Thursday, October 19, 2006
God bless this fine editorial in today's New York Times.
The G.O.P.’s Bad Bet
By Charles Murray
Last week President Bush signed a law that will try to impede online gambling by prohibiting American banks from transferring money to gambling sites. Most Americans probably didn’t notice or care, but it may do significant political damage to the Republicans this fall and long-term damage to Americans’ respect for the law.
So, a month before a major election, the Republicans have allied themselves with a scattering of voters who are upset by online gambling and have outraged the millions who love it. Furthermore, judging from many hours of online chat with Internet poker players, I am willing to bet (if you’ll pardon the expression) that the outraged millions are disproportionately electricians, insurance agents, police officers, mid-level managers, truck drivers, small-business owners — that is, disproportionately Republicans and Reagan Democrats.
In the short term, this law all by itself could add a few more Democratic Congressional seats in the fall elections. We are talking about a lot of people (an estimated 23 million Americans gamble online) who are angry enough to vote on the basis of this one issue, and they blame Republicans.
In the long term, something more ominous is at work. If a free society is to work, the vast majority of citizens must reflexively obey the law not because they fear punishment, but because they accept that the rule of law makes society possible. That reflexive law-abidingness is reinforced when the laws are limited to core objectives that enjoy consensus support, even though people may disagree on means.
Thus society is weakened every time a law is passed that large numbers of reasonable, responsible citizens think is stupid. Such laws invite good citizens to choose knowingly to break the law, confident that they are doing nothing morally wrong.
The reaction to Prohibition, the 20th century’s stupidest law, is the archetypal case. But the radical expansion of government throughout the last century has created many more.
For example, all employers are confronted with rules and regulations from Occupational Safety and Health Administration and the Equal Employment Opportunity Commission that they regard with contempt — not because they cut into profits, but because they are, simply, stupid. They impede employers yet provide no collateral social benefit. And so employers treat the stupid regulations as obstructions to be fudged or ignored. When they have to comply, they do not see compliance as the right thing to do, but as placating an agency that will hurt them otherwise.
The same thing applies to lesser degrees to all of us who find ourselves doing things that we know are pointless (think of various aspects of tax law) only because we fear attracting a bureaucracy’s attention. For millions of Americans, our day-to-day relationship with government is increasingly like paying protection to the Mafia — keeping it off our backs while we get on with our lives.
The temptation for good citizens to ignore a stupid law is encouraged when it is unenforceable. In this, the attempt to ban Internet gambling is exemplary. One of the four sites where I play poker has blocked United States customers because of the law, but the other three are functioning as usual and are confident that they can continue to do so. They are not in America, and it is absurdly easy to devise ways of transferring money from American bank accounts to institutions abroad and thence to gambling sites.
And so the federal government once again has acted in a way that will fail to achieve its objective while alienating large numbers of citizens who see themselves as having done nothing wrong. The libertarian part of me is heartened by this, hoping that a new political coalition will start to return government to its proper functions. But the civic-minded part of me is apprehensive. Reflexive loyalty to the rule of law is an indispensable cultural asset. The more honest citizens who take for granted that they are breaking the law, the more their loyalty to the law, and to the government that creates it, is eroded.
Charles Murray is a scholar at the American Enterprise Institute.
For those who are not aware, the American Enterprise Institute is a prominent conservative think tank in the United States.
Tuesday, October 17, 2006
"Poker is ok and blogs are ok, but put the two together and you have less than what you started with."
Wikipedia: Articles for deletion - Poker blog
Amen to that.
I have the shell of a Monster uber post written up, but alas, gentle reader, it shall have to wait for a bit. Real life is thumping me.
But I'm gonna give you one of my all-time favorite posts on RGP.
The Low Limit Hold'em Player's Guide to Table Etiquette
Many new players feel intimidated by casino poker with its seemingly baffling rituals and pomp. Even the seasoned player will make the occasional faux pas, so a short refresher may be helpful to avoid looking like a "newbie" in your favorite cardroom.
PROTECT THY HAND
Protecting your hand means just what you would expect: Cup your hands concealing the fact that you even have cards. Wait until the action passes you and the dealer turns the next card before calling out, "Hey, what about me?"
