PPA Linked to Full Tilt / PokerStars SunFirst Bank Lobbying Effort, Part 4: The SunFirst Collapse

28th February 2013 // Legal News, News

In 2010, a two-pronged, informal lobbying effort, designed to garner legal support for the online-poker processing being run through the St. George, Utah-based SunFirst Bank, had its legal arguments presented to Utah Attorney General Mark Shurtleff.

The lobbying push enlisted the separate contributions of both Elite Debit’s Jeremy Johnson and the Poker Players Alliance’s executive director, John Pappas, both of whom had previous connections to Shurtleff. The effort was coordinated with the help of several prominent gaming lawyers connected to Full Tilt and PokerStars, for whom the Elite / SunFirst processing was by early 2010 a vital channel. Those gaming lawyers included A. Jeff Ifrah, Mark Zwillinger, Ian Imrich and Tom Goldstein, who collectively have worked with both Tilt and Stars as well as the PPA.

While the lobbying efforts were at first warmly received by Shurtleff and John Swallow, Shurtleff’s Deputy Attorney General, that changed after the other legal problems facing both Johnson and the SunFirst operation arose.

Here’s what Shurtleff e-mailed to Johnson in 2010, regarding the legality of the SunFirst / Elite processing: “Mark and I met today and we discussed it and he read it like I did. Can I call you tomorrow and we can talk about it? Utah law is less lenient than federal law. But I have some ideas that should help. Let’s talk tomorrow.”

A couple of months later, another e-mail confirmed the same train of thought, when Swallow wrote, “Jeremy, I am not aware of any such law in Utah to prohibit what you are doing. I’ll have one of our assistant Attorneys General look into it tomorrow. Let’s talk tomorrow.”

But by 2012, when Johnson was under federal indictment for marketing fraud related to his iWorks business empire, and the SunFirst online-poker processing had collapsed, with the Black Friday indictments exposing its inner workings, Swallow’s take on online poker had changed.

Here’s how the later conversation went, per the secretly recorded 2012 conversation between Johnson and Swallow, as published by the Salt Lake Tribune:

Swallow: I said it’s OK to process poker?

Johnson: Yeah.

Swallow: In Utah?

Johnson: Yes. And — and, John, it is — it is legal.

Swallow: No, it’s not.

Why the switcheroo? It seems to be the classic case of a politician getting cold feet. In December of 2010, the $275 million FTC indictment against Johnson and iWorks was handed down, only a few weeks after the FDIC concluded a separate action against SunFirst Bank, directly targeting the poker processing and ordering the Elite Debit operation to be shuttered.

The FDIC edict against SunFirst made headlines, but those didn’t even mention online poker, as in the case of this Reuters business blog story which warned of the dangers of banks doing third-party payment processing (TPPPs). The FDIC settlement with SunFirst in November of 2010 asserted that the Elite Debit processing scheme cooked up by Johnson and Chad Elie amounted to a violation of the Bank Secrecy Act, and that SunFirst was thereby assisting Elite Debit in a form of money laundering. Falsely coding thousand-dollar deposits as golf-ball purchases surely didn’t help.

That’s the sort of operation — meaning Elite Debit and SunFirst — that the PPA found itself lobbying on behalf of, an effort coordinated by the PPA’s two largest corporate benefactors which appears to run far, far afield from the PPA’s stated position as a grass roots lobbying organization benefiting United States poker players.

The basic question remains: Why would the PPA get involved in lobbying on behalf of such a shady operation?

It speaks to the desperation of the sites involved, meaning Full Tilt and PokerStars, but in retrospect it all makes very little sense. The very act of lobbying on behalf of the SunFirst operation, based in one of America’s most conservative, anti-gambling states, had to be considered a risk in and of itself.

The effort may also have even tipped off Shurtleff and Swallow of the Utah Attorney General’s office that other investigations were proceeding at the federal level into both of Johnson’s mega-million-dollar schemes, the iWorks marketing scams (largely based on “forced upsells” and fraudulent credit-card billings), as well as the Elite Debit poker operation, which by late 2010 actually put more money into Johnson’s corporate pockets than the iWorks empire.

If Utah AGs Shurtleff and/or Swallow placed any calls to federal officials to learn about “online-poker processing stuff,” and thereby entered into an exchange of information with officials from the FDIC, FTC or DOJ, it’s even possible that the PPA’s April 2010 lobbying hastened the arrival of the Black Friday crackdown itself.

The FDIC-ordered shuttering of the SunFirst / Elite Debit operation in November of 2010 left Full Tilt without a ready processing channel for its American players, thus creating the backlog of some $80 million in uncleared deposits that essentially caused the site’s post-Black Friday collapse.

In hindsight, the PPA’s actions can be viewed as a reckless and unwise effort on behalf of corporate interests that damaged players’ interests instead of helping them, and at the very least, it speaks of an utter lack of due diligence regarding the real nature of the Utah processing operation.

That, in turn, again raises the question of whether the PPA should be viewed as a lobbying group placing the players’ needs first, or is instead serving foremost as a tool for corporate masters. In a recent thread at the PokerFraudAlert forums hosted by Todd “Dan Druff” Witteles, PPA board member Rich Muny commented as follows:

“PPA is not in the tank for anyone. That being said, Druff said no one can start an effective poker group without outside donations, so it seems to be we have the best of both worlds — a subsidized advocacy effort and a player organization that is not in the tank for anyone but the players.”

The e-mails and lobbying history of the PPA on behalf of the SunFirst processing operation appear to contradict that assertion.

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