the bad guy in all of this. "Joe Norton completely restructured the management team as soon he became aware that cheating had occurred on the AP site," said Liggett, who was appointed by Norton. "The new team brought in a Compliance Officer and two Security Managers, and it established risk assessment procedures and ongoing internal audits."
Norton and his crew have been working effortlessly to ensure Absolute Poker and UltimateBet ridded all past improprieties. They've even taken a chapter from the old ValuJet handbook - changing the company's name.
ValuJet was forced to do so following a series of incidents involving its commercial aircrafts that culminated in a deadly crash in 1996 over the Florida Everglades. They too embraced a new management team and later changed their name to AirTran, which has enjoyed great success over the past 10 plus years. And Norton hopes to the same will happen with his revamped company, now calling itself Cereus.
Norton might be wanting to change his name following the 60 Minutes airing. The irony in all of this being that Norton and the Kahnawakes have helped legitimize the online gambling industry. Unfortunately, they've also been thrust into the role of cleaning up the messes caused by others.
"60 Minutes" Segment Seemed To Promote Online Gaming Regulation:
Although one falsehood was reported in the 60 Minutes story of the online poker cheating scandal, in general, it should lead speculators to desire regulation in the United States. Currently, online poker is not illegal in the United States, although the 60 Minutes story said it was on three separate occasions.
The story has been highly anticipated by the online gaming industry since it was revealed that they would be airing the story after Sunday's NFL football games. Many were worried that it would lead the public to view online gambling as an evil that should be banned, but the story did not bend that way. Nor did it bend necessarily towards the need for legalization and regulation.
Sunday, November 30, 2008
Cheating Continues To Plague Online Gambling
Cheating plagues online gambling sites
Whenever Todd Witteles signed on to an Internet poker site, the first thing he did was look around for inexperienced players. One day in August 2007, the Las Vegas poker pro thought he had found an easy mark on AbsolutePoker.com.
A newcomer using the name "Greycat" was making unusually big bets off weak hands. "He seemed like a bad player who had just been getting incredibly lucky," Witteles recalled. "When you see someone like Greycat, you stop everything you're doing to play."
But in a series of one-on-one games, Witteles quickly found himself down $15,000. Worse, Greycat began taunting him. Soon, some of Witteles' online poker friends began wondering publicly whether Greycat was cheating. It was almost as though he could see Witteles' hole cards.
It turned out that was exactly what Greycat was doing. After months of pressure from a small group of players who took it upon themselves to investigate the claims, AbsolutePoker was forced to admit that a cheater had cracked its software, and it refunded $1.6 million to Witteles and dozens of other players.
It appeared to be a huge victory for the players and the self-policing nature of the Internet. Yet just weeks later, rumors of a new scandal rocked the world of online poker, this time at AbsolutePoker's sister site, UltimateBet.com. The stakes were dramatically higher: more than $20 million cheated from players over four years. The alleged culprits included a former world poker champion and UltimateBet employees who had hacked into the site.
Even as Internet gambling grows in popularity and profits, with millions of players and billions of bets, the two biggest cheating scandals in online gambling are raising fresh questions about the honesty and security of a freewheeling industry that operates outside of U.S. law.
Unlike brick-and-mortar casinos that undergo rigorous security checks, many Internet gambling sites operate in a shadowy world of little regulation and even less enforcement, a joint investigation by The Washington Post and CBS's "60 Minutes" has found. Dozens of these sites are located in countries with no reporting requirements. The licensing agencies there essentially operate as pay-as-you-go boutiques, generating millions of dollars in fees while showing little interest in policing rogue sites.
As it has given birth to Amazon.com, eBay and scores of other 21st-century businesses, the Internet has also spawned its own gambling boom, with estimated revenue more than tripling over five years, to $18 billion annually, including about $4 billion from virtual poker.
Millions of the bets originate in the United States, where online poker and gambling sites are banned, forcing players to reach out across the Internet like modern-day bootleggers. Yet players have little way of knowing who is watching their bets or where their money is going. Often, owners hide behind multiple layers of limited partnerships, making it difficult to determine who controls the sites or to lodge complaints about cheating.
In the AbsolutePoker and UltimateBet cheating scandals, players decided to investigate the matter themselves after managers and regulators did not respond to their complaints. "No one would listen to us," said Serge Ravitch, a 28-year-old lawyer-turned-poker pro who played a key detective role.
AbsolutePoker and UltimateBet operate out of a shopping mall in Costa Rica, run their games on computer servers housed on an Indian reservation near Montreal, and are licensed by a Mohawk tribe that has no background in casino gambling and does not answer to federal or provincial regulators.
Joseph Tokwiro Norton, who owns both Web sites, is the former grand chief of the Mohawk tribe. He was instrumental in setting up the licensing agency and a highly profitable companion business that owns the server farm. Yet until he issued a news release in October 2007, even some of the most powerful members of his tribe had no idea Norton owned the poker sites.
"I was as surprised as anyone else," said Michael Delisle, the current grand chief of the Mohawk Council of Kahnawake. He added that he had not spoken with Norton about the cheating. "I have had no opportunity," he said in an interview, "and honestly I don't think it's any of my business."
The Kahnawake collect millions in fees each year by licensing Internet gambling companies and hosting the Web sites on servers inside a high-tech building converted from a mattress factory. Recently, they took a 40 percent stake in another Internet server firm on the Isle of Man, in the Irish Sea. They collect more than $1 million a year from that investment, which aims to expand and protect their Internet gambling footprint.
Norton, a former ironworker, purchased AbsolutePoker and UltimateBet in 2006 and folded them into a newly created holding company, Tokwiro Enterprises ENRG. The company says it is "properly registered as a proprietorship in Canada." He declined repeated requests to be interviewed for this article, but has denied he knew about the cheating. Managers at AbsolutePoker and UltimateBet also declined interviews, as did the Kahnawake's licensing and regulatory body, the Kahnawake Gaming Commission.
In January, the commission fined Norton's company $500,000 for the AbsolutePoker scandal. But the apparent victory by the player-detectives quickly soured when the Kahnawake declined to name the cheater or turn his name over to prosecutors.
In September, the panel slapped UltimateBet with a $1.5 million fine. But it stopped short of following through on a recommendation by an outside investigator to suspend or close the site.
The three-member commission largely operates in secret, and it would not disclose the size of its staff. It outsources background checks to a security firm in Horsham, Pa., and uses a small company in Australia to audit its licensee's software. It called on Frank Catania, former head of the New Jersey Division of Gaming Enforcement, to investigate UltimateBet and reopen the AbsolutePoker probe.
In an interview, Catania said there was no comparison between New Jersey and the Kahnawake when it came to oversight. "I don't think they have -- they don't have the staff, first of all," he said. "With the New Jersey Gaming Commission, I had about 400 people there. I had CPAs. I had our big budget."
AbsolutePoker's origins are sketchy. Records and interviews point to a poker aficionado named Scott Tom, who attended the University of Montana in the late 1990s. After graduating, Tom and several partners headed to Costa Rica and started the business.
A number of online gambling sites already existed. But it was not until a few years later that Internet poker exploded. The impetus was a former Tennessee accountant and aptly named player, Chris Moneymaker. In 2003, Moneymaker came from nowhere to win the main event at the World Series of Poker in Las Vegas. His $2.5 million victory was televised on ESPN and is widely credited with igniting a worldwide surge.
"When I am being glib, I refer to it as the Moneymaker effect," said David Schwartz, director of the Center for Gaming Research at the University of Nevada at Las Vegas.
Soon, scores of sites began popping up in Antigua, Costa Rica, Malta, the Isle of Man and other exotic locations. The Kahnawake alone license 450 sites run by 60 permit holders. By 2007, Internet gambling sites had revenue of $18.4 billion, up from $5.9 billion in 2003, according to Christiansen Capital Advisors, a New York firm that tracks online gambling.
Thousands of those players found their way to AbsolutePoker, which boasts on its Web site that it has handled more than 300 million hands since it started accepting bets and that at its peak accounted for as much as 5 percent of the multibillion-dollar online poker market.
"It was probably pulling in between $150,000 and $250,000 a day," estimated Bobby Mamudi of the Gaming Intelligence Group, which tracks worldwide gambling issues from England. Hundreds of customer service employees worked at its office in a mall in San Jose, Costa Rica, and at a smaller office in Panama.
