Kentucky judge issues $290M judgment against PokerStars & Amaya (now Flutter Entertainment)

It took quite a bit of work, but I was able to obtain the actual judgment as written by Judge Wingate (Franklin County, KY) last month. The core reason Wingate issued the $290 million partial summary judgment, according to what he wrote, is that the pre-Amaya PokerStars did everything possible to keep from providing Isai Scheinberg and Pinhas Schapira for depositions. According to what Wingate wrote, Scheinberg's reps agreed to have him be deposed from London on June 3rd, but Scheinberg refused to show up for it.

Lots of outtakes and additional info here (an I'm sure Druff won't mind this link):

http://www.flushdraw.net/news/unobta...ucky-judgment/

Assuming the judgment isn't overturned somewhere down the road, that leaves Amaya needing to claw back the money from Scheinberg and other former Stars owners.

Amaya has already publicly responded, shows no sign of caving soon, but worst case will go after the former owners for recovery.

http://finance.yahoo.com/news/amaya-...065800010.html

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Amaya intends to vigorously dispute any liability that may be ordered at the trial court level, and believes that there are a number of compelling legal arguments reserved for consideration, including, without limitation, the lack of standing to bring this proceeding in the name of the Commonwealth and the Court's failure to properly apply the law.

To the extent the PokerStars entities may be ultimately obligated to pay any amounts pursuant to a final adjudication following exhaustion of all appeals and other legal options, Amaya intends to seek recovery against the former owners of the PokerStars business.

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A first guess is that KY and Amaya are likely to settle within about a year (when is that AG up for reelection?) for about 15% of the $290m, or about $40-$45m. KY's AG looks like a crime fighter, Amaya can turn around and seek recovery from Isai et al, and the net cost is a tiny fraction of Amaya's $2.6b market value.

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Originally Posted by MumblesBadly

Amaya has already publicly responded, shows no sign of caving soon, but worst case will go after the former owners for recovery.

http://finance.yahoo.com/news/amaya-...065800010.html

Quote:

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Amaya intends to vigorously dispute any liability that may be ordered at the trial court level, and believes that there are a number of compelling legal arguments reserved for consideration, including, without limitation, the lack of standing to bring this proceeding in the name of the Commonwealth and the Court's failure to properly apply the law.

To the extent the PokerStars entities may be ultimately obligated to pay any amounts pursuant to a final adjudication following exhaustion of all appeals and other legal options, Amaya intends to seek recovery against the former owners of the PokerStars business.

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A first guess is that KY and Amaya are likely to settle within about a year (when is that AG up for reelection?) for about 15% of the $290m, or about $40-$45m. KY's AG looks like a crime fighter, Amaya can turn around and seek recovery from Isai et al, and the net cost is a tiny fraction of Amaya's $2.6b market value.

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Yeah, Eric H. sent me that quote yesterday as well; it's up in an earlier FD piece. I wasn't too worried about reading the tea leaves whuile writing that story, as I wanted to focus on Wingate's order and opinion. I'd guess your estimated settlement to be on the conservative side, just because of all the pressure Kentucky can cause to Amaya's US growth plans. But that stuff is a different story. Maybe tomorrow.

This should be on the former owners unless the sale of the company paperwork states that Amaya take on all past debts and legal related issues. If that is the case the parties filing claims can legally go after the new owners for past debts instead of being forced to go after past owners which all they will care about is getting paid since this is an act of dirty, yet legal extortion by Kentucky

When it comes to money sometimes it don't matter who has to pay it so if Amaya agreed to some weird terms when purchasing the company then perhaps they screwed up royally and won't have a case against the former owners.

Was Kentucky the same state as the one which once took Bodog's domain? Or was that Kansas?

BTW, Haley, you're correct... never mind relevant links to other sites. I'm pretty much the opposite of Mason, in that and many other ways.

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Originally Posted by haleylh

Quote:

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Originally Posted by MumblesBadly

Amaya has already publicly responded, shows no sign of caving soon, but worst case will go after the former owners for recovery.

http://finance.yahoo.com/news/amaya-...065800010.html



A first guess is that KY and Amaya are likely to settle within about a year (when is that AG up for reelection?) for about 15% of the $290m, or about $40-$45m. KY's AG looks like a crime fighter, Amaya can turn around and seek recovery from Isai et al, and the net cost is a tiny fraction of Amaya's $2.6b market value.

