Part 4 of PokerNews' sit-down with Full Tilt's Howard Lederer (pictured) was rolled out late Wednesday afternoon and the 26-minute video began with the aftermath of Black Friday. As the ashes smoldered on the U.S. online poker market, Lederer and Full Tilt's management and ownership were trying to solve a shortfall of over $200 million in cash caused by a backlog of banking transactions. Check out PocketFives' recaps of Part 1, Part 2, and Part 3 of "The Lederer Files."When Lederer arrived at Full Tilt's headquarters in Dublin shortly after Black Friday, the backlog of cash was high on his list of priorities to discuss: "I felt like that was a question that would be #1 on my list of questions when I got to Dublin. There were a lot of other things that had to be dealt with… There were fires that had to be put out." For example, a U.S. Department of Justice seal graced Full Tilt's website.
Lederer and Chris Ferguson arrived in Dublin, talked, and were aware of the nine-figure shortfall. On April 21, the final financial report came out. On the shortfall amount, Lederer acknowledged, "It's a horrific number. The number in terms of the difference between the money owed to the players and the cash on hand was about $250 million."
"I never thought it was a mistake," Lederer said of the $250 million figure. Upon closer examination, out of a backlog of $134 million, only $10 million was still sitting in the accounts of the players who made the deposits in the first place. Lederer observed, "It's the best argument for skill in poker. The players who had been making deposits were losing poker players and the money didn't stay in their accounts."
Lederer and Ferguson originally thought that between $60 million and $70 million would be recoverable. In reality, the number was just $10 million.
Full Tilt's CFO, CEO, Ferguson (pictured), and Lederer were the only four people aware of the dire financial circumstances as of April 21. "The second we found out, there's no thought of trying to hide it," Lederer maintained. "It's figuring out how do we fix it." A Board meeting was called that had company lawyers like Barry Boss, Jeff Ifrah, and Ian Imrich. The group later convened in Ireland.Due to the fact that many of Full Tilt's members were "hostile" toward Bitar due to his alleged financial stumbles, Lederer did most of the talking on the conference calls. "Those early calls were difficult," Lederer said. "They weren't as productive as I would have liked them to be." For example, on the first call, Perry Friedman's lawyer represented him. Lederer reacted, "I was very concerned about the chilling effect that members like that would have on the group as a functioning entity."
"We were our own worst enemy," Lederer said of Full Tilt's ownership. "All of the owners that hadn't been active in management and been active in creating the shortfall, [for them,] it's very easy to feel like a victim in a situation like that. There are owners who were getting checks, thought the company was in great shape, and were now told there's $250 million missing… In situation like that, it's very difficult to get people to take responsibility for the problem."
Lederer maintained that the ownership was divided on their approach to the shortfall: "No matter who was actually culpable in creating the problem, we own the company. We were responsible and there were a number of owners who understood that… We had another group of owners who were much more interested in trying to figure out who was at fault. The problem with that way of thinking is if we figure out who is at fault, how is that going to get anyone paid? How is that going to solve the problem? The only thing that mattered was getting our customers paid. That was our moral responsibility to the poker community."
This author remembers writing about a rumored Full Tilt deal involving casino icon Jack Binion (pictured). Lederer said its draft called for a 40% dilution of ownership for $150 million. However, the deal didn't go over well with Full Tilt's investors: "While I was reading it, I almost got booed off the phone. I had to stop because I couldn't continue reading for a bit. I kept getting interrupted by everyone." Lederer added that Gus Hansen served as the voice of reason, asking members to quiet down so "The Professor" could read the terms.Why did a deal, which eventually occurred with PokerStars, take 15 months if the financial situation was so grim? Lederer asserted, "I was just one voice out of many… In early May 2011, I did bring up the issue of time and urgency… I thought there was serious urgency and we should take the first best offer we could get. I thought we needed to try our best to try to complete that deal by the end of May… When I made that suggestion, it didn't go over well with the members. They didn't want us to panic and take the first deal."
Full Tilt was still operating in May 2011, one month before the Alderney Gambling Control Commission suspended its license. Lederer reminded investors, "My point was we don't have time. You never know when another shoe will drop. In particular, I was concerned about the World Series of Poker. I thought that when the WSOP started, there would be a echo chamber of negative publicity for the company." Little did Full Tilt know how loud the echo chamber would become.
Look for more installments of "The Lederer Files" on PokerNews in the coming days. React to the interview in our thread in Poker Community.