Generally, Internet poker is divided into two types of games: cash games in which winners collect the money on the table, just as in a live casino game, and tournaments in which players put up an entry fee and the winning pots are divided based on play. A key difference is that games are played on computers, not face to face. Players cannot see one another to gauge expressions or tics. The online style of play is also faster and more aggressive than that of live games. Some players may have four or five games going at once. Poker sites use a variety of payment methods, including prepaid debit cards, electronic transfers and bank wires.
In addition to tournament fees, Internet poker sites make money from advertising and by taking a small percentage of the pot, called a rake. The rake can be as little as pennies but adds up over millions of pots, industry analysts say.
One of the regulars at AbsolutePoker was Witteles, a former computer scientist whose screen name is "Dan Druff." At 36, he jokes that he is often the oldest player in Internet games. "It's a very young crowd," he said. "Most of them are in their early 20s."
Witteles said he plays almost exclusively in cash games. When he squared off against Greycat in 2007, it was to play Texas hold 'em, currently the most popular poker game, in which bluffing is critical. "So if the other guy can see your cards," Witteles said, "it's a real disaster. I quickly got slammed for $6,000."
Witteles waited for Greycat's luck to run out. But he continued to make one unlikely winning bet after another. Witteles' losses mounted to $15,000. Although frustrated, he didn't yet suspect cheating. And had Greycat not taunted him -- ridiculing his skills in the game's instant-message box -- Witteles said he might have gone undetected. "There was a real arrogance and vindictiveness to the thing," he said.
It is not uncommon in Internet poker for other players to follow the games. Some started to post comments on a popular poker forum about Greycat's improbable winning streak and several other suspicious accounts on AbsolutePoker. Witteles wondered whether Greycat somehow had access to a "superuser" account, which would allow him to use the site's software to spy on his cards. But when he complained to AbsolutePoker, Witteles said, "I got a different story every time."
A few weeks later, in September 2007, a 21-year-old player named Marco Johnson paid $1,000 to enter a tournament sponsored by AbsolutePoker. Johnson, who uses the screen name "Crazy Marco," reached the final against a player called "Potripper." They played 20 hands and Potripper won them all, collecting $428,520.
At first, Johnson shrugged off the loss. But others watching the final games online insisted that he, too, had been cheated. Johnson requested his hand histories for the games. Poker sites generally promise to keep players' archives for as many as five years.
A few days later, Johnson received a confusing Microsoft Excel spreadsheet containing 65,000 lines. At first, he set it aside.
While players heatedly debated Potripper's play in poker forums, the management at AbsolutePoker released the first of several statements denying the cheating allegations. "While we are continuing with our investigation, we have yet to find any evidence of wrong doing," the first statement said. "A super-user account does not exist in our software," stated the second. "Absolute Poker remains a 100% secure place to play."
Players continued to attack AbsolutePoker in online forums, complaining that they could not get answers to their questions or tell who owned the site. A few frustrated players decided it was time to start their own investigation.
Although players can be fiercely competitive during a match, it is not unusual for them to share information afterward. "Most of the top players know one another," said Ravitch, who plays on his laptop from his home in Queens. "If I don't know someone in the seat next to me, chances are I know his friends."
Ravitch is a graduate of the University of Michigan Law School who realized he enjoyed playing poker more than filing legal briefs. "Sunday is my work day," he said. "That's when all the big tournaments are."
Each week, Ravitch said, he averages about 20 hours of play while spending an additional 10 hours studying a large database of hand histories he has compiled, searching for competitors' tendencies. "Poker has become mathematically much more sophisticated," he said. Among the successful participants, he added, "there are no dumb players."
Ravitch offered to help analyze the suspect hand histories. He was joined by Nat Arem, a former auditor in the Philadelphia office of the consulting firm Deloitte & Touche. Like Ravitch, the 26-year-old Arem is good at math and with computers. In 2006, he attended Emory Law School in Atlanta for a semester but dropped out after selling a software program that players use to track the results of poker tournaments. He now lives in Costa Rica, where he develops poker-related businesses.
In the fall of 2007, Arem and Ravitch obtained copies of Marco Johnson's spreadsheet file and started analyzing the data. Arem wrote a software program to decode the information. Joined by a handful of other poker detectives, they quickly identified improbable betting patterns for Potripper and several other suspect accounts. The patterns suggested that the players with improbable win rates could somehow see their opponents' face-down, or hole, cards.
"Obviously, if you can see your opponents' hole cards, you have a huge advantage," Ravitch said. "That helped to explain how the suspect accounts never seemed to lose."
One of the first things the poker detectives noticed was that Potripper was playing exclusively in "nosebleed stakes," games with the biggest pots. "He got caught because it was easy to catch," Ravitch said. "There are only a handful of other players playing those stakes, and everyone knows one another."
Instead of losing a few hands to deflect attention, Potripper continued to win every time. "It would have been so easy if he had just lost a few hands. No one would have ever suspected a thing," Ravitch said.
In addition to hand histories, the poker detectives said, Johnson's spreadsheet contained e-mail and Internet addresses that appeared to connect one of the suspicious accounts to Costa Rica, to a home owned by Scott Tom, the founder of AbsolutePoker who sold the business to Joe Norton in October 2006. When the poker detectives posted their findings on a popular poker forum called Two Plus Two, bloggers pounced on the information as proof that Tom must have known about the cheating, if not have cheated himself.
It was not clear from the information, however, whether Tom used the account or whether someone else may have had access to it. AbsolutePoker officials did not address the bloggers' charges. Instead, they released a statement saying that Tom had not worked at the site for more than a year -- a claim that they would later be forced to retract. In fact, Tom continued to manage day-to-day operations at AbsolutePoker until October 2007, when he resigned as the cheating scandal was heating up.
Norton was "aware of the press releases but did not (initially) realize they were false," the company said in response to written questions from The Post. "The fact that they were misleading, if not outright false, contributed to Joe's decision to change the management" in October 2007. AbsolutePoker officials have said that Tom was not involved in the cheating, but they have declined to say who was. Tom declined requests for comment.
Tom's father, Phil, defended his son in interviews and via e-mail, saying Scott was "attacked viciously and unfairly by bloggers" who tried to link him to the cheating. "I couldn't believe some of the things they were saying, how he was the cheater," he said.
According to his father, Scott Tom is still living in Costa Rica but is hard to contact. "Even I have trouble reaching him," Phil Tom said. "I don't call him. He calls me."
If Scott Tom wasn't the cheater, who was?
The poker detectives kept pushing. By mid-October 2007, they were focusing on an employee at AbsolutePoker's Costa Rica office. They posted their findings online, setting off a new wave of charges and increasing pressure on AbsolutePoker's management and the Kahnawake Gaming Commission to address the cheating.
Shortly thereafter, the commission announced that it had hired Gaming Associates, a small Australian computer security firm, to audit the poker site's software. Two days later, AbsolutePoker released an e-mail acknowledging that it had identified "an internal security breach that compromised our systems for a limited period of time." It added: "The cause of the breach has been determined and completely resolved."
The company's statement did not detail how the breach occurred, how many players were cheated or how the cheater was able to spy on cards without being noticed.
Unbeknown to the players, AbsolutePoker had already cut a secret deal with the cheater, whom it characterized as a "consultant with managerial responsibilities." The company agreed not to release his name in return for a "full and detailed explanation" of how he cheated, according to company officials and other interviews. AbsolutePoker also agreed not to sue the cheater or turn him over to Costa Rican authorities, company officials told The Post.
"Of course we considered going to the police, but we decided that it was in the best interest of our cheated players and of AP to get the perpetrator to tell us how the cheating was done," company officials wrote in response to questions from The Post. "We also recognized that prosecutions for white collar crimes in Costa Rica can be time-consuming and sometimes unsuccessful."
(The name of the alleged cheater has circulated widely among poker players on the Internet. The Post is not publishing his name because, even though he purportedly confessed to AbsolutePoker, the company did not release its records and would not discuss the matter. The alleged cheater declined requests to be interviewed.)
Witteles and other players said they were appalled by AbsolutePoker's decision not to seek prosecution of the cheater. "Yeah, we were paid back," he said. "But they made absolutely no attempt to bring any of the people to justice. If someone stole that amount of money from a casino, they would be thrown in jail."
AbsolutePoker said it fired the cheater on Oct. 20, 2007, the day before it started sending $1.6 million in refunds to the cheated players. "Our previous business culture was entrepreneurial, decentralized and individualistic," company officials wrote The Post. "In retrospect, this decentralized approach was not conducive to strict oversight and accountability." The company says it "installed a completely new management team" in order to "build a solid security foundation."
