Atlantic Club Fires Back at PokerStars

Posted on May 14th, 2013 by Todd Wilkins

PokerStarsThe owners of the Atlantic Club casino held nothing back in their response to PokerStars’ lawsuit that aims to keep the deal for the New Jersey casino alive.

Colony Capital, the casino owners, asked the court to lift the temporary restraining order (TRO) that was entered by Judge Batten last week. The judge granted the TRO when PokerStars argued in their lawsuit that terminating the agreement to purchase the Atlantic Club violates the New Jersey Casino Control Act. The defendants insist that time has expired on the agreement that required PokerStars to have been granted a casino operating license by April 26 in order for the deal to progress.

The Atlantic Club claims that its unfair that PokerStars readily agreed upon a date in which to terminate the contract without proper licensing having been issued and now says that the date cannot be enforced because the licensing process has not concluded. The Atlantic Club also points out that new information has come to light which shows PokerStars to be an unsuitable licensee because certain previous company executives remain fugitives from the law in failing to answer the Black Friday indictment against them, according to NorthJersey.com

The latter allegations pertain to the founder of PokerStars, Isai Scheinberg, and another company executive, Paul Tate. Neither of the two have traveled to the U.S. to respond to the Black Friday charges. In settling those allegations with the U.S. DoJ in 2012, Scheinberg agreed to step down from his executive role.

The Atlantic Club alleges that Scheinberg still operates in an official capacity with the company based on a telephone conversation with Atlantic Club CFO Eric Matejevich on April 26. Scheinberg reportedly told Matajevich that PokerStars believes its chances of successfully obtaining a New Jersey casino license is about 90% and that Matajevich could call the Division of Gaming Enforcement to verify that if he so desired.

The arguments made by the Atlantic Club are similar to those asserted by the American Gaming Association in March in their petition to state gaming regulators urging that PokerStars’s gaming license application be denied. PokerStars defended the AGA accusations by stating that they admitted no wrongdoing in settlement negotiations with the DoJ and that the AGA was promoting an anti-competitive marketplace in favor of the land-based casinos it represents.

The Atlantic Club wants the TRO removed so negotiations with other prospective buyers can commence. It claims that with online gambling ready to launch in New Jersey in November, it doesn’t want to wait around all summer and learn that PokerStars’ license application will be rejected because the poker site is associated with serious criminal activities more extensive and unresolved than previously disclosed, among other reasons.

Basically, the Atlantic Club owners assert that PokerStars breached the agreement by not obtaining a license within the previous specified time. Also, Colony Capital would be irreparably harmed if the TRO remains in effect and PokerStars ends up not being approved for a license, which is a serious doubt in the mind of Atlantic Club’s owners based on the company’s alleged criminal activities.

PokerStars’ lawsuit brings up the fact that some $11 million has already been paid to keep the Atlantic Club operating and an additional $4 million termination fee would be due if the agreement is negated. That totals $15 million, which is roughly the agreed upon purchase price. PokerStars has cried foul that $15 million might be shelled out with nothing in return.

In response to that, the Atlantic Club states that PokerStars likes to portray itself as an innocent victim, which is far from the truth considering that company executives remain fugitives from the law. The Atlantic Club says its PokerStars’ own fault for agreeing to a date in which licensing needed to be secured and not complying with that agreement. And that losing $15 million is the risk they took for the opportunity of being at the forefront of online gaming in New Jersey.

PokerStars has an opportunity to file a reply brief by May 15 and a hearing on the matter is set for Friday, May 17 at 1:30 p.m. ET before Judge Batten.

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