Having the button confers upon you an enormous positional advantage. Thus you will want to get the button as often as possible. If the button is to your immediate right or left, but the player in that position doesn't seem to be paying attention, simply slide the button in front of yourself.
IS IT MY BLIND?
Never post a blind until the dealer asks you for the second time. If the dealer forgets to ask, you are not required to pay. Often they make a mistake. Ask how much it is.
Players are often unsure when it is appropriate to ask for time. In general this is proper in any of the following conditions:
You are first to act.
You are last to act.
It is your turn to act.
You are looking at the menu.
You are reading the Racing Form.
SPLASHING THE POT
Chips should always be splashed into the closest side pot.
Always discuss all hands in play. If three deuces flop, loudly proclaim that no one can have quads because you folded the deuce. The other players will offer their sympathy and maybe even announce what they folded. This makes the game more interesting and is merely a courtesy to those no longer in the hand.
SHOW?! NO YOU SHOW!
The best hand will want to build suspense by waiting until everyone else has shown. However the worst hand will also want to do likewise to avoid the embarrassment that comes from letting other players see what crummy cards he played. This tends to create a deadlock where no player is willing to show a hand.
If this happens, simply reach out and sweep up the chips for yourself exclaiming, "Hey if no one else wants it.". Alternatively invoke the speed rule: The first person to show gets to take a chip out of the pot. The last to show is forced to throw one additional chip in.
OVERCALLING YOUR HAND
is not only amusing, it is sometime vital in order to get a player with a better hand to muck his cards. You run the risk of being accused of "angling", so smooth things over by offering to give the pot to your opponent. Exception: If the pot is large, request the decision of the floorman - it cannot hurt.
CRITICIZING OTHER PLAYERS
lacks class. That is why the expression "Nice Catch, sir!" was invented. Use this expression on every hand you lose even if the sir in question is female. If a person criticizes you, demand to know why "If they are so good, why are they playing low limit?"
If you play 72off for the hell of it and flop a full house and some wiseguy starts spouting off, "Malmuth say..." or "Lee Jones says..." immediately cut them off and say, "statistics-shamistics, those guys are snobs and there is more to poker than mathematics." This is not only a clever thing to say it is also correct. Remember even Einstein who was poor at math, went on to discover matter or something and become fabulously wealthy.
Once consider a sign of immaturity, this is now the hallmark of the seasoned professional. New players however are often confused when it is appropriate to fling cards at the dealer. This is really a matter of taste but the rule of thumb is to do this whenever you have been dealt two consecutive bad starting hands. If you have pocket Aces cracked, flinging of the cards is automatic. Aim for the face. Flicking lit matches at the dealer is dangerous and is not advised.
If the flop gives you the nut monster hand but no one calls, it is OK to fling the cards over the dealers head onto the neighboring table.
Flinging cards at another player is a high variance play. He may be armed. It is safer to just fling your cards across the table in an attempt to foul his hand. If he protests, remind him that it is his responsibility to put a chip on his cards.
Although the floorman's decision is final, this rule is frequently misunderstood. What this really means is that the decision of the final floorman is final. If the first floorman does not side with you, do not give up until you have called over every floorman on that shift.
Request a color change when you have amassed exactly 101 chips. Immediately break down the big chip on the following hand. Ask the dealer for one of each color chip. Chip runners should only be used when the dealer has begun to ignore your requests. As a side note, it is OK to order food and drinks from the chip runner if there are no food servers or cocktail waitresses nearby.
Requesting a deck change cannot alter the laws of probability and only serves to slow the game down. Thus you should only ask for one if someone else is winning.
You are permitted breaks from the table for restroom visit, eating, or just wandering about to stretch your legs. Typically 20 minutes is permitted, but there are ways to increase this, by "lobbying at the table."
Request an out button while you eat dinner at the table. Once you have finished, you have an additional 20 minutes to walk off that meal. Return to the table, play one or two hands to reset the clock and then wander off to chat with one of the waitresses for an additional 20 minutes. When you return, post only one of your blinds. If the dealer reminds you that you missed both, ask incredulously, "how much!?" Request an out button again while you watch your own game from the rail.