In January 2008, the Kahnawake Gaming Commission released a four-page report on the AbsolutePoker scandal. It said a single cheater using several screen names had taken advantage of a flaw in the software to spy on players' cards during a six-week period starting in August 2007.
It fined Norton's firm $500,000. But it also declined to name the cheater, contending that there "would be no material benefit to the affected players."
"I don't know about that," said Frank Catania, the former New Jersey gambling official who helped the Kahnawake write their Internet gambling regulations, and who was hired by the commission last summer to investigate Norton and his poker sites. "Maybe what they should have done is named the person."
A day after the Kahnawake commission released its report about AbsolutePoker, managers at UltimateBet were alerted to new allegations of cheating involving a player using the screen name "NioNio."
One of those who had played against NioNio was David Paredes, 29, a Harvard graduate and lawyer-turned-hedge fund employee. As a childhood math whiz, Paredes had been good enough at chess to travel to national tournaments. In high school, he and his friends played poker for as much as $100 a game. During breaks from law school at New York University, he played at the Foxwoods Resort Casino in Connecticut and in the city's network of underground clubs.
Paredes started playing online around 2005. "I made money almost from the start," he said. Over time, he said, he used his winnings to pay off his law school bill, rent a Manhattan apartment and pay private tuition for a high school student he mentors.
In July 2007, Paredes lost $70,000 to NioNio in a series of games. NioNio had played recklessly, Paredes recalled, making one improbable bet after another, yet winning most hands.
Paredes said he did not suspect cheating until he discussed his hands with another player who also had lost to NioNio. They did a statistical analysis of hand histories, and what they found shocked them: During one brief stretch, NioNio had managed to win $300,000 while rarely losing. Another poker detective calculated that his win rate was about equal to winning the Powerball jackpot three days in a row.
Moreover, it appeared that NioNio was not the only unusually lucky player. Their investigation turned up seven other suspicious accounts that had won a total of $1.5 million on UltimateBet. Later, UltimateBet officials determined that the cheaters had used as many as 88 screen names to avoid detection.
It was as though the cheaters were playing against a "bunch of blind men," Catania recalled. "I mean ... you're the only one that can see. Everyone else is blind."
In news releases, UltimateBet said that former employees had secretly installed a back door in the software allowing them to spy on players' cards. They stressed the gaming commission's finding that the breach took place before Norton bought UltimateBet in 2006 through a limited partnership in Malta called Blast Off Ltd.
The company told The Post that it performed full financial and operational due diligence before the sale but that it did not find the unauthorized software. Catania, the outside investigator, said that UltimateBet officials did "no due diligence on the technical part. None." At the same time, he said he did not think Norton was aware of the cheating.
UltimateBet officials acknowledged to The Post that the "winning-hand statistics were certainly suspicious and should have been flagged for investigation." They said the accounts belonged to professional players who had been designated as VIP players by the prior owners, and as such were not subject to the same level of scrutiny as other accounts. They added that they did not review the VIP accounts until after the cheating allegations surfaced.
Citing what they said were UltimateBet player logs and real estate records, some of the poker detectives this summer linked former World Series of Poker champion Russ Hamilton to the scandal. In online posts, they alleged that several of the suspect accounts were traced back to property Hamilton owns in Las Vegas, where he is based.
Hamilton did not respond to the accusations. In September, the Kahnawake Gaming Commission announced that there was "clear and convincing evidence" that Hamilton "was the main person responsible for and benefiting from the multiple cheating incidents" at UltimateBet.
The commission did not disclose its evidence allegedly linking Hamilton to the cheating. But Catania said the player accounts "point directly to Russ Hamilton." He added that six to eight accounts were involved in the cheating. "And we know Russ Hamilton was ... part of those accounts."
Hamilton's lawyer, David Chesnoff, scoffed at the accusations. "Have I heard these allegations? Yes," he said. "We deny them." He added: "Without having an opportunity to review what is alleged to exist, we can't answer the questions and don't think we should dignify it with answers."
In a statement, UltimateBet's owner, Tokwiro Enterprises, cited the commission's finding that Hamilton was responsible for the cheating. The company noted that Hamilton "was never employed by Tokwiro or any of its companies," though he briefly had a "relationship" with the company in which he referred players from his Web site to UltimateBet.
To date, UltimateBet has issued $6.1 million in refunds. Catania said the poker site has promised to reimburse players an additional $15 million, at which point he expects UltimateBet to lose its license or be sold.
The gaming commission fined UltimateBet $1.5 million "for its failure to implement and enforce measures to prohibit and detect fraudulent activities." It defended its handling of the case but said its actions "were not well communicated to the poker industry or public at large, creating an incorrect perception that the (commission) was doing nothing."
The Kahnawake now say they operate one of the most secure Internet gambling operations in the world. Tokwiro says it has "established cutting-edge security systems that make us the safest site in the industry." But Catania said he does not expect cheating to stop: "I'm sure there are people out there right now figuring out, let's say, 'Here's a way we can do it again.'"
Whenever Todd Witteles signed on to an Internet poker site, the first thing he did was look around for inexperienced players. One day in August 2007, the Las Vegas poker pro thought he had found an easy mark on AbsolutePoker.com.
A newcomer using the name "Greycat" was making unusually big bets off weak hands. "He seemed like a bad player who had just been getting incredibly lucky," Witteles recalled. "When you see someone like Greycat, you stop everything you're doing to play."
But in a series of one-on-one games, Witteles quickly found himself down $15,000. Worse, Greycat began taunting him. Soon, some of Witteles' online poker friends began wondering publicly whether Greycat was cheating. It was almost as though he could see Witteles' hole cards.
It turned out that was exactly what Greycat was doing. After months of pressure from a small group of players who took it upon themselves to investigate the claims, AbsolutePoker was forced to admit that a cheater had cracked its software, and it refunded $1.6 million to Witteles and dozens of other players.
It appeared to be a huge victory for the players and the self-policing nature of the Internet. Yet just weeks later, rumors of a new scandal rocked the world of online poker, this time at AbsolutePoker's sister site, UltimateBet.com. The stakes were dramatically higher: more than $20 million cheated from players over four years. The alleged culprits included a former world poker champion and UltimateBet employees who had hacked into the site.
Even as Internet gambling grows in popularity and profits, with millions of players and billions of bets, the two biggest cheating scandals in online gambling are raising fresh questions about the honesty and security of a freewheeling industry that operates outside of U.S. law.
Unlike brick-and-mortar casinos that undergo rigorous security checks, many Internet gambling sites operate in a shadowy world of little regulation and even less enforcement, a joint investigation by The Washington Post and CBS's "60 Minutes" has found. Dozens of these sites are located in countries with no reporting requirements. The licensing agencies there essentially operate as pay-as-you-go boutiques, generating millions of dollars in fees while showing little interest in policing rogue sites.
As it has given birth to Amazon.com, eBay and scores of other 21st-century businesses, the Internet has also spawned its own gambling boom, with estimated revenue more than tripling over five years, to $18 billion annually, including about $4 billion from virtual poker.
Millions of the bets originate in the United States, where online poker and gambling sites are banned, forcing players to reach out across the Internet like modern-day bootleggers. Yet players have little way of knowing who is watching their bets or where their money is going. Often, owners hide behind multiple layers of limited partnerships, making it difficult to determine who controls the sites or to lodge complaints about cheating.
In the AbsolutePoker and UltimateBet cheating scandals, players decided to investigate the matter themselves after managers and regulators did not respond to their complaints. "No one would listen to us," said Serge Ravitch, a 28-year-old lawyer-turned-poker pro who played a key detective role.
AbsolutePoker and UltimateBet operate out of a shopping mall in Costa Rica, run their games on computer servers housed on an Indian reservation near Montreal, and are licensed by a Mohawk tribe that has no background in casino gambling and does not answer to federal or provincial regulators.
Joseph Tokwiro Norton, who owns both Web sites, is the former grand chief of the Mohawk tribe. He was instrumental in setting up the licensing agency and a highly profitable companion business that owns the server farm. Yet until he issued a news release in October 2007, even some of the most powerful members of his tribe had no idea Norton owned the poker sites.
"I was as surprised as anyone else," said Michael Delisle, the current grand chief of the Mohawk Council of Kahnawake. He added that he had not spoken with Norton about the cheating. "I have had no opportunity," he said in an interview, "and honestly I don't think it's any of my business."
