Sincere Apologies on My Own Behalf and on Behalf of Bear Hug Poker to Mr. Ivey

Henry Jacobson, Bear Hug Poker

I guess I should have known.  With my particular lifetime of experience, I should have been able to smell this rat. I have really screwed up and embarrassed myself and Bear Hug Poker. Sincere apologies on both my behalf and the company I work for to Phil Ivey for just getting this one so so wrong in my blog post of April 18. Phil Ivey is just too smart and too much of a stand-up guy for me to have put myself on the wrong side of this issue. As for Poker News and the way it reported the history and causes of litigation relating to this case in its April 11 article, shame on you, too.  I will approach your reporting in a far more circumspect manner in the future. But let’s not spread the blame for my gaffe. It is my own and in the process I have besmirched the reputation of one of the good guys and one of the all-time greats. I won’t ask for forgiveness because I don’t deserve it. I saw red meat and like a hungry wolf I lunged at it. I’m an asshole. I have more information now and the pieces fit together in a way they did not before. Phil Ivey’s actions are fundamentally no different than those of Don Johnson’s (the guy who knocked over the Borgata for 15 million playing blackjack). Both players took advantage of what the casino was willing to give them. The fact that both of these events happened at the Borgata, is not an accident. Like Johnson, Ivey understands the lay of the land better than the industry itself.Both players understood that Atlantic City had found itself at the bottom of the gaming food chain and had become “Desperation City”. Both players understood that the Borgata was horny for any whale-level action it could find – even if the whales were killer sharks.Both players simply took what the casino gave them and used those edges to exploit them. Not unlike a superior poker player identifying a leak in a weaker player’s game and exploiting it until the cows come home. It can take a long time for the cows to come home, just as it can take a long time for a bad poker player to make the adjustment necessary to counter-act the exploitive strategies a superior player. The Borgata and, for that matter Crockfords, have no one to blame but themselves and should pay up to Mr. Ivey.

The key here, of course, is culture. Mac Verstandig, the brilliant attorney who contributed the piece to Poker News that got me straightened out, doesn’t talk a lot about culture in his article. He alludes to it, and that’s enough for a lawyer to do. But I am not a lawyer, I am a life-long student of the human condition. I observe and I bank my observations in my sub-conscious from where I will later recognize how the observations I have banked apply to a specific situation and then I will use that intuition to exploit an opponent whether that be in the card room or the board room. I’m the kind of guy you want on your team– and that’s the last time I’m going to pat myself on the back in this blog.

To say a little more about culture and the aspect of culture we call superstition, it is rife throughout the casino business. Just watch a movie called The Cooler, starring William H. Macy, and you will see a moving example of how the house, not only the player, embraces that slippery slope called superstition. And while some of you may believe that the house is past superstition and behaves like a perfect robot, to this day, you would be wrong.

At the top of the superstition hierarchy in the casino culture sits Baccarat. Baccarat is arguably the most superstition laced pit-game of them of them all. As Mr. Verstandig points out in his excellent article, the kinds of tweaks and nits that Mr. Ivey and his associate were asking for were garden variety in the Baccarat culture. On a scale of 1-to-10, with 10 being the kookiest superstition-based request imaginable, Ivey’s request were in the 5-6 range. Nothing special. That the casino didn’t have the expertise to recognize that their advantage was being exploited and obliterated by one of the world’s greatest gamblers, is the part that has me scratching my head. But alas, the Borgata has a history of ineptitude and that is why they constitute “low hanging fruit” for gentlemen of superior knowledge and intelligence such as Mr. Ivey and Mr. Johnson.

Everything you need to know regarding the bogus basis on which Borgata and Crockfords are withholding Ivey’s winnings are in Mr. Verstandig’s article below. This is an extremely well written and informative article and I encourage our readers to have a look:

Sorting Out the Law Behind Phil Ivey’s Edge Sorting Debacle at Borgata
·        April 18, 2014
·        Maurice “Mac” VerStandig

PokerNews contributor and East Coast-based attorneyMaurice “Mac” VerStandig is an expert on the American gaming scene. Well-versed in casino management from common issues of fraud and theft prevention to theUnlawful Internet Gambling Enforcement Act andIndian Gaming Regulatory Act, VerStandig has a strong background in bankruptcy work and is also skilled in the strategic valuation and monetizing of complex assets. He applies that knowledge to all areas of his practice, from fraud recoveries to traditional insolvencyproceedings. Here, VerStandig takes a look at theBorgata lawsuit against Phil Ivey and offers his opinion on its chances of success.

There is a marked irony, bordering on outright hypocrisy, underlying the Borgata’s lawsuit against Phil Ivey, his associate Cheng Yin Sun, and Gemaco, Inc., as a casino openly in the business of exploiting statistical advantages has filed a legally hyperbolic, seemingly overreaching, complaint against a couple of players who may have also been in the business of exploiting statistical advantages. To be sure, the Borgata appears to have a very real case against Gemaco, a playing card manufacturer that is apparently not very good at manufacturing playing cards, but the Atlantic City casino’s claims against Ivey and Sun strike as too richly imaginative to withstanding judicial scrutiny, and ultimately serve to only soil the relative ethos of an otherwise robust pleading against Gemaco.