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Yeah, Eric H. sent me that quote yesterday as well; it's up in an earlier FD piece. I wasn't too worried about reading the tea leaves whuile writing that story, as I wanted to focus on Wingate's order and opinion. I'd guess your estimated settlement to be on the conservative side, just because of all the pressure Kentucky can cause to Amaya's US growth plans. But that stuff is a different story. Maybe tomorrow.

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I base my estimate on a couple factor:
1) Amaya has legal means to drag this out to where they MUST pony up a check, including making KY fight for collections of Amaya's assets in other states.
http://www.ccaacollect.com/images/enforcing.pdf

2) I'm guessing that KY's AG probably would like a victory feather before the next election... (Checking election timetable)... which is...

URP! The most recent election was just last month! And the next one isn't until 2019!
https://ballotpedia.org/Kentucky_Att...election,_2015

And KY's AG is new to the office. So he has time to play hardball with this matter. With that, both the time frame and estimated settlement amount I gave yesterday *are* conservative. So, let's double the time frame (2 years) and increase the amount to about 25%: $70-$75m.

Quote:

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Originally Posted by BeerAndPoker

This should be on the former owners unless the sale of the company paperwork states that Amaya take on all past debts and legal related issues. If that is the case the parties filing claims can legally go after the new owners for past debts instead of being forced to go after past owners which all they will care about is getting paid since this is an act of dirty, yet legal extortion by Kentucky

When it comes to money sometimes it don't matter who has to pay it so if Amaya agreed to some weird terms when purchasing the company then perhaps they screwed up royally and won't have a case against the former owners.

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This would be very surprising.

Next story is up, in which Judge Wingate goes off on PokerStars for having "fleeced" Kentucky and its players. Plus, Oldford Group and Rational Group extended an "invitation" (love these scare quotes here) to extend 5th Amendment privileges against self-incrimination to... overseas corporations.

Between the 5th Amendment and the fleecing stuff I still think the thread belongs in Flying Stupidity, but whatever.

http://www.flushdraw.net/news/more-k...nt-protection/

Quote:

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Originally Posted by haleylh

Next story is up, in which Judge Wingate goes off on PokerStars for having "fleeced" Kentucky and its players. Plus, Oldford Group and Rational Group extended an "invitation" (love these scare quotes here) to extend 5th Amendment privileges against self-incrimination to... overseas corporations.

Between the 5th Amendment and the fleecing stuff I still think the thread belongs in Flying Stupidity, but whatever.

http://www.flushdraw.net/news/more-k...nt-protection/

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The notion that Pokerstars owes the penalty based on what the players lost is ridiculous because Pokerstars wasn't the winner of the money. This really is a case of abuse of the justice system to commit a form of commercial extortion.

Quote:

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Originally Posted by haleylh

Next story is up, in which Judge Wingate goes off on PokerStars for having "fleeced" Kentucky and its players. Plus, Oldford Group and Rational Group extended an "invitation" (love these scare quotes here) to extend 5th Amendment privileges against self-incrimination to... overseas corporations.

Between the 5th Amendment and the fleecing stuff I still think the thread belongs in Flying Stupidity, but whatever.

http://www.flushdraw.net/news/more-k...nt-protection/

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On the other hand, 5th Amendment rights do not apply to civil cases. It is a civil right applicable to criminal prosecution, not civil suits, which is what this case is.

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Among the purported, blatant delaying tactics employed by Rational Entertainment and Oldford Group lawyers were such hilarities as PokerStars and its parent companies supposedly having a right to not testify in the case under the language of the Fifth Amendment to the US Constitution, an important civil-right tenet of US law that prevents individuals from having to testify against themselves.

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The lawyers for Pokerstars obviously knew this, but purposely delayed by arguing this "civil right". If I had been the judge, I would have taken every opportunity to spank Pokerstars for such a bullshit maneuver. And Wingate probably did all he could in that manner without damaging the merit of his ruling.

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Judge Wingate barely shielded his indignancy in referring to his dismissal of the Oldford/Rational claim. “This leads to the Court’s third and final finding,” Wingate wrote, “that Oldford and REEL’s objection to written discovery — specifically, that the privilege against self-incrimination should be extended to corporations — can barely be characterized as legitimate.”