The Kahnawake collect millions in fees each year by licensing Internet gambling companies and hosting the Web sites on servers inside a high-tech building converted from a mattress factory. Recently, they took a 40 percent stake in another Internet server firm on the Isle of Man, in the Irish Sea. They collect more than $1 million a year from that investment, which aims to expand and protect their Internet gambling footprint.
Norton, a former ironworker, purchased AbsolutePoker and UltimateBet in 2006 and folded them into a newly created holding company, Tokwiro Enterprises ENRG. The company says it is "properly registered as a proprietorship in Canada." He declined repeated requests to be interviewed for this article, but has denied he knew about the cheating. Managers at AbsolutePoker and UltimateBet also declined interviews, as did the Kahnawake's licensing and regulatory body, the Kahnawake Gaming Commission.
In January, the commission fined Norton's company $500,000 for the AbsolutePoker scandal. But the apparent victory by the player-detectives quickly soured when the Kahnawake declined to name the cheater or turn his name over to prosecutors.
In September, the panel slapped UltimateBet with a $1.5 million fine. But it stopped short of following through on a recommendation by an outside investigator to suspend or close the site.
The three-member commission largely operates in secret, and it would not disclose the size of its staff. It outsources background checks to a security firm in Horsham, Pa., and uses a small company in Australia to audit its licensee's software. It called on Frank Catania, former head of the New Jersey Division of Gaming Enforcement, to investigate UltimateBet and reopen the AbsolutePoker probe.
In an interview, Catania said there was no comparison between New Jersey and the Kahnawake when it came to oversight. "I don't think they have -- they don't have the staff, first of all," he said. "With the New Jersey Gaming Commission, I had about 400 people there. I had CPAs. I had our big budget."
AbsolutePoker's origins are sketchy. Records and interviews point to a poker aficionado named Scott Tom, who attended the University of Montana in the late 1990s. After graduating, Tom and several partners headed to Costa Rica and started the business.
A number of online gambling sites already existed. But it was not until a few years later that Internet poker exploded. The impetus was a former Tennessee accountant and aptly named player, Chris Moneymaker. In 2003, Moneymaker came from nowhere to win the main event at the World Series of Poker in Las Vegas. His $2.5 million victory was televised on ESPN and is widely credited with igniting a worldwide surge.
"When I am being glib, I refer to it as the Moneymaker effect," said David Schwartz, director of the Center for Gaming Research at the University of Nevada at Las Vegas.
Soon, scores of sites began popping up in Antigua, Costa Rica, Malta, the Isle of Man and other exotic locations. The Kahnawake alone license 450 sites run by 60 permit holders. By 2007, Internet gambling sites had revenue of $18.4 billion, up from $5.9 billion in 2003, according to Christiansen Capital Advisors, a New York firm that tracks online gambling.
Thousands of those players found their way to AbsolutePoker, which boasts on its Web site that it has handled more than 300 million hands since it started accepting bets and that at its peak accounted for as much as 5 percent of the multibillion-dollar online poker market.
"It was probably pulling in between $150,000 and $250,000 a day," estimated Bobby Mamudi of the Gaming Intelligence Group, which tracks worldwide gambling issues from England. Hundreds of customer service employees worked at its office in a mall in San Jose, Costa Rica, and at a smaller office in Panama.
Generally, Internet poker is divided into two types of games: cash games in which winners collect the money on the table, just as in a live casino game, and tournaments in which players put up an entry fee and the winning pots are divided based on play. A key difference is that games are played on computers, not face to face. Players cannot see one another to gauge expressions or tics. The online style of play is also faster and more aggressive than that of live games. Some players may have four or five games going at once. Poker sites use a variety of payment methods, including prepaid debit cards, electronic transfers and bank wires.
In addition to tournament fees, Internet poker sites make money from advertising and by taking a small percentage of the pot, called a rake. The rake can be as little as pennies but adds up over millions of pots, industry analysts say.
One of the regulars at AbsolutePoker was Witteles, a former computer scientist whose screen name is "Dan Druff." At 36, he jokes that he is often the oldest player in Internet games. "It's a very young crowd," he said. "Most of them are in their early 20s."
Witteles said he plays almost exclusively in cash games. When he squared off against Greycat in 2007, it was to play Texas hold 'em, currently the most popular poker game, in which bluffing is critical. "So if the other guy can see your cards," Witteles said, "it's a real disaster. I quickly got slammed for $6,000."
Witteles waited for Greycat's luck to run out. But he continued to make one unlikely winning bet after another. Witteles' losses mounted to $15,000. Although frustrated, he didn't yet suspect cheating. And had Greycat not taunted him -- ridiculing his skills in the game's instant-message box -- Witteles said he might have gone undetected. "There was a real arrogance and vindictiveness to the thing," he said.
It is not uncommon in Internet poker for other players to follow the games. Some started to post comments on a popular poker forum about Greycat's improbable winning streak and several other suspicious accounts on AbsolutePoker. Witteles wondered whether Greycat somehow had access to a "superuser" account, which would allow him to use the site's software to spy on his cards. But when he complained to AbsolutePoker, Witteles said, "I got a different story every time."
A few weeks later, in September 2007, a 21-year-old player named Marco Johnson paid $1,000 to enter a tournament sponsored by AbsolutePoker. Johnson, who uses the screen name "Crazy Marco," reached the final against a player called "Potripper." They played 20 hands and Potripper won them all, collecting $428,520.
At first, Johnson shrugged off the loss. But others watching the final games online insisted that he, too, had been cheated. Johnson requested his hand histories for the games. Poker sites generally promise to keep players' archives for as many as five years.
A few days later, Johnson received a confusing Microsoft Excel spreadsheet containing 65,000 lines. At first, he set it aside.
While players heatedly debated Potripper's play in poker forums, the management at AbsolutePoker released the first of several statements denying the cheating allegations. "While we are continuing with our investigation, we have yet to find any evidence of wrong doing," the first statement said. "A super-user account does not exist in our software," stated the second. "Absolute Poker remains a 100% secure place to play."
Players continued to attack AbsolutePoker in online forums, complaining that they could not get answers to their questions or tell who owned the site. A few frustrated players decided it was time to start their own investigation.
Although players can be fiercely competitive during a match, it is not unusual for them to share information afterward. "Most of the top players know one another," said Ravitch, who plays on his laptop from his home in Queens. "If I don't know someone in the seat next to me, chances are I know his friends."
Ravitch is a graduate of the University of Michigan Law School who realized he enjoyed playing poker more than filing legal briefs. "Sunday is my work day," he said. "That's when all the big tournaments are."
Each week, Ravitch said, he averages about 20 hours of play while spending an additional 10 hours studying a large database of hand histories he has compiled, searching for competitors' tendencies. "Poker has become mathematically much more sophisticated," he said. Among the successful participants, he added, "there are no dumb players."
Ravitch offered to help analyze the suspect hand histories. He was joined by Nat Arem, a former auditor in the Philadelphia office of the consulting firm Deloitte & Touche. Like Ravitch, the 26-year-old Arem is good at math and with computers. In 2006, he attended Emory Law School in Atlanta for a semester but dropped out after selling a software program that players use to track the results of poker tournaments. He now lives in Costa Rica, where he develops poker-related businesses.
In the fall of 2007, Arem and Ravitch obtained copies of Marco Johnson's spreadsheet file and started analyzing the data. Arem wrote a software program to decode the information. Joined by a handful of other poker detectives, they quickly identified improbable betting patterns for Potripper and several other suspect accounts. The patterns suggested that the players with improbable win rates could somehow see their opponents' face-down, or hole, cards.
"Obviously, if you can see your opponents' hole cards, you have a huge advantage," Ravitch said. "That helped to explain how the suspect accounts never seemed to lose."
One of the first things the poker detectives noticed was that Potripper was playing exclusively in "nosebleed stakes," games with the biggest pots. "He got caught because it was easy to catch," Ravitch said. "There are only a handful of other players playing those stakes, and everyone knows one another."
Instead of losing a few hands to deflect attention, Potripper continued to win every time. "It would have been so easy if he had just lost a few hands. No one would have ever suspected a thing," Ravitch said.
In addition to hand histories, the poker detectives said, Johnson's spreadsheet contained e-mail and Internet addresses that appeared to connect one of the suspicious accounts to Costa Rica, to a home owned by Scott Tom, the founder of AbsolutePoker who sold the business to Joe Norton in October 2006. When the poker detectives posted their findings on a popular poker forum called Two Plus Two, bloggers pounced on the information as proof that Tom must have known about the cheating, if not have cheated himself.
