Monthly Archives: November 2008

Washington Post Story Goes Online

The story is available here:

http://www.washingtonpost.com/wp-dyn/content/story/2008/11/29/ST2008112902159.html

I’m reading it now, I will post some comments about it in a few minutes once I get through it…

EDIT with comments… I’ll do it in list order:

  1. The article says a lot of typical mainstream media (MSM) stuff like: “Dozens of these sites are located in countries with no reporting requirements.“  Okay, sure… but then it fails to mention that there are dozens more who are publicly traded and have very strict reporting requirements.  And also fails to mention the ones who are regulated by the non-KGC licensing bodies, some of whom are very strict from what I’m told.  It’s just typical MSM bias to call online poker “shadowy” when, in fact, only parts of the industry are shadowy (but fail to mention the good side).
  2. Page 1 also says: “AbsolutePoker and UltimateBet operate out of a shopping mall in Costa Rica.”  Could they make it sound more like a two-bit operation?  To the 99% of you who’ve never seen AP/UB’s offices, they’re actually pretty impressive.  Their main office (which is NEAR a mall) is a five or six story large building.  It’s one of the most impressive office buildings I’ve seen in Costa Rica and a realtor told me the building cost in the $10 million range (although it’s possible that the realtor made that figure up).  Hundreds of AP/UB employees work there.  They also have a few smaller offices which don’t resemble a mall at all.  I have no idea why Gil Gaul would say they “operate out of a shopping mall” unless he wanted to make them sound less professional.  Note that I am not saying AP/UB was a professionally run organization (it wasn’t)… but they don’t work out of a shopping mall, I’m sure of that.  He also says it again later on, so it wasn’t like it was a mistake: “Hundreds of customer service employees worked at its office in a mall in San Jose, Costa Rica, and at a smaller office in Panama.
  3. On Page 3, Gaul says the following: “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.“  That’s an absurdly bad journalistic error.  POTRIPPER won $10,000 more than Marco.  I would even let “collecting $30,000” slide because it makes sense to most people to say that, even though the economic reality is that they’d both already made $20,000 and the heads up match was only for $10,000.  But to say $428,520 shows a severe misunderstanding and lack of research.  I’m sure that 428k was the amount of tournament chips that POTRIPPER won or something like that.  This stuff tilts me… it makes it sound way worse than it was from a $ perspective.
  4. About myself, he says the following on Page 4: “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.“  Meh, I guess I can let that slide.  It’s close, but that isn’t what we did.  I never once looked at betting patterns.

Overall, I think he did a pretty good job.  It’s clear that the story was written quite awhile ago due to the lack of focus on UB as opposed to AP.  I’m not sure if 60 minutes will have the same skewed approach.  I know they did a bunch of interviews awhile ago, so it’s unclear to me exactly how updated everything will be.

I will post my thoughts on the 60 Minutes piece as soon as I see it (which should be Sunday night, but it depends on if I’m around a TV when it’s on or if I have to watch it online later).

EDIT #2:

I just found a bunch more stuff about the whole thing, including a part about my Absolute Poker Cheating Scandal blog.

Here’s the link about my blog:
http://www.washingtonpost.com/wp-srv/investigations/poker/arem-hands.html.

Also, here’s a link to the main landing page for the AP/UB stuff:
http://www.washingtonpost.com/wp-srv/investigations/poker/

I no longer think it’s as skewed or incomplete, although I hope Gil fixes the line about POTRIPPER winning 428k. Also, I wish there was more information about the good sites in online poker to show that it isn’t all bad.

Ultimate Bet Memo about 60 Minutes

This is an Ultimate Bet memo that was sent out today to employees. It was titled “Re: 60 Minutes Television Program” and it came from the desk of Paul Leggett, the COO.  It was forwarded to me by a UB employee.

Here are the contents of the memo:

As you know from previous communications from me, the CBS television show 60 Minutes is preparing a program on recent events involving Absolute Poker and UltimateBet; and on online poker in general. According to the CBS 60 Minutes email alert, the program will air this Sunday, November 30th. 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.