For those not familiar with Ivey and Sun’s scheme (the details of which Ivey has openly acknowledged in the context of another case at an unrelated casino), the duo first took to Crockfords — a swank British gaming parlor — and then the Borgata — the only New Jersey casino even vaguely close to being “swank” — for a series of marathon sessions of Punto Banco and Mini Baccarat. Different nomenclature notwithstanding, these are essentially the same game. And while not as iconic as poker, blackjack or craps in the modern gaming lexicon, baccarat has long been among the most regal of betting events, even playing prominent roles in Dr. No and Casino Royale, acting as a second fiddle only to a certain beverage that ought not be stirred.

The actual rules of baccarat are relatively unimportant, other than to recognize that it is a pure game of chance dealt with a standard 52-card deck, that the house edge is narrow, and that baccarat players have a long and tawdry history of introducing some truly bizarre superstitions into gaming parlors. Gently blowing on the dice at a craps table is downright sensible behavior compared to some of what goes on in baccarat pits on a daily basis, and casinos are remarkably adept at making sure their prized gamblers not realize just how absurd they look engaging longwinded philosophical conversations with the deuce of clubs.

Just like blackjack and poker, baccarat is a game largely reliant upon the dizzying uniformity of cards yet to be turned. In the same manner one would check kings on the river if he or she knew for certain an opponent was holding pocket aces, one imbued with knowledge of the next card to be dealt could wreak utter havoc on a game of baccarat. And, as is now rather clear, Ivey and Sun just so happened to be imbued with that knowledge.

The key to this particular magic trick is known as “edge sorting,” which really amounts to little more than the strategic exploitation of inconsistencies in the way patterns on the back of playing cards are cut. Many houses, these days, have a white border around their playing card patterns, in large part to block against this precise scheme; the Borgata, for one reason or another, did not. And, apparently, if one looked closely at the back of a Bortgata baccarat deck, he or she could see inconsistently cut patterns, revealing larger images of gems on one side than another. Ivey and Sun realized this, sat for marathon sessions of baccarat, and ensured cards were turned such that certain favorable members of the deck had backs facing one way, while others faced the opposite way, according to the lawsuit.

To make this work, the Borgata alleges, a few oddities were required: First, Ivey specifically requested these Gemaco cards. Second, an automatic shuffling machine had to be used (which, evidentially, ensures cards not be turned from one side to another, as a human dealer might do in washing a deck before a manual shuffle). Third, the dealer had to speak Mandarin Chinese — a language in which Sun is seemingly fluent.

At a poker table, the introduction of conditions such as this would send up more red flags than a May Day parade in Tiananmen Square. But in the superstition-laced world of baccarat, these demands actually register as somewhat mild on the scale of relative voodoo.

According to the lawsuit, Ivey and Sun played four sessions at the Borgata in 2012, ultimately taking down $9,626,000 in winnings before the casino began to sense that something may be amiss. The final session, in September of 2012, was awkwardly tempered by word spreading that Crockfords was withholding payment of monies putatively won by Ivey, in a game of Punto Banco, because it believed he had been edge sorting. The Borgata actually theorizes, in its suit, that Ivey may have started to intentionally lose hands once he knew the New Jersey casino was wise to his British troubles, as he apparently went from being up over $3 million on the trip, to ultimately leaving with the relatively meager $824,900 in profit.

With this background, the lawsuit should be viewed as two claims — one against Ivey and Sun, and one against Gemaco. The latter is decidedly less enticing in nature, and accordingly unworthy of much ink herein, but it bears noting that this set of claims actually seem rather robust — Gemaco allegedly sold the Borgata non-uniform cards; the Borgata lost just under $10,000,000 to a player who exploited this lack of uniformity; law and reason alike support the suggestion that Gemaco likely acted negligently and breached a warranty or two along the way.

By contrast, the claims against Ivey and Sun are much murkier. Putting aside, momentarily, the actual form of these claims (which is touched upon below), there is something of a metaphysical grey area at the heart of this case. On one extreme end of the spectrum is a player who uses loaded dice in a craps game — this individual, if caught, is destined for time in a local cell block, as well as a rendezvous with the civil justice system. On the other extreme end of the spectrum is a card counter crunching numbers through a six-deck blackjack shoe — this individual, if caught, will be kindly asked to leave the premises, allowed to keep his or her winnings, and revered in the halls of MIT.

Edge sorting falls somewhere between card counting and weighted snake eyes — and the law is yet to figure out just where. There is no real precedent for cases like this, and when the judicial system cannot find precedent, it goes in search of analogy — something that does not much help here, either, because edge sorting is not truly analogous to anything other than an honest game of three-card Monte, and that is something of an oxymoron unto itself.

One of the more amusing aspects of the lawsuit is that the Borgata, clearly trying to tie edge sorting to the slot-fraud end of the spectrum, alleges Ivey and Sun to have utilized a “cheating device,” which is expressly illegal under New Jersey law. Of course, that does not truly strike as humorous until the complaint reveals what this “cheating device” was — the automatic shuffler. Yes, that automatic shuffler — the one owned by the Borgata, presumably acquired from a manufacturer of regulation gaming equipment, and the one used every day to make sure a hybrid generation of card counters not be able to follow specific cards through a manual shuffle.