It was not clear from the information, however, whether Tom used the account or whether someone else may have had access to it. AbsolutePoker officials did not address the bloggers' charges. Instead, they released a statement saying that Tom had not worked at the site for more than a year -- a claim that they would later be forced to retract. In fact, Tom continued to manage day-to-day operations at AbsolutePoker until October 2007, when he resigned as the cheating scandal was heating up.
Norton was "aware of the press releases but did not (initially) realize they were false," the company said in response to written questions from The Post. "The fact that they were misleading, if not outright false, contributed to Joe's decision to change the management" in October 2007. AbsolutePoker officials have said that Tom was not involved in the cheating, but they have declined to say who was. Tom declined requests for comment.
Tom's father, Phil, defended his son in interviews and via e-mail, saying Scott was "attacked viciously and unfairly by bloggers" who tried to link him to the cheating. "I couldn't believe some of the things they were saying, how he was the cheater," he said.
According to his father, Scott Tom is still living in Costa Rica but is hard to contact. "Even I have trouble reaching him," Phil Tom said. "I don't call him. He calls me."
If Scott Tom wasn't the cheater, who was?
The poker detectives kept pushing. By mid-October 2007, they were focusing on an employee at AbsolutePoker's Costa Rica office. They posted their findings online, setting off a new wave of charges and increasing pressure on AbsolutePoker's management and the Kahnawake Gaming Commission to address the cheating.
Shortly thereafter, the commission announced that it had hired Gaming Associates, a small Australian computer security firm, to audit the poker site's software. Two days later, AbsolutePoker released an e-mail acknowledging that it had identified "an internal security breach that compromised our systems for a limited period of time." It added: "The cause of the breach has been determined and completely resolved."
The company's statement did not detail how the breach occurred, how many players were cheated or how the cheater was able to spy on cards without being noticed.
Unbeknown to the players, AbsolutePoker had already cut a secret deal with the cheater, whom it characterized as a "consultant with managerial responsibilities." The company agreed not to release his name in return for a "full and detailed explanation" of how he cheated, according to company officials and other interviews. AbsolutePoker also agreed not to sue the cheater or turn him over to Costa Rican authorities, company officials told The Post.
"Of course we considered going to the police, but we decided that it was in the best interest of our cheated players and of AP to get the perpetrator to tell us how the cheating was done," company officials wrote in response to questions from The Post. "We also recognized that prosecutions for white collar crimes in Costa Rica can be time-consuming and sometimes unsuccessful."
(The name of the alleged cheater has circulated widely among poker players on the Internet. The Post is not publishing his name because, even though he purportedly confessed to AbsolutePoker, the company did not release its records and would not discuss the matter. The alleged cheater declined requests to be interviewed.)
Witteles and other players said they were appalled by AbsolutePoker's decision not to seek prosecution of the cheater. "Yeah, we were paid back," he said. "But they made absolutely no attempt to bring any of the people to justice. If someone stole that amount of money from a casino, they would be thrown in jail."
AbsolutePoker said it fired the cheater on Oct. 20, 2007, the day before it started sending $1.6 million in refunds to the cheated players. "Our previous business culture was entrepreneurial, decentralized and individualistic," company officials wrote The Post. "In retrospect, this decentralized approach was not conducive to strict oversight and accountability." The company says it "installed a completely new management team" in order to "build a solid security foundation."
In January 2008, the Kahnawake Gaming Commission released a four-page report on the AbsolutePoker scandal. It said a single cheater using several screen names had taken advantage of a flaw in the software to spy on players' cards during a six-week period starting in August 2007.
It fined Norton's firm $500,000. But it also declined to name the cheater, contending that there "would be no material benefit to the affected players."
"I don't know about that," said Frank Catania, the former New Jersey gambling official who helped the Kahnawake write their Internet gambling regulations, and who was hired by the commission last summer to investigate Norton and his poker sites. "Maybe what they should have done is named the person."
A day after the Kahnawake commission released its report about AbsolutePoker, managers at UltimateBet were alerted to new allegations of cheating involving a player using the screen name "NioNio."
One of those who had played against NioNio was David Paredes, 29, a Harvard graduate and lawyer-turned-hedge fund employee. As a childhood math whiz, Paredes had been good enough at chess to travel to national tournaments. In high school, he and his friends played poker for as much as $100 a game. During breaks from law school at New York University, he played at the Foxwoods Resort Casino in Connecticut and in the city's network of underground clubs.
Paredes started playing online around 2005. "I made money almost from the start," he said. Over time, he said, he used his winnings to pay off his law school bill, rent a Manhattan apartment and pay private tuition for a high school student he mentors.
In July 2007, Paredes lost $70,000 to NioNio in a series of games. NioNio had played recklessly, Paredes recalled, making one improbable bet after another, yet winning most hands.
Paredes said he did not suspect cheating until he discussed his hands with another player who also had lost to NioNio. They did a statistical analysis of hand histories, and what they found shocked them: During one brief stretch, NioNio had managed to win $300,000 while rarely losing. Another poker detective calculated that his win rate was about equal to winning the Powerball jackpot three days in a row.
Moreover, it appeared that NioNio was not the only unusually lucky player. Their investigation turned up seven other suspicious accounts that had won a total of $1.5 million on UltimateBet. Later, UltimateBet officials determined that the cheaters had used as many as 88 screen names to avoid detection.
It was as though the cheaters were playing against a "bunch of blind men," Catania recalled. "I mean ... you're the only one that can see. Everyone else is blind."
In news releases, UltimateBet said that former employees had secretly installed a back door in the software allowing them to spy on players' cards. They stressed the gaming commission's finding that the breach took place before Norton bought UltimateBet in 2006 through a limited partnership in Malta called Blast Off Ltd.
The company told The Post that it performed full financial and operational due diligence before the sale but that it did not find the unauthorized software. Catania, the outside investigator, said that UltimateBet officials did "no due diligence on the technical part. None." At the same time, he said he did not think Norton was aware of the cheating.
UltimateBet officials acknowledged to The Post that the "winning-hand statistics were certainly suspicious and should have been flagged for investigation." They said the accounts belonged to professional players who had been designated as VIP players by the prior owners, and as such were not subject to the same level of scrutiny as other accounts. They added that they did not review the VIP accounts until after the cheating allegations surfaced.
Citing what they said were UltimateBet player logs and real estate records, some of the poker detectives this summer linked former World Series of Poker champion Russ Hamilton to the scandal. In online posts, they alleged that several of the suspect accounts were traced back to property Hamilton owns in Las Vegas, where he is based.
Hamilton did not respond to the accusations. In September, the Kahnawake Gaming Commission announced that there was "clear and convincing evidence" that Hamilton "was the main person responsible for and benefiting from the multiple cheating incidents" at UltimateBet.
The commission did not disclose its evidence allegedly linking Hamilton to the cheating. But Catania said the player accounts "point directly to Russ Hamilton." He added that six to eight accounts were involved in the cheating. "And we know Russ Hamilton was ... part of those accounts."
Hamilton's lawyer, David Chesnoff, scoffed at the accusations. "Have I heard these allegations? Yes," he said. "We deny them." He added: "Without having an opportunity to review what is alleged to exist, we can't answer the questions and don't think we should dignify it with answers."
In a statement, UltimateBet's owner, Tokwiro Enterprises, cited the commission's finding that Hamilton was responsible for the cheating. The company noted that Hamilton "was never employed by Tokwiro or any of its companies," though he briefly had a "relationship" with the company in which he referred players from his Web site to UltimateBet.
To date, UltimateBet has issued $6.1 million in refunds. Catania said the poker site has promised to reimburse players an additional $15 million, at which point he expects UltimateBet to lose its license or be sold.
The gaming commission fined UltimateBet $1.5 million "for its failure to implement and enforce measures to prohibit and detect fraudulent activities." It defended its handling of the case but said its actions "were not well communicated to the poker industry or public at large, creating an incorrect perception that the (commission) was doing nothing."
The Kahnawake now say they operate one of the most secure Internet gambling operations in the world. Tokwiro says it has "established cutting-edge security systems that make us the safest site in the industry." But Catania said he does not expect cheating to stop: "I'm sure there are people out there right now figuring out, let's say, 'Here's a way we can do it again.'"
Friday, November 28, 2008
A Hollywood Star Was Once A Professional Casino Cheat!