Because of 60 Minutes’ apparent bias against Tokwiro and online poker, we have decided not to appear on camera. We have, however, had many conversations with the program’s producers. We provided them with extensive background materials and documents, and we answered questions on-the-record, but off-camera. Despite all this, it is not likely that our views will be properly represented. Therefore, it is important that all of our staff know the following facts about our company:

  • Tokwiro Enterprises, ENRG, is the full and sole owner of both Absolute Poker and UltimateBet. Joseph Tokwiro Norton is the full and sole owner of Tokwiro Enterprises.
  • Incidents of cheating at both Absolute Poker and UltimateBet were fully reported and investigated by Tokwiro, by the Kahnawake Gaming Commission, and by third parties engaged by Tokwiro and the KGC. As soon as Joe Norton realized that cheating had occurred, he took immediate and appropriate actions.
  • The KGC’s investigators have acknowledged that Tokwiro, as a corporate entity, was not involved in and did not benefit from the cheating.
  • The date range, financial extent, and methods used in the cheating are now known and understood.
  • 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.
  • Tokwiro has no interest in protecting or shielding the cheater in the UltimateBet incident in any way. We vigorously pursued the Company’s legal options in this case, and won a $15 million settlement from the previous owners. The alleged cheater, who was named in the September 2008 KGC statement, has never been an employee of Tokwiro; nor has he been an employee of AP or UB since our purchase of these companies.
  • The perpetrators in the Absolute Poker and UltimateBet incidents were different individuals who were not working in concert, and who used completely different methods to cheat.
  • We have now completed all reimbursements to affected players. Everyone, who was a victim of these schemes, has now been made whole. We have paid out millions of dollars to customers who were cheated.

We should also be mindful of the fact that we have taken a series of actions that are designed to ensure that this kind of cheating can never again happen on our sites. You are well aware, I am sure, of many of these, but 60 Minutes may very well ignore them in its program.

  • Joe Norton completely restructured the management team as soon he became aware that cheating had occurred on the AP site. The new team brought in a Compliance Officer and two Security Managers, and it established risk assessment procedures and ongoing internal audits.
  • We have developed a new Security Center that incorporates gaming statistics, new security software, and human analysis and oversight to catch and prevent potential cheating.
  • UltimateBet and Absolute Poker have been moved to a common software platform, CEREUS, which will facilitate monitoring of the system and tracking of any suspicious activities.
  • We have also established a new, specialized Poker Security Department, in addition to the existing general security department.
  • We hired outside gaming industry analysts to do a full audit of all software code and internal practices, and to make recommendations about best practices.
  • We instituted a Whistleblower Policy to formally protect Tokwiro employees and contractors who report any suspicion of cheating.
  • We developed a Code of Ethics that formally prohibits any employee or contractor for any Tokwiro business from playing for money on any Tokwiro site.
  • We discontinued the policy of “greenlighting” VIP Pro players at cashout.
  • We have forbidden account name changes except under very specific circumstances (such as abuse in a chat room).

Because of the actions we have taken, Absolute Poker and UltimateBet are now two of the safest places to play poker online, and we are committed to keeping them that way. We believe that our loyal customer base will understand this, even if 60 Minutes does not.

Regardless of how the 60 Minutes producers may choose to slant their show, we at Tokwiro are confident that we have acted with diligence and transparency in addressing these crises, and we will continue to do so. We have tried to tell the story of how the cheating occurred in a complete and transparent way; I myself have sat for an extensive interview with Susan Reisler, a former anchorwoman for the Canadian Broadcasting Corporation, and answered questions in depth. You can watch this interview on YouTube at http://www.youtube.com/watch?v=srcc5AJMP1I, or on Tokwiro’s corporate web site, http://www.tokwiro.com. I have also posted my thoughts regarding the cheating scandal on my personal blog at http://blog.ultimatebet.com/2008/11/rebuilding-a-brand/.

This last year has been a difficult one for our Company. We – both our customers and our employees – have been the victims of not one, but two, sophisticated fraud schemes that have cost us millions of dollars and have tarnished the hard-earned reputations of our stellar brands. Joe and I want to thank each and every one of you, our valued employees, for your commitment, trust and confidence. Because of you, I firmly believe that we have emerged from these trials as a stronger, more focused and more secure company than ever, ready to provide an unequaled poker experience to our thousands of loyal customers.

Thank you.

60 Minutes Piece Finally Happening

After months of delays, the 60 Minutes piece about Absolute Poker and Ultimate Bet is finally going to happen this weekend.

The CBS website has the following teaser clip:

What I saw on that clip is pretty much what I expected, no huge surprises. I’m still curious to see the whole piece — and I’m sure most of the poker world will be glued to the TV this Sunday night to see how the whole thing plays out.

This (60 Minutes considering Absolute Poker story) is the original post that I made about the story way back in March. Over eight months later, here we are…

What do you think will happen?

