Excapsa Told to Pay Up in UltimateBet Scandal
November 4, 2008 (InfoPowa News) — In Canada, The National Post reported at length Tuesday on an important Ontario Superior Court judgment in a civil action tied to the UltimateBet "hole card" cheating scandal which saw thousands of online poker players cheated out of millions of dollars while using software that was developed by Excapsa.
With a former Ontario premier and a one-time Royal Canadian Mounted Police commissioner on its board of directors, Toronto-based Excapsa Software Inc. sold its assets in 2006 to former Mohawk grand chief Joe Norton's Tokwiro Enterprises.
Excapsa is currently undergoing liquidation proceedings in the Ontario Superior Court, and has been tied to the UltimateBet debacle.
The National Post reports that Superior Court Justice Sarah Pepall this week approved a settlement that will see Excapsa shareholders pay US $15 millon to Blast Off Ltd., the company owned by ex-chief Norton that runs UltimateBet. Blast Off says it desperately needs the cash to refund the many players cheated while playing online poker between 2004 and 2008.
In September, an independent enquiry commissioned by the Kahnawake Gaming Commission found "clear and convincing evidence" of "multiple cheating incidents" on UltimateBet between May 2004, and January 2008. A "tool" that allowed insiders to see opponents' hidden cards had been inserted into the site's software, the court was told. The enquiry identified U.S. professional poker player and former WSOP champion Russell Hamilton, a former consultant to UltimateBet, as "the main person responsible" for the cheating.
Hamilton has not been charged with any criminal wrongdoing, and he has not responded publicly to the Kahnawake Gaming Commission's allegations.
The site has already paid out US $6 million, but has calculated that it owes at least another US $9 millon to people who were cheated through the hidden tool in the Excapsa software.
David Peterson, the former Liberal premier of Ontario who served as non-executive chairman of Excapsa in 2006, said in an interview that the board of directors had no idea that one of the company's most valuable assets had been rigged to allow cheating. He is no longer involved with the company and said he is 'not sure' whether he continues to hold shares.
Sheldon Krakower, the court-appointed liquidator for Excapsa, said Monday's decision by Justice Pepall will allow UltimateBet to stay in business and refund all cheated players.
The National Post reports that, according to documents filed by the liquidator, ex-chief Norton initially sought US $81.4 million in damages for being sold corrupted software. That figure included US $5 million for harm to Norton's reputation and US $49 million for damage done to the company's value as a result of the cheating controversy.
Blast Off Limited alleged that Excapsa "had knowledge of the [cheating] tool" before the 2006 sale but failed to disclose its existence. Excapsa officials have denied any knowledge of the fraudulent software. The cheating was uncovered this year when online poker playing sleuths found that certain UltimateBet accounts were enjoying astronomically high success rates.
The Excapsa sale followed a September 2006 crackdown on online gambling by the U.S. Congress. Blast Off agreed to pay US $130 million, with US $10 million paid up front and the remainder in installments through 2012. Blast Off stopped making payments last December when the cheating scandal surfaced.
Krakower's own investigation persuaded him that Blast Off had a "valid claim" against Excapsa because the cheating tool was in place when the company and its software asset was sold.
He advised shareholders that fighting Blast Off in court would likely mean an end to payments of the US $109 million still owed from the original sale and could wipe out Excapsa's cash funds of US $36 million.
Krakower acknowledged that the incident continues to leave "a bad taste" with online gamblers.
"How many of these situations might exist that people are not finding?" he said in an interview with The National Post. "The good message, and the message that UltimateBet wants to send, is that it not only cleaned up and took out the tool, but it's refunding players, many of whom probably don't even know that they were cheated and probably don't have the proof."
A detailed analysis was conducted on millions of poker hands to identify who lost money while playing against the cheaters. UltimateBet says their accounts will be refunded.
This is the second cheating scandal to hit gambling sites owned by Norton. In January, Absolute Poker was fined $500,000 by the Kahnawake Gaming Commission after another case in which insiders tampered with software to allow them to cheat. The commission never named the cheaters in that case but said they were not part of the current management. The UltimateBet cheating landed Norton's Tokwiro Enterprises company a $1.5 million fine.
The National Post opines that the cheating scandals have damaged Kahnawake's reputation as a regulatory hub for online gambling. In January, the British government announced that it had refused to add Kahnawake to a "white list" of jurisdictions permitted to advertise online gambling in the lucrative U.K. market.
Norton declined comment when contacted by the newpaper, and the Kahnawake Gaming Commission did not return phone calls.