Believe it or not, one of the ancestral members of the casino cheat team I was a member of, the Classon Pastposting Team, actually went on to become a major motion picture star in the 1950s, 60s and 70s. Also believe it or not, she was discovered by a Hollywood producer while performing her “role” in a Classon pastposting roulette move at the old and famed Stardust Casino on the Las Vegas Strip. Although I can not divulge her identity because she is still alive and would undoubtedly sue me for doing so, I promise that if she dies before me, which hopefully is likely, I will identify her at that time. In any event, here is an excerpt from my memoir American Roulette that shows “Ruthie” in action. Maybe after reading it you can guess who she is?
Excerpt from American Roulette:
Joe Classon found a dancer working the Lido show at the Stardust for whom he flipped. Her name was Ruthie and she was from Wisconsin. After accompanying the Classons on a Caribbean road trip that mixed pleasure with business, Ruthie accepted Joe's hand in marriage. They got married in one of the little wedding chapels downtown.
It wasn't long before Ruthie was "dancing" around Vegas’s roulette tables. An energetic sexy redhead, she found the Classon number on the roulette wheels as entertaining as any show she’d ever done on or backstage. She quickly took over Joe's role as roulette “claimer,” claiming pastposted winning bets on the tables. Joe became the check-bettor and his brother Henry continued popping in the moves. The new three-man (two-man-one-woman) operation was even more effective. With this diversification of roles, Henry was able to leave the table after he did the move, then circle around the pit and serve as team security. He observed Ruthie claiming from afar. From a distance he could better protect her. He could see the steam when it developed behind her.
When Caesars Palace opened in 1966, they did their first black-chip roulette move in the new heralded casino. And as Henry had by then mastered the straight-up move underneath the marker, they went right for the $3,500 payoff. They added a little twist. Knowing that the $3,500 was a big number, they decided to strengthen their chances of success with the implementation of a set-up. With Henry and Joe in position at the table—Henry already having swiped three of Joe's roulette chips under which he would slip in the black—the sexily clad Ruthie, in her cocktail dress bought in the Caesars dress shop, sauntered up to the table and bet a black chip straight up on number 28. Leaving the table, she had to take a tour of practically the whole casino to escape the line of sight between her and the gawking floorman and pit boss, who had zoomed through the pit to the roulette wheel at her arrival. The next time they saw the curvaceous woman, she was claiming the hundred-dollar bet she had just won on number 34. They couldn't pay her fast enough.
The advent of the sexy woman claimer was fabulous. It added a whole new dimension to the operation. Not only were you armed with a highly efficient portfolio of flexible casino moves, you now had an adaptable psychological weapon. Up against a beautiful woman claiming a bet, the casino bosses had no chance. In the heat of battle, Ruthie flirted to no end with the floormen and pit bosses as she sizzled up and down pits. She played their ids, their egos—in some cases even their cocks. When in the middle of a claim, she always gave the floorman and pit boss the impression she was available. When they asked the obvious questions: "Where's the good gentleman tonight?" or "Does your husband always let you bet that much at roulette?"—Ruthie had the answers that charmed them, titillated them. She would say, "When I find that gentleman, I'll let you know." And then, "Now you know why I'm not married." It was not beyond Ruthie to go right into a pit while her bet was still unpaid and rub up against the ranking pit boss whose decision it was to pay her or not. Even Joe could not be sure what she was whispering into that pit boss's ear. And while doing all that, the pit bosses knew she wasn't a whore. Even Las Vegas's finest did not bet black chips at roulette alone.
Ruthie was the ultimate performer. She had always wanted to be an actress. Before coming to Vegas to dance, she had tried a stint in Hollywood but couldn't land anything besides a few minor roles in sitcoms. Claiming in the Classon "road show" was ideally suited for her. She really took to it. And at craps she was a tigress. Male dealers being attacked by this fiery feline claimer on the felt dropped their chips in surrender. Once she was challenged by a boxman suspecting her of switching in a craps move herself and hiding the chips switched out in her handbag. Ruthie promptly turned her handbag upside down and let its contents spill out on the layout, stunning both the boxman and the dealer—as well as Joe and Henry. Just after the last vial of lipstick rolled toward the boxman, Ruthie asked him provocatively, "Is there anywhere else you'd like to look?"
Now that the Classons had Ruthie, they were able to work the casinos in Vegas without showing their faces. Henry and Joe took much less exposure because neither one claimed anymore. On the tables they began disguising themselves, without being obvious. Henry dyed his hair gray to appear older. Joe opted for the military crewcut he'd had in Korea. He also had himself fitted for zeros at a trendy optometrist's office. Together they now appeared like an experienced businessman and a young airline pilot. The effect of that makeover was that much of that dense steam in Vegas began to dissipate. And with that, the team went on a relentless attack against the casinos.
On New Year's Eve, 1968, Henry and Joe Classon, in full disguise, were sitting at a roulette table in the Stardust Casino. Unbeknownst to them, and also to Ruthie, who had just walked away from a gallery of staring eyes after losing her hundred-dollar set-up bet, a powerful Hollywood producer was sitting next to Henry at the bottom of the layout. When their number came in, Henry switched the chips and Ruthie returned to claim the $3,500. The Stardust was not Caesars and the bosses there had a little tougher time coughing up the prize. When Ruthie realized she was going to have to work for the payoff, she was equal to the task. She spun into a Marilyn Monroe number, swirled her dress as she danced into the pit, smooched up to the pit boss and must have had that mesmerized producer thinking that the name of that famous film should have been Gentlemen prefer redheads. Not only did she get paid the $3,500, she got the producer's business card before leaving the table. He had furtively slipped it into her hand, whispering that she should call him Monday morning at his Hollywood office.
Ruthie never claimed another bet in a casino. She called the producer Monday morning, was in Beverly Hills having lunch with him at one o'clock in the afternoon. It turned out that the producer had witnessed their entire New Year's Eve act at the Stardust. He saw Henry put the move in underneath the marker. Being an inveterate gambler, the producer understood everything. He even told Ruthie that he knew Joe was in on the caper because the move had gone in under his chips. He also told Ruthie that her playacting was the best he had ever seen. Where had she been all these years? When Ruthie told him she had spent nearly three years in Tinseltown and couldn't amass anything better than bit parts, he was pressed hard to believe her. Nevertheless, three weeks later, Ruthie started shooting her first role in a major film. Her marriage to Joe she had quickly annulled. Though she never married the already married producer, she did have a long affair with him, and during the 1970s and 1980s she became a considerable movie star, of course under a different name.
When Joe first heard about the producer it was by telephone from Hollywood that Monday afternoon. Ruthie was calling to tell him she wouldn't be home for the barbecue by the pool. Joe's first comment, in light of the producer's powers of observation, was that maybe he wanted to join the pastposting team. Or at least make a movie about what he'd seen!
Thursday, November 27, 2008
Tokwiro COO Leggett Issues Memo To UltimateBet Employees About "60 Minutes" Cheat Segment!
As previously reported, the story by CBS News program “60 Minutes” about the online poker cheating scandals at Ultimate Bet and Absolute Poker will air this Sunday, November 30th. In a blog posted by Nat Arem, who has been close to the investigation, it was revealed that Tokwiro COO Paul Leggett issued a memo to Ultimate Bet employees about the program airing. The memo was forwarded to Arem by an employee at the company.
Although many in the industry do not know what to expect when the segment airs at 7:00pm ET on Sunday night, Leggett does not anticipate a ringing endorsement of Tokwiro-owned rooms Absolute Poker or Ultimate Bet, or the industry in general. He commented, “We have every reason to believe that the 60 Minutes producers are intent on portraying the online poker industry and our companies in a negative light, and we do not expect that the program will be either fair or balanced.”
Tokwiro received a $15 million settlement from former UB owners Excapsa to compensate players who were wronged by the cheating on Ultimate Bet, which was directed by former affiliate program manager and 1994 World Series of Poker Main Event champion Russ Hamilton. The player bases of AP and UB were merged this week to form the CEREUS poker network.
Leggett revealed that Tokwiro officials did not appear on camera, but rather provided the producers of the show with relevant background information and “answered questions on-the-record, but off-camera.” The memo stated that Joseph Tokwiro Norton is the sole owner of Tokwiro. In addition, it noted that the investigation into the cheating scandal at Ultimate Bet by its licensing body, the Kahnawake Gaming Commission (KGC), revealed “that Tokwiro, as a corporate entity, was not involved in and did not benefit from the cheating.”
On who was behind the scandal on Absolute Poker, Leggett revealed, “Tokwiro agreed not to prosecute the perpetrator in the Absolute Poker cheating, and to protect that individual’s identity, because this was the only way to ensure that the ability to cheat was fully discovered and disabled. Because of this decision, AP could continue operating and begin to reimburse affected players as quickly as possible.”
