A Common Thread Stitches Together Recent Events

Beware Of The Ides Of March: A Bad Run For Lawyers

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Ironically, one day after the Ides of March, it was revealed in the Caesars’ bankruptcy proceedings that someone had probably gotten screwed.

While this had been the contention by many groups involved in this process, in particular many of Caesars’ creditors, the judge actually memorialized this possible screwing in a story of a tryst involving a Caesars’ lawyer and a supposedly independent financial advisor that, also ironically, became public on April 1.

The story graced both the hallowed pages of Fortune Magazine and the New York Post. The Post added a most interesting angle to the story by providing to its readers the insight that the ex-husband of the female participant, who was reached at home while managing eight children, had no comment.

Another interesting bit about all of this is the reasonably incredible story of how the court came to understand the tryst was taking place. There was, it seems, “a chance encounter” at a Michigan resort between the couple and a coincidentally present government watchdog whose job it was to police for conflicts involving lawyers in bankruptcy proceedings.

Talk about a Black Swan. It seems much more obvious that someone probably dropped a dime on the couple. It appears the only remaining question for all of this is who will star in the movie about Caesars’ bankruptcy? Strong cases can be made for both Michael Douglas and Monty Python.

Another of the big stories of this period was, of course, the insider trading accusations, and later charges, surrounding Amaya, and the law firm involved here was Greenberg Traurig. Greenberg Traurig had a favorable relationship with Amaya, for according to its press releases the firm helped “guide” Amaya in the acquisition of Cadillac Jack in 2012, and again aided in selling that company to Apollo Global Mgt. in 2015.

The big score, however, was in 2014 when the law firm was the lead M&A counsel for Amaya in the acquisition of Oldford Group Limited (the biggest prize were the PokerStars and Full Tilt brands).

Regarding this transaction, one would assume that the lead M&A counsel for a $4.9 billion transaction would mention to all of the involved participants to keep this a double cross-your-heart secret from their friends and kin. But following this transaction, the Autorité des marchés financiers (AMF), the financial regulatory authority for the Province of Quebec, suggested that some of the folks surrounding this transaction might have been a bit chatty, and the AMF wanted to study this a bit, and began raiding offices and the like.

In equity markets, a thing like an investigation involving key players in a company has the tendency to quell interest in one’s stock. This is terribly important to people who own that stock, like a company’s executives, and people who are incentivized through stock options and what not, like a company’s board.

So, Amaya’s board then set out to orchestrate its own “external-internal” investigation to see if there was anything to this talking out of school thing that the AMF suggested. Who did Amaya hire? Well, among others it hired its friends at Greenberg Traurig.

Now, it might seem strange that a company that was being investigated for inappropriate behavior involving a merger and acquisition would hire the firm that was its counsel during that merger and acquisition to investigate the company for inappropriate behavior surrounding that merger and acquisition.

An appropriately cynical person might also suggest that a law firm that had made substantial sums of money serving a client in the past probably will not launch the most robust investigation into its client’s behavior, if that investigation could cost its client their gaming licenses, bankroll, and even their freedom. It is that goose with the golden eggs thing.

Well, the good news was that apparently Greenberg Traurig found nothing of much interest in the area of inappropriate conduct during their investigation, and the board then distributed a press release that shared the good news.

But that good news was short-lived, for those pesky financial regulators at the AMF then brought charges against members of the company and others, and that really damaged the stock, as well as giving the CEO some time off with pay while all of this played out.

The Amaya press release announcing the CEO’s paid timeout with the company was also kind enough to suggest that the things that the folks at Greenberg Traurig were looking for in the external-internal investigation were not the things that resulted in the charges. It seems they are suggesting that Greenberg Traurig was looking for love in all of the wrong places.

In an effort to end this narrative on a positive note, it should be added that Greenberg Traurig has not further monetized this episode by joining in those firms that have filed class actions against Amaya and its officers and directors. I suspect that just would not be right.

Well, to make an effort to suggest that things do come in threes, this period was also punctuated by the fascinating story featuring the global law firm Mossack Fonseca. This firm’s brand will always be known for a massive trove of data roaming about the planet known as the Panama Papers.

Why I find this story of such interest, and relevant to gambling, has to do with the future.

The lead journalistic entity on this story, Süddeutsche Zeitung, has indicated, in response to the notion that there has been a noticeable lack of U.S. individuals yet exposed…“just wait for what is coming next.”

What is of interest with this possibility is that a cornerstone of regulated gaming in the U.S. is the complete and unequivocal disclosure of all assets by those people subject to licensure. It will be interesting to see if any gaming licensees will be forced explain how they “forgot” to include these Panamanian Paper-related assets on their personal disclosure forms, understanding that such a failure can be grounds for revoking a license. It is part of that theory of gaming regulation that suggests it does not reflect well on a jurisdiction if its key licensees lie and hide stuff.

I suspect that there are some lessons to all of this. Obviously, if two people are representing different sides of a transaction before a court of law, they should not bump nasties; with the possible corollary that if they do bump nasties they should work to not be caught by “chance encounters.”

Secondly, the folks who assisted the ship in navigating its journey through a merger and acquisition are probably not the best folks to call if that ship ends up on the rocks.

Finally, if one is requested to tell the truth on an application, tell the truth. Aside from the common element of all of these stories involve law firms or lawyers, there is another common element, and that is that no matter what one might think, there is really no such thing as a safe secret anymore.

The opinions expressed in this article are the author’s alone, and do not necessarily reflect the position of the Government of Bermuda, the Bermuda Casino Gaming Commission, or any other entities or individuals within that country. The author is also sincerely appreciative of the help he received from his friends and colleagues throughout the gaming world in developing this article, understanding that any and all errors are his own.

- Richard Schuetz is the Executive Director of the Bermuda Casino Gaming Commission, and was formerly a Commissioner for the California Gambling Control Commission.
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