New Colors + Archive Pages

If you’re one of the people who comes to my blog (as opposed to using a feed reader), then you might notice that I changed up the colors of the design a bit. It’s still the same layout, but I changed images and the stylesheet. I just like a lighter look than I had before — it was something I was planning on doing ever since I switched templates, but this was just when I had time and motivation to change everything.

Also, I added some archive pages to make it easier to find old posts.

Here they are:

All of the posts are organized date descending and hopefully this will make it easier to find everything. I’d also added them under the “Archive” tab on the right in case you’re ever looking for a specific post.

Typical Human Fallacies: Breaking Even

I’ve been thoroughly baffled by the tendency of humans to want to break even on things that are compartmentalized in their mind — often at the expense of mathematical expectation.  This sort of thing rears its head in poker very often.  I hear the following statements from new/bad players all the time:

  • I just never leave a table while I’m down, so I can’t lose
  • I make sure that I win every day.  If I win a big pot at the beginning of the day, I quit to lock up the win.  If I’m down, I keep playing until I’m back to even for the day.

There are lots of variations of those statements, but they’re all similarly retarded.  New players bring a mathematically lacking attitude to the game of poker.  I always try to explain that you should make the decision to play or not play without regard for your past results over the last hour/day/week/month.  Instead, your decision should be based on the game conditions, your mindset (ie, if you’re tilted), bankroll and other factors.  If your next hand should be profitable (ie, you’re playing well, there are fish at the table and you’re bankrolled), then you should play.  If you leave tables like that because you won a few big pots and you want to lock up the win, then you have a lot to learn.

So why am I writing about this now?  Well, I work with some guys here in Costa Rica who’ve done very well with Poker Source Online and the other websites that they own.  They all invest in the stock market and, at dinner last night, we were discussing various stocks.  One of them said something like “I bought more of that to bring my average cost down”.  I sat there thinking…. “seriously, is that his investment strategy?”.  So I said that I feel like the whole idea of averaging cost in a stock is retarded and makes zero sense.  Instead, each purchase of a block of stocks should be evaluated separately without regard for a previous purchase or sale.  As I said in the opening sentence of this blog, people like to keep “compartments” of profit/loss centers in their life and for some reason, these guys keep individual stocks in compartments.  They expressed back to me that they think it’s a bad investment strategy to take a loss in a stock.  I asked about the following scenario…

Let’s say you invest $20,000 into a stock.  1000 shares at $20 per share.  You make this investment because you feel that the fundamentals of the stock support a $20/share price.  Then some bad news hits and the stock drops to $14.  You buy another 1000 shares for $14,000 because you feel it’s a good stock at $14.  Then the stock goes to $16.50.  What do you do?

I asked if they would sell the stock under the assumption that they feel that $16.50/share is a fair price for their 2000 shares at that point in time.  They said no and that it’s a bad investment strategy.  I was kind of in shock.  That makes so little sense to me it’s just ridiculous.  What does purchase price have to do with sale price from a mathematical expectation standpoint?  Absolutely nothing.  In addition, they stated that part of their reason for buying the stock at $14 would be to “average their cost down” to $17.  Once again, that’s retarded.  Averaging costs is so dumb I can’t even express how retarded it is.  What the hell does either purchase have to do with the other one?  The answer is that they should not be related.  Each purchase should be evaluated on its own merits.  Each sale should be evaluated on its own merits.  Attempting to break even or win on every stock at the cost of EV is bad investment strategy, plain and simple.

The bad part about people who insist on breaking even is that they have nothing to back up their strategy except “god this math you speak of is annoying and my brain hurts” or “there you go again with your EV and expectation stuff” or “but how can I lose?” or any other silly statement.  It’s usually better to simply laugh at them and let them donk on.  Of course, the good part about these people is that, in the process of them giving up expectation, that makes the world more profitable for intelligent poker players and investors.  So maybe I should stop tapping the glass?

Earthquakeaments

I flew into Costa Rica earlier this evening from Houston.  I’ve basically just been unpacking, catching up on a few things around my condo and relaxing before heading to bed.  A few hours ago, I was just sitting down to eat a snack when I suddenly felt the floor shaking.  A few things in my condo were rattling and I was freaked out for a second — then I realized it was an earthquake.  That was the first time I’d ever felt an earthquake where I actually felt the floor moving and shaking underneath me.  Some of the first news reports about the earthquake are starting to hit the news wire… See this link: http://news.bbc.co.uk/2/hi/americas/7736933.stm.

Judging from this page on Google Maps (link), the epicenter was only a little over 100 miles from where I live near San Jose.

I’m sure that a lot more news will appear tomorrow regarding damage and other earthquake fallout. I’ll definitely be following it…