Leggett added that Hamilton was not an employee of Tokwiro and that the offenders in each of the two cheating incidents did not work together in any way. Despite the fact that both groups were able to see the hole cards of customers who played online, each used a different tool in order to do so. The story that appears on CBS’ website entitled “How Online Gamblers Unmasked Cheaters” explains that the cheating resulted in over $20 million being taken from customers. According to the memo, all affected customers have been reimbursed accordingly. The $15 million that Tokwiro received from Excapsa was used for this purpose.
The memo concludes with a look at the changes at Tokwiro as a result of the two high-profile incidents. The company’s management team was revamped and three new security-related personnel were brought onboard. A new “Security Center” was developed to track abnormalities on the CEREUS network, which was launched on Tuesday morning, the same day as the world found out that the 60 Minutes story would air this week. The additions of a “Whistleblower Policy” and “Poker Security Department” were also highlighted.
A Code of Ethics was instituted at the parent company of Ultimate Bet and Absolute Poker, which “formally prohibits any employee or contractor for any Tokwiro business from playing for money on any Tokwiro site.” Account name changes are also generally not allowed. Finally, Tokwiro “discontinued the policy of ‘greenlighting’ VIP Pro players at cashout.”
Although many in the industry do not know what to expect when the segment airs at 7:00pm ET on Sunday night, Leggett does not anticipate a ringing endorsement of Tokwiro-owned rooms Absolute Poker or Ultimate Bet, or the industry in general. He commented, “We have every reason to believe that the 60 Minutes producers are intent on portraying the online poker industry and our companies in a negative light, and we do not expect that the program will be either fair or balanced.”
Tokwiro received a $15 million settlement from former UB owners Excapsa to compensate players who were wronged by the cheating on Ultimate Bet, which was directed by former affiliate program manager and 1994 World Series of Poker Main Event champion Russ Hamilton. The player bases of AP and UB were merged this week to form the CEREUS poker network.
Leggett revealed that Tokwiro officials did not appear on camera, but rather provided the producers of the show with relevant background information and “answered questions on-the-record, but off-camera.” The memo stated that Joseph Tokwiro Norton is the sole owner of Tokwiro. In addition, it noted that the investigation into the cheating scandal at Ultimate Bet by its licensing body, the Kahnawake Gaming Commission (KGC), revealed “that Tokwiro, as a corporate entity, was not involved in and did not benefit from the cheating.”
On who was behind the scandal on Absolute Poker, Leggett revealed, “Tokwiro agreed not to prosecute the perpetrator in the Absolute Poker cheating, and to protect that individual’s identity, because this was the only way to ensure that the ability to cheat was fully discovered and disabled. Because of this decision, AP could continue operating and begin to reimburse affected players as quickly as possible.”
Leggett added that Hamilton was not an employee of Tokwiro and that the offenders in each of the two cheating incidents did not work together in any way. Despite the fact that both groups were able to see the hole cards of customers who played online, each used a different tool in order to do so. The story that appears on CBS’ website entitled “How Online Gamblers Unmasked Cheaters” explains that the cheating resulted in over $20 million being taken from customers. According to the memo, all affected customers have been reimbursed accordingly. The $15 million that Tokwiro received from Excapsa was used for this purpose.
The memo concludes with a look at the changes at Tokwiro as a result of the two high-profile incidents. The company’s management team was revamped and three new security-related personnel were brought onboard. A new “Security Center” was developed to track abnormalities on the CEREUS network, which was launched on Tuesday morning, the same day as the world found out that the 60 Minutes story would air this week. The additions of a “Whistleblower Policy” and “Poker Security Department” were also highlighted.
A Code of Ethics was instituted at the parent company of Ultimate Bet and Absolute Poker, which “formally prohibits any employee or contractor for any Tokwiro business from playing for money on any Tokwiro site.” Account name changes are also generally not allowed. Finally, Tokwiro “discontinued the policy of ‘greenlighting’ VIP Pro players at cashout.”
Wednesday, November 26, 2008
Cheating Turkey Of The Year!
Now that it's Thanksgiving, it's time for my second annual Casino/Poker Cheating Turkey of the Year. In order to qualify, candidates must satisfy three main concerns:
1) Had to get caught (Obviously!) and prosecuted
2) His or her scam had to be either stupid or poorly conceptualized
3) The person had to have not only embarrassed himself but also others
The winner of the 2008 Cheating Turkey Of The Year is Ian McFadden, a London cab driver who signed a 4-man Russian roulette cheating team into various London casinos as his guest. While the Russians were using computers to determine where the roulette ball would land and thus cheat one particular casino, McFadden was roaming around the casino pickpocketing chips from gamblers at the tables. Unbeknownst to the cabbie, who was quite drunk, he picked the pocket of the leader of the Russian cheat team, whom he had signed into the casino as his guest! Surveillance caught the thievery on tape, and then when security agents questioned McFadden, he spilt the beans on the Russians! They all spent the night in a London pokey!
Happy Thanksgiving!
CBS "60 Minutes" Online Poker Cheating Piece To Air This Sunday! Don't Miss It!
60 Minutes To Air Report on Online Poker Cheats Sunday, November 30th!
It has now been confirmed that the story by CBS News program “60 Minutes” concerning the cheating scandals on Ultimate Bet and Absolute Poker will air this Sunday, November 30th. The story serves as the finale of a four month-long investigation by 60 Minutes as well as The Washington Post newspaper correspondent Gilbert Gaul. The piece is entitled “How Online Gamblers Unmasked Cheaters” and will hit the airwaves at 7:00pm ET on CBS.
A teaser video posted by 60 Minutes features an interview that correspondent Steve Kroft conducted with Todd Witteles, an online poker player who is better known as “Dan Druff.” Witteles commented on the Absolute Poker scandal, “This Graycat person was new and at first he seemed like a live one. He seemed terrible. He was raising just really, really bad hands against very good hands. He seemed to play crazy. He seemed like he was giving his money away, except the only thing was, he wasn’t losing.” Witteles explained why the run-in with Graycat on Absolute Poker was out of the ordinary: “He was playing in a style that was sure to lose, but he was killing the game day after day.”
The teaser video explains that Graycat was winning at 15 standard deviations above the mean, “which was approximately equivalent to winning a one in a million jackpot six consecutive times.” The POTRIPPER account was the proverbial stone that broke the camel’s back, making a famous 10-high call against Marco “CrazyMarco” Johnson in a $1,000 tournament in September of 2007. Observing POTRIPPER in action was Absolute Poker user number 363, which was later traced back to the company’s headquarters in Costa Rica.
The Kahnawake Gaming Commission released the following statement about the cheating scandal that plagued Ultimate Bet, which is owned by the same parent company as Absolute Poker: “The Commission found clear and convincing evidence to support the conclusion that between the approximate dates of May 2004 to January 2008, Russell Hamilton, an individual associated with Ultimate Bet’s affiliate program, was the main person responsible for and benefiting from the multiple cheating incidents.” In July, the Ultimate Bet account “sleeplesss,” which was one of the user names associated with the cheating scandal, was positively linked to a home owned by Hamilton in Las Vegas.
On Tuesday, the player bases of Ultimate Bet and Absolute Poker merged to form the CEREUS poker network. The delay in its launch may have been due to an ongoing legal battle in Canada between Tokwiro (the current ownership group of Ultimate Bet and Absolute Poker) and Excapsa (the former ownership group of UB). Tokwiro was awarded $15 million in the case, which was used to pay back players who had been wronged by the cheating scandal.
In a press release from November 5th, Tokwiro COO Paul Leggett stated, “Now that the main perpetrator has been named, the settlement with the previous owners is behind us, and players have received refunds, it should now be apparent that Tokwiro had no involvement in this cheating and that we have fought to correct it with every tool at our disposal.”
Tuesday, November 25, 2008
UltimateBet and Absolute Poker to Launch CEREUS in Attempt to Bring Back Credibility To Cheat-Victimized Sites and Bad-Beat Jackpots
The long-awaited CEREUS network will officially launch on Tuesday, combining the player bases of UltimateBet and Absolute Poker into one large pool. Members will likely remain playing on each individual online poker room. However, when they log on, patrons of UltimateBet and Absolute Poker will experience inflated traffic and an increased Bad Beat Jackpot. The launch of CEREUS was officially announced in July, just before the investigation into the cheating scandal at UltimateBet was completed. In addition, Tokwiro, which is the parent company of both UB and AP, recently won a $15 million judgment against the former owners of UB and used the money to refund players.