Or better yet go off and play Pai Gow. There is no rule that you can't play in more than one game at a time.
is generally prohibited except that spouses are encouraged to share chips when one is getting low on funds. There is also the custom of the lucky chip. Whenever you win a pot, it is customary to toss a lucky chip to each of your friends or to the chip leader. That person should immediately acknowledge your generosity by rolling a lucky chip back to you. Sometimes you can get everyone rolling chips to each other.
THE NAME GAME
Whenever any deuce flops, loudly exclaim, "doooces never loooses!" or "Acey Deucey Never Loosey." You just cannot say it often enough. It is just as clever the thousandth time you hear it. Many hands in Holdem have cute widely known names such as "Big Slick" or "Heinz57", "Broderick Crawford" and even the "Montana Banana." But there was a time before these hands had names - someone had to name them, why not you? It is perfectly acceptable to christen hitherto unnamed hands with whatever strikes your fancy. Example: "Hooks-n-crooks" for Jacks and Sevens. Use your imagination. Any two cards could be "The Big 'W'". Obscurity and pithiness is what you are striving for. Even Mike Caro suggests that feigning insanity can help your table image.
Exist on either side of the dealers and are reserved for smokers who are just joining the game. It is OK to smoke while seated there, but if noticed you must hold the cigarette an extra foot further away from the table. Notice that if you smoke standing up, you are not violating the rule.
TOKING THE DEALER
Toking, or tipping the dealer is a personal decision. Since dealers often claim that they are not at fault when they ruin your hand on the river, by symmetry they are equally not responsible when you win. They cannot have it both ways. So why bother? Tipping should be considered charity that you might give a pathetic homeless person. If you do tip, ask for a receipt.
Another way to appear generous and look like a tipper, is after winning a big pot, just ask the dealer if you toked him. Often he will not remember. There - you just saved some money. If he says no, ask him if he's sure. If he still insists, say you are pretty sure that he's wrong and that you already toked him, but that you'll be certain to get him next time.
Tablecops are sniveling irritating players usually heavily stuck and imagines that it is his or her responsibility to point out every minor infraction such as folding out of turn, or showing hands to other players still in the hand or using a 2-way radio to communicate with ones partner. If you should be unlucky enough to find one of these sanctimonious holy-rollers at your table, a simple reminder such as, "Just because you are losing doesn't mean we can't have fun here" should suffice to reset the mood. Ask the dealer if you can have the whiner's seat when he busts out.
If you follow this advice, you will quickly gain the respect and admiration of all the regulars and you just might increase your expectation by a bet or two. Bet? Who bet? Is it on Me?
-Eric Cole Pivnik
Sunday, October 15, 2006
I'm getting Guinness-fueled and starting an uber post.
But to hold you over, I found this very interesting article covering Party Poker in Barron's Online Magazine.
Bonus Code IGGY on Party Poker, indeed.
Only the House Wins
LAST MONDAY WAS Black Monday for the internet-gambling industry on the
London Stock Exchange. Industry giant Party Gaming lost about $5
billion in market value as its stock plummeted 58% to 45 from 107
pence. Falling more than 60% were the listings of Sportingbet and
online-gaming cash-transfer services Neteller and FireOne Group.
The cause of the debacle was the passage on Sept. 30, during the waning
hours of the U.S. congressional session, of a law to make it illegal
for banks or credit-card companies to process payments to online
gambling outfits. The measure, sponsored by Republican Rep. James Leach
of Iowa and Republican Sen. John Kyl of Arizona, had been knocking
around for months, stymied by various internal congressional squabbles
and special interests such as the horse-betting industry's request for
special exemptions. Finally, however, the ban made it, heaving across
the finish line as a rider to the port-security bill. President Bush is
expected to sign that into law in early November.
The immensity of the disaster to the online-gambling industry is
readily apparent: the majority of its business comes from U.S. gamblers
even though the companies are all domiciled in offshore tax havens like
Gibraltar, Antigua and Costa Rica. Some 80% of PartyGaming's revenue,
for example, originates in the U.S., mostly from poker players
attracted to the site's 24/7 card playing. Now, most of the online
companies have announced plans to pull out of the American market
Some investors, of course, will try to find bargains amid the wreckage;
perhaps thinking the companies could excel as vehicles for foreign
betting. Fat chance. In fact, the outlook for this sector may well get
worse in the months ahead, as the implications of the U.S. ban play
through financial statements. One of the few investors likely to get
out alