COO of Absolute Poker and UltimateBet Opens Up

It’s been almost a year since Paul Leggett put his head into a hornets nest and took the job as Chief Operating Officer for Tokwiro, the company that owns both online poker sites Absolute Poker and UltimateBet.

He came to the job knowing he had to rebuild the reputation of Absolute Poker, which was rocked by online poker’s first major cheating scandal. But only weeks into the gig, more trouble was dumped on his desk when the company became aware of another cheating perpetrator that haunted UltimateBet for a good portion of the site’s history.

Just like that and Leggett was in charge of a company that owned two sites that needed fixed in a major way. Both the sites became instant poster children for what can go wrong at an online poker room if bad, greedy people are able to exploit a susceptible security system.

At least $21 million was stolen from players who were being taken advantage by a former Absolute Poker employee still not named and former World Series of Poker champion Russ Hamilton, who used his partnership as an affiliate of UltimateBet to get around its security.

The UltimateBet scandal began before Joseph Norton bought the two companies in 2006, but cheating on both sites continued until they were sniffed out by online players in 2007 and 2008. Tokwiro sued the former owner of UltimateBet, Excapsa, and received a $15 million judgment from a Canadian court because of the breaches. All the money, plus $6.1 million of Tokwiro’s own, was used to pay back the cheated players.

Tokwiro was also fined a total of $2 million by the Kahnawake Gaming Commission (KGC) and also has to subject itself to and pay for random audits until at least through next year, and probably beyond, Leggett said.

To further muddy the waters, Norton, a former chief of the Kahnawake’s, was a key player in founding the KGC, which is supposed to regulate the online casino industry and protect it against cheaters. It licenses more than 400 companies.

In inheriting these problems, Leggett said he had to change the culture of Tokwiro by first replacing most of its management team. He said he had to change the “entrepreneurial” ways and turn it into a “company that is focusing on security and compliance and transparency and internal audits and things of that nature.”

Bringing the two sites together on one platform was a goal of Tokwiro since day one, and the security breaches only showed how important it was for them to get all its players onto one state-of-the-art platform. So the CEREUS poker network was built and recently launched with an emphasis on its security system and a hope that time will prove that its problems are behind Tokwiro.

Leggett was kind enough to talk with Card Player about CEREUS and the past that the company has to withstand, embrace and learn from. He also regularly posts his thoughts on a blog through Tokwiro.

Card Player: Why move to one platform now?

Paul Leggett: It’s a decision that’s been on the table since Tokwiro acquired the two businesses. The whole purpose of acquiring the two businesses was to put them together and gain the operational efficiencies, and things like that, but it’s been a long time coming since I joined the company. It was a project that I was extremely passionate about.

We were diverted by these scandals quite a bit, so that put us off-track and delayed us implementing it. But the real reasons for it was to provide a better product and experience for our players by giving them double the amount of players to play against.

And also, the operation efficiencies that we gain as a company by cost-savings and having one platform that we’re supporting, instead of doing it across two, and it’s easier for our customer service department, etcetera.

CP: How do the sites operate both independently and dependant of each other?

PL: I guess now, they’re very dependent on the single software platform and they’re both very dependent on the platform and the security and the regulatory compliances, which was a major focus of developing it, so they’re very dependent on the software side and operationally with customer service etcetera.

Players from both sites can now obviously play against each other, which provides them with a lot more choice, but the brands are different. The brands really do and are going to do more in the future, they’re going to target different segments of the poker market and offer more promotions and events and such to target different players.

CP: When weighing the decision to combine the player pools of both sites how much did the name-brand recognition of both sites play a part in keeping two?

PL: Well, this is a big market-strategy question that we’ve been wrestling with for a while. Moving to a single brand can definitely have its advantages and we obviously recognized that. We decided to keep the brands for a couple reasons. Initially, we really wanted to completely address these security and transparency issues we’ve had before moving to a single brand. We didn’t want negative people thinking we’re trying to run or hide from our problems and our past. So that was definitely something initially that we considered.

But the main reason for really keeping them is that both brands have a lot of value and a lot of loyalty and our marketing strategy will really kind of evolve in 2009 that we’ll use these two brands to target different segments in the poker market and we see a lot of potential in that two-brand strategy. What we’re looking to do is target different types of demographics with the two different brands and you’ll see a lot more of that in the future.

CP: What part of the world do you see a majority of your new players coming from?

PL: We definitely want to focus on a global strategy, but we do see a lot of potential in the European markets, specifically Germany and the Nordic countries. We think there’s a lot of potential to grow in that region.

CP: What part does America play in that equation?

PL: Again, we’re a global operation and our doors are open to every country in the world so America is a big part of that equation and will continue to be a big part of the marketing strategy.

CP: Tell me the details of building a new poker platform the last year. Who was the developer? How was the platform tested? What were the priorities as the build went on?

PL: We have a software development shop out of South Korea and they developed the CEREUS platform. The security of the platform was tested by Gaming Associates. But the priority for the platform was always security and compliance of regulatory standards. We made a lot of improvements to the security of hole cards, we built a major layer of security, and this was really our strategy, building multiple layers of security to make sure nothing like the cheating of the past can ever happen again.

This new layer of security, which is called our Security Center Software application, was built specifically for the CEREUS Network. Essentially, it’s a security framework for advanced fraud algorithms that kind of alert our security team of any abnormal behavior. Things like detecting abnormal winning statistics or somebody who is multi-accounting or somebody who is chip dumping and currently we’re enhancing it with many new methods, things like detecting bots. We can detect bots now, but we’re adding in really advanced algorithms that will detect bots in a different way.

CP: What would you tell a player who followed the cheating scandals on both sites about the new platform that might assure them of safety moving forward?

PL: It’s not just the platform to me, although it’s a very, very important part of it. Essentially, obviously, our company, Tokwiro, was plagued with problems in recent years. Both sites they acquired had a cheating scandal on them. One was an internal employee at Absolute Poker and the company, I think, did everything it could to rectify the situation properly once it was discovered. And the UltimateBet scandal, inherited obviously from the previous owners, and we did everything we could to get to the bottom of everything and understand everything that happened, reimburse players with a lot of our money but we also received a settlement of $15 million from the previous owners, which I think, proves to everybody and shows that we really nothing to do with this.

But we really fought to get the players their money back so I think we did everything we could to try to rectify these problems, but we really have also changed the entire company.

We started with a complete new management team when I became COO in January of 2008. And we’ve implemented a new compliance team, a new specialized poker security department, we built this new security center, we’ve made huge strides with a bunch of regulatory compliance initiatives. Again, it’s the whole company, it’s the software, and now we’re working on some advanced security initiatives that I think will really help people to feel comfortable.

CP: So coming in, you really had the challenge to change the whole company culture. What were your biggest challenges doing this?

PL: There was a ton of challenges. I guess the first one was really a big one, it was trying to change a company that was kind of built on entrepreneurship and change it to a company that is focusing on security and compliance and transparency and internal audits and things of that nature. It was a pretty major shift in thinking, but there was a ton of good people that were working for this company already. I think it was really the roots of these companies were much more entrepreneurial and they needed a lot more process, audit driven, compliance, like the land-based gaming industry. It needed a lot more structure. And that was a major philosophy change for the company.

But there was also challenges shortly after I became COO when we started to receive complaints about the UltimateBet cheating scandal. We started to look into that and it was a major challenge. Looking at that, I originally had concerns whether I wanted this job, but after looking through it, we realized, as a company, we had to face this, we had to resolve this issue, get players their money back and make sure those responsible were held accountable and it became a major challenge that we overcame.

CP: Let’s talk a bit about holding the cheaters responsible. Russ Hamilton was the only cheater named after the investigations were complete. Where are the other names and why isn’t Tokwiro putting them out there? And what are you guys doing to get these guys held accountable?

PL: It’s important to understand our role in this whole thing. Essentially, we are a victim by inheriting the cheating when we acquired the businesses. The scandal began many years before we bought it, we’ve conducted our own internal investigation and we turned that over to our regulatory body, who conducted their own independent investigation.

The gaming commission subsequently named Russ Hamilton as the main perpetrator but our investigation determined that there was one main perpetrator who actually cheated and several others who seemed aided in the cheating, but whether they willingly participated is not conclusive. We’re simply not judge and jury.

So I understand that the public wants us to come out and make accusations and point fingers all over the place, but, again, simply, we’re just not the judge and jury. We’ve done our investigation, we’ve tried to be as transparent with everything we could and the gaming commission has done a good job at least naming the one person they believed to be the main perpetrator who was doing the actual cheating. And it’s very possible, and I hope they will name other people, if they can confirm (who they are).

I know they released in their press release that they are going to work with different police forces. I believe they’re currently working with one and they’re willing to discuss working with others with the information they have. And we’re continuing to explore what we can do specifically with the cheaters themselves, but it’s very complicated and there are jurisdictional issues, but our first priority was always to get a name released who was involved and to get the players their money back. And we’re talking about an enormous about of money that we were able to refund players and we’re happy with that. But it’s not over. We just think we’ve taken some pretty big steps and made a lot of progress so far.

CP: How far along are you in getting money back to the players?

PL: It’s completed. One-hundred-percent.

CP: What role did the KGC play in building CEREUS?

PL: As a regulatory body, we have to submit to them any material change we’re going to make to the gaming platform. This constituted a major change, so they were very involved and their auditors had to come in a take a look and approve that material change. So they took a look at the security of the platform, they went to our development shop in South Korea to make sure they were happy with their development processes and the security of the platform. And they were actually involved in the day we transitioned and the plan we used to transition just to make sure the player's data was secure and wouldn’t be lost in the transition. So, they were instrumental in approving it and monitoring the actual transition.

CP: The owner of your company, Joseph Norton, is a member of the Kahnawake nation and a former commission member. How can you assure your players that Tokwiro is not working hand-in-hand with the KGC and that the KGC is completely independent of the company?

PL: This question is asked a lot and it’s a little difficult to answer. Joseph Norton was the Chief of the Mohawks of Kahnawake. And while he was Chief, he was instrumental in establishing the KGC itself. After he was Chief, he left public life and entered into private business and he is a strong believer in the benefits of gaming for the community through taxation and employment on the reservation. He saw an opportunity to acquire these two businesses. As an entrepreneur, he saw an opportunity and took it and he became a licensee of the regulatory body of the KGC.

He’s a licensee, he’s one of many hundreds, I believe, and that’s the situation. It’s hard for me, I guess, to prove anything else, but I think anybody that’s seen these investigations, I realize that a lot of people have conspiracy theories. But we’ve been fined $2 million, we paid for a lot of investigations that cost an enormous amount of money, and we’ve been involved in many audits that I don’t see the end of. They’re going to continue through 2009 and I think we’ll be fighting this until we can do things that just prove that we are secure.

I think we’ve got a lot of proving to do to rebuild faith, but it’s hard to kind of prove that there’s no influence. But I believe it’s fairly obvious that they’re not involved, though some people are understandably upset about these scandals and will choose to take their dollars elsewhere and never believe a word we say. That’s inevitable. We’re here to prove that were transparent.

CP: What’s the future hold for Tokwiro?

PL: I think it’s going to be a pretty exciting future. I think our company has come through some very difficult times. It’s a lot of new people and a lot of new blood and we faced a major challenge and came through it and now we’re ready to turn that passion and that energy onto growing the business. We’ve got some pretty exciting things planned for the marketing of these two brands. We really want to push the envelope and let the world know we’re here. But, again, the transparency and security is what were looking to prove and show people that we’re leading the industry there. We will not forget our past. We’ve learned from this and fixed it and we want to ensure everyone that it’s fixed.

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