The July press release from UltimateBet explains why its customers will look forward to the launch of CEREUS: “CEREUS is the result of more than 12 months innovation and development. What does it mean for UB players? As part of the network, UltimateBet will retain all the unique assets that create the ultimate poker experience, but we will share more players, more action, more tournaments, and add incredible new features.”
In addition to increased player traffic as a result of customers from each site merging into one network, CEREUS will offer a much larger Bad Beat Jackpot for its poker customers. On Ultimate Bet, it currently stands at just over $287,000 and is growing minute by minute. It was last hit on November 17th for $200,000. On Absolute Poker, it was last hit on November 10th by MOKIEHUSKY, whose quad tens went down in flames, triggering the jackpot of $44,389. PocketFives.com has learned that the Bad Beat Jackpot may actually double in size when the CEREUS network is launched on Tuesday.
Ultimate Bet’s team of Star Players includes PocketFiver Cliff JohnnyBax Josephy, a World Series of Poker bracelet winner and 27th player on the PocketFives.com Online Poker Rankings. Also a member of the Star Players Team is Jim P0KERPR033 Campbell, the number eight ranked player on PocketFives.com. His second place finish in a $300 rebuy event during the ninth Full Tilt Online Poker Series was worth $157,000. Joining the squad in October was Adam Roothlus Levy, who made a deep run and finished 48th in the 2008 WSOP Main Event for $135,100.
It’s unknown exactly how the development of CEREUS will affect the guaranteed tournament schedule on UltimateBet and Absolute. PocketFivers went 1-2 in the UB $200,000 Guaranteed tournament this weekend, as irishgirl08 emerged victorious from the pack of 873 entrants en route to a $45,000 payday. Heads-up, irishgirl08 defeated yellowhat, who pocketed $27,000 for second place. Coming in sixth was mgerman23, who won $9,000, and rounding out the PocketFives.com contingent in the $200K Guaranteed on UB was ultimatekaos, who finished in eighth place for $5,000. The tournament has a $215 buy-in.
World Poker Tour Bellagio Cup IV winner Mike SirWatts Watson took fourth in the $150,000 Guaranteed on Absolute Poker, which is a $530 buy-in tournament that takes place every Saturday. Watson pocketed $12,000 for his efforts. Also reaching the final table of the $150K Guaranteed was o11pokerdr, who took sixth place and cashed for $6,750. The tournament is one of the few major events held on Saturday, as opposed to a Sunday affair like the $200K Guaranteed on UltimateBet and the Sunday Million on PokerStars.
Absolute Poker is also in the midst of running Gizmo freerolls, which are 2,500 point buy-in events that give away prizes like a Touchsmart PC, a Sony Portable DVD Player, poker chipsets, and Absolute Poker gear. The next Main Event takes place this Friday, November 28th at 8:00pm ET and a full satellite system is in place.
Three weeks ago, Ultimate Bet’s parent company, Tokwiro, won a judgment against the online poker room’s former owners, Excapsa, in the amount of $15 million. A press release available on UB’s site states, “Excapsa will pay US$15 million to Blast-Off Ltd., the Tokwiro-controlled company that originally acquired UltimateBet. This payment will be used immediately to refund players who were affected by the cheating scandal that Tokwiro inherited when it purchased the business from Excapsa.” It appears that the delay in launching CEREUS after its announcement in July may have been due to the ongoing legal proceedings, which were conducted in a Canadian court room.
UltimateBet is slated to distribute a press release about the launch of CEREUS this afternoon and we’ll bring you more details as we get them.
What Makes A Really Good Poker Or Casino Cheat Team?
So you’ re wondering what really makes a good casino cheat team? Just like any other enterprise, legitimate or illegitimate, poker and casino cheat teams have to be organized, and each member of the team should be limited to a single function that he needs to perform to perfection. In short, successful casino and poker cheating operations should be run like military operations, where each soldier in the platoon has a specific strategic function to perform against the enemy. Whether or not cheat teams consider the casino and poker room their enemies, they certainly have to carry out its operations as if fighting on a “green felt” battlefield.
To give you some insight into the workings of a professional casino cheat team, let me describe how my pastposting team carried out its roulette moves against the casino. Normally, we worked in a four-man/woman team. Two of the members worked solely as “checkbettors.” Their function was simply to place numerous bets across the roulette layout each spin in order to force the dealers to make specific physical movements that allowed our third member, the “mechanic,” the split-second necessary to do the actual move, which was to “pastpost” or place high-denomination chips on the winning number after it was determined. The fourth member of the team, the “claimer,” would claim the pastposted winning bet and collect the big payoffs from the dealer. The key to the whole operation was to limit the duties of each team member to a single specific function, which in turn limited the pressure on each person. A cheat team operating under minimal pressure always performs better. By operating in this manner, our team was able to beat casinos at their own game for decades!
To give you some insight into the workings of a professional casino cheat team, let me describe how my pastposting team carried out its roulette moves against the casino. Normally, we worked in a four-man/woman team. Two of the members worked solely as “checkbettors.” Their function was simply to place numerous bets across the roulette layout each spin in order to force the dealers to make specific physical movements that allowed our third member, the “mechanic,” the split-second necessary to do the actual move, which was to “pastpost” or place high-denomination chips on the winning number after it was determined. The fourth member of the team, the “claimer,” would claim the pastposted winning bet and collect the big payoffs from the dealer. The key to the whole operation was to limit the duties of each team member to a single specific function, which in turn limited the pressure on each person. A cheat team operating under minimal pressure always performs better. By operating in this manner, our team was able to beat casinos at their own game for decades!
Monday, November 24, 2008
Prison Poker Schools! What's Next For Card Cheats?
I have heard of some crazy ideas, but this one might take the cake! Prison authorities in the UK have set up poker schools for inmates...at taxpayers' expense. How can anyone in their right minds think that this is a good idea to occupy prisoners' time? About the only thing that would come to my mind in a poker game in this setting is cheating, right? Well, in any event, convicts at Saughton in Edinburgh waste hours on end playing on six tables with cards, stacks of chips and green felt mats bought for them. Gambling for money is illegal in prison but inmates keep a secret tab of cash won and lost. And brawls break out over cheating and unpaid debts.
Justice Secretary Kenny MacAskill has ordered a probe. He said last night: "This is unacceptable. I have asked the Scottish Prison Service to look into it as a matter of urgency. "Gambling is not allowed in prisons and inmates should be making better use of their time than running up debt. We must end this culture of free bed and board. Prison is a punishment for crimes. Many inmates play for tobacco and sweets but a Saughton source claimed cash changes hands." No kidding!
MacAskill went on to say, "Bosses maybe thought poker would keep cons occupied and off drugs. But it has made things worse. There are fights over allegations of cheating and unpaid gambling debts. Prison officers are thoroughly pissed off. There are at least six of these poker schools on the go from as early as the cons can get to them until they have to go back to their cells. But the officers have trouble getting them back to the cells if they are in the middle of a game - especially if they are losing at that particular time. Cons can buy into games using tobacco and sweets. But as there is obviously a shortage of cash in prison, cons are also buying in on the promise of getting money sent to whoever wins by family or friends on the outside. That doesn't always happen and it is inevitably a source of friction and fights. Next thing roulette wheels will be put in place, then a lap-dancing club in Saughton - because after this nothing would surprise us."
Church leaders, politicians and antigambling campaigners are "appalled" by the prison poker schools. Labour justice spokesman Richard Baker said: "It is appalling that convicted criminals are allowed to waste their days playing poker. I cannot understand the logic of the person who thought encouraging cons to gamble while in jail was a good idea."
Reverend Ian Galloway, convener of the Church of Scotland's Church and Society Council, said letting prisoners and their families run up debt made it even harder for them to change their lifestyle after prison. He added: "If prison is about rehabilitation then poker tables are clearly unhelpful." again, no kidding!
Gambling addiction support group GamCare said: "Prisoners are people at vulnerable stages of their lives so it does seem odd for prison authorities to give them gambling opportunities."
The Scottish Prison Service confirmed poker sets were part of the recreation equipment at Saughton - along with other board and card games. They said: "Poker is popular in culture outside of prisons. Gambling for money is, of course, forbidden and people will be reported if they are caught doing so."
Inmates have also been given Sony PlayStations and Nintendo Game Boy consoles. They can spend £20 a month getting prison staff to buy them luxuries.
What next..roulette wheels and lap-dancing clubs?
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