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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Caesars exec cited by Mass. regulators says he has nothing to hide

8 November 2013

Caesars Interactive Entertainment CEO Mitch Garber said he has never hidden his past employment as the chief executive of two foreign-based Internet gaming operations that took wagers from U.S. customers almost a decade ago.

So Garber, 49, was more surprised than anyone that his background was one of four concerns cited by the Massachusetts Gaming Commission when it said last month that Caesars Entertainment Corporation would not be suitable to operate a casino in the state.

The suggestion caused Caesars Entertainment to withdraw from a proposed $1 billion hotel-casino development in the Boston area. Meanwhile, other statements attributed to Massachusetts gaming regulators drew ire from Wynn Resorts Ltd. Chairman Steve Wynn and cautious concern from MGM Resorts International Chairman Jim Murren. Both companies are bidding to build casinos in Massachusetts.

The online gaming companies that Garber oversaw both signed nonprosecution agreements with the U.S. Department of Justice and paid hefty fines for their activities before the enactment of the Unlawful Internet Gambling Enforcement Act in October 2006.

Garber’s role in the agreements were included within a seven-page section of a nearly 600-page investigative report filed with the Massachusetts Gaming Commission by an outside investigative firm.

“We believe, as a company, that Massachusetts is trying to establish a standard that is inconsistent with the last 40 years of regulation in gaming,” Garber said in an interview this week. “Our interpretation is that Massachusetts is creating standards that are almost impossible to meet.”

Garber’s history is well-documented. It’s a large portion of his gaming industry career that spans more than two decades and is something that he has never shied from. He was vetted by Caesars’ compliance committee before joining the company in 2009.

Garber, a resident of Montreal, was licensed by Nevada gaming regulators this year and is participating in the licensing process in New Jersey and Maryland. As head of Montreal-based Caesars Interactive, Garber is responsible for the World Series of Poker, the pay-to-play WSOP.com in Nevada and the company’s social gaming division.

Caesars on Oct. 18 withdrew from a partnership with the Suffolk Down Race Track for the proposed gaming venture near Logan International Airport after the report cited issues with Garber, the company’s $23.7 billion debt, Caesars’ business ties with the Gansevoort Hotel Group — which had an investor accused of Russian mob ties — and the company’s treatment of a Las Vegas high roller.

On Tuesday, East Boston voters rejected the Suffolk Downs casino plan, leaving the project in limbo.

Garber said the report unearthed no new facts or broke new ground. Frankly, he didn’t understand why his previous work gave investigators any trouble.

“I’m always happy to talk about my past and my career,” said Garber, who is also CEO of the company’s newly created spinoff, Caesars Growth Partners.

Investigators questioned Garber’s time as CEO of Optimal Group, a Canadian-based Internet gaming payment company, and as CEO of PartyGaming, a Gibraltar-based online casino company that was traded on the London Stock Exchange. Garber, an attorney involved in gaming since 1992, grew both businesses.

Before the Unlawful Internet Gambling Enforcement Act, Garber said Internet gaming activities in the United States “were unsettled” in the opinion of many “highly intelligent bankers, lawyers and auditors.”

Things changed when the act became law in 2006. Garber, who was CEO of PartyGaming at the time, pulled the plug on the company’s U.S. business, refunding money Americans had on account with PartyGaming.

“I was the first CEO to turn off the U.S. business,” Garber said. “That’s what a public company CEO should have done. So that part of my history was well- known.”

The move cost PartyGaming some $8 billion of market capitalization in one day. Garber set about to re-grow the business, acquiring three Europe-facing Internet gaming companies.

A few years later, when the Justice Department began investigating the Internet gaming industry, Garber and the company’s board of directors decided to approach federal prosecutors about a settlement. In 2009, PartyGaming signed the nonprosecution agreement and forfeited $105 million.

Garber left PartyGaming as CEO in 2008, returned home to Canada and became a consultant to Caesars. His departure was unrelated to the settlement.

“My family wanted to move back to Canada,” Garber said. “I had done the restructuring, and it was announced that I would leave in a year. I agreed with the board, however, that once we identified a new CEO, I would leave.”

Optimal, which Garber left in 2006, signed a nonprosecution agreement in 2009 and forfeited $19.1 million.

Garber said PartyGaming, which has merged with Bwin International to become Bwin.party, signed the agreement and admitted to violating the law “in order to get out from under a cloud.” The company, he said, did not believe it was violating the law before the Unlawful Internet Gambling Enforcement Act was signed.

In December 2011, the Department of Justice came out with a new interpretation of the Federal Wire Act, which said the law only pertained to sports wagering.

Garber said the change matched the opinion of many European gaming operators before the Unlawful Internet Gambling Enforcement Act.

Garber said the public may not understand the differences between PartyGaming and a company like Full Tilt Poker, which continued to accept wagers from Americans after the Unlawful Internet Gambling Enforcement Act and was forced to close by prosecutors in the April 2011 “Black Friday” crackdown on illegal Internet gaming.

“One is a London Stock Exchange company with corporate governance that is audited and has sophisticated board members,” Garber said. “The other is a private company with an unsophisticated management team with no board and no governance that didn’t turn off their U.S. business after UIGEA passed.”

Garber said he was contacted by many of his co-workers to express their support after the Massachusetts report surfaced.

“I’m proud to work at Caesars, and I’m proud of what I did at Party,” Garber said. “Not a single new fact will arise.”
Caesars exec cited by Mass. regulators says he has nothing to hide is republished from Online.CasinoCity.com.