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Here is a summary discussion of this matter using federal case law.
http://www.litigationandtrial.com/20...se-inferences/

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Second, although in a criminal procedure, the court must instruct the jury that it cannot draw an inference of guilt from a defendant’s failure to testify about facts relevant to his case, Griffin v. California, 380 U.S. 609 (1965), in civil cases, “the Fifth Amendment does not forbid adverse inferences against parties to civil actions when they refuse to testify in response to probative evidence offered against them.” Baxter v. Palmigiano, 425 U.S. 308, 318 (1976).

The rule under Baxter is akin to Cicero’s maxim, “Though silence is not necessarily an admission, it is not a denial, either.” That is to say, an opposing party can’t simply point to the silence and claim victory in their civil case, but a court is entitled to draw adverse inferences against the party that “pleads the Fifth.” (Justice Brandeis said: “Silence is often evidence of the most persuasive character.” United States ex rel. Bilokumsky v. Tod, 263 U.S. 149 (1923)). Thus, pleading the Fifth in a civil case in federal court is never helpful, is rarely harmless, and is typically very damaging — indeed, it’s often fatal to the party’s claims or defenses.

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The battle over the damages is interesting.

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Widely-Diverging Damages Total Not Finalized

As the temporary summary judgment states, the amount of the judgment rendered is tentatively set at just over $290 million, which could then be trebled under the statute used in the case. Neither side is happy with that number. Kentucky actually wants about $535 million, which could be then trebled to nearly $1.608 billion, while Amaya asserts that Wingate’s calculation method is invalid. Amaya suggests a $20 million figure that’s more in line with PokerStars’ reported revenue from the state during that period, about $18 million.

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Amaya might have committed themselves to a minimum settlement of $54m given its admission that it earned $18m from KY customers, and treble damages apply. And that is ignoring interest from the period of the offense to when the case is settled.

Because it's not likely to cost Amaya relatively much to keep fighting, I'm still guessing a $70-$75m settlement if KY's AG wants to wrap this up relatively quickly (within a year or two), but the amount KY will settle for will go up as the calendar advances towards the next re-election season (3 1/2 years), as a low figure relative to the judgement (even $75m) could look to voters like blatant caving to "corporate" interests.

By the way, I did a Steve Harvey. With all due apologies (and the story has already been corrected) it was Mark Scheinberg who failed to show for the deposition, not Isai. It wasn't quite as bad as Harvey's maybe-intentional gaffe, since Mark Scheinberg's name was mentioned in full only once, in a footnote, and there were a ton of main-body references to "Scheinberg" in the order. It's all corrected now, and it should propagate through Google soon enough.

There is also more up today on how the depositions may have been erroneously ordered anyway, plus a long excerpt that shows Judge Wingate getting his judicial undies in a bunch.

http://www.flushdraw.net/?p=8529

BUMP

Kentucky Supreme Court reinstated the judgment against Pokerstars, who is now on the hook for over 1 billion dollars.

https://www.onlinepokerreport.com/46...kerstars-fine/

Cliffs:

- In 2013, Kentucky sued Pokerstars for operating illegally, and used an antiquated law called "Loss Recovery Act", which allows states to reclaim triple the losses of Kentucky residents' total loss to gambling operations. It was found that Kentucky residents lost a total of $290 million on Stars -- but laughably these same players' winnings were ignored! Thus, a guy who lost a $1000 pot and then won a $3000 pot would still be considered a $1000 loser! After tripling the amount, it became $870 million, and Kentucky won the lawsuit in 2015.

- The state Court of Appeals struck it down in 2018.

- The state Supreme Court just reversed the appeal, and Pokerstars is back on the hook -- including another $330 million of interest, for a total of $1.2 BILLION!

- Pokerstars claims they are going to fight this, but it's not clear how, given that this was a state Supreme Court ruling


Pokerstars actually only raked $18 million from Kentucky residents, which makes this judgment pretty outrageous.

BUMP AGAIN

Pokerstars just lost the appeal, and it looks like $100m in bonds which Pokerstars put up in escrow are about to be seized. Then they'll still be on the hook for another $1.2 BILLION!

Uh oh!

https://www.pokernewsdaily.com/flutt...-action-34381/

This can be a yuuuuuuuuuuuuge problem.

It's possible the US Supreme Court will hear the next appeal, but not that likely. If that fails, then it's a done deal. Pretty damn unfair, to be honest, but this is the chance Pokerstars took by operating illegally for 4 1/2 years.