Admittedly, I am not a judge, nor am I a New Jersey lawyer (though I work with many of them at Offit Kurman), but I cannot reason how a casino’s own automatic shuffler can be deemed a “cheating device” without making a mockery of either the gaming industry, the legal profession, or both. This is tantamount to a Yankees pitcher crying foul when a line drive is hit back at his chest — the medical staff may prove momentarily sympathetic, but an umpire is almost certain to just let out a chuckle and direct the next batter into the box.

In total, Ivey and Sun face 12 counts in this lawsuit, many of which are highly technical, and a few of which appear to be just plainly inapplicable. Claims for fraud in the inducement, breach of contract, and breach of the implied covenant of good faith and fair dealing all strike as particularly far-fetched; the suggestion that a casino can be fraudulently induced into dealing a card game with its own cards, equipment, and personnel, is seemingly fantastical; the theory that a contract — express or implied — underlies games of baccarat is similarly perplexing; and the hypothecation that the covenant of good faith and fair dealing — something normally invoked in arm’s length business transactions — covers the mercenary-rich environment of a casino floor, where both the player and the house are unapologetically out to win the other’s money, is likewise baffling.

Similarly, claims for violation of racketeering laws are not likely to survive a well-drafted motion to dismiss. The racketeering laws, about which I have previously written on this site, were originally drafted to aid in mafia prosecutions, and have morphed over time into a sort of “super fraud,” capable of ensnaring true criminal organizations. These claims rarely withstand even the slightest of scrutiny, and the allegations of this case certainly do not strike as sufficiently egregious to deviate from this rule.

Other claims are interrelated, which is to say that certain claims depend on the success of others to survive. And, at core, most of these lose all oxygen if a court finds, as I suspect it will, that 1) there is no contract between a player and a casino; 2) a casino deviates from its own well-oiled protocols at its own risk; and 3) exploiting house vulnerabilities is not a form of “swindling and cheating” any more than an automatic shuffler is a “cheating device” (please cast aside memories of one particularly memorable scene in Ocean’s Thirteen, and appreciate that no one is alleging Ivey or Sun to have planted a corrupt shuffler in the Borgata).

Borgata

One claim, however, deserves greater attention — not for its merit, but for its dangerous hypocrisy. The Borgata has brought suit for unjust enrichment, an old common law claim that is frequently introduced in civil litigation across the United States. The core “elements” of this cause of action are only the enrichment of one party, at the expense of another, with knowledge, in a situation where equity dictates the monies lost should be returned. There are few finer examples of the wholly subjective realm of equity jurisprudence than this claim, and it is a favorite of lawyers who believe sympathetic facts and clients can sway a judge into awarding monies because such is, in essence, the right thing to do.

Here, however, the tolerance of a claim for unjust enrichment would be a self-inflicted dagger in the heart of American gaming. The Borgata is in the business of unjustly enriching itself, just as is every other gaming hall in the country. Flashy signs meant to induce gamblers into sucker bets, deceptively simple games with well-masked house advantages, and the whole façade of a casino itself — from maze-like infrastructures, to free drinks, to playing chips that exist in large part to help people forget real money is being gambled — are textbook examples of one party (the house) enriching itself at the expense of another party (the player), in circumstances that are far from equitable.

Stated otherwise, the Borgata needs to be cognizant that this sword has two edges — if Ivey and Sun can be held liable for unjust enrichment in a gaming hall, it should not be long before hoards of hungry attorneys looking to make a name for themselves start bringing suit against the Borgata (and other establishments) for the same cause of action. And while the easy answer seems to be that the Borgata holds a license that permits it to operate public swindles, few things are so clear cut. Recent news of a man bringing suit against a casino for allowing him to lose money while intoxicated garnered soft laughter, aimed mostly at his seemingly hopeless lack of perception, but if the Borgata succeeds here, suits of that nature, once thought frivolous, may be prone to suddenly start surviving motions to dismiss.

Finally, a technical note: Since this suit was filed, the United States District Court for the District of New Jersey has issued an order requiring the Borgata to file an amended complaint, and a few have looked at this as the court being overly eager to scold the Borgata for a sloppy claim. In all fairness to a pleading that frankly deserves little credit otherwise, the flaws that led to this specific order are both common and hyper technical; they do not relate to the merits of the casino’s claims, and instead deal only with finite constitutional issues of federal jurisdiction. I have seen multiple orders like this in my own practice, over the past few years, and long ago learned to credit them as little more than ministerial directives.

*Views expressed in this article are those of the author and not necessarily of PokerNews.

Maurice “Mac” VerStandig is an attorney with Offit Kurman, P.A., where his practice focuses on the litigation of various commercial and private disputes, including claims of fraud and financial insolvency cases. He has considerable knowledge of the numerous legal issues encompassing the American gaming scene, and is licensed to practice law in Maryland, Virginia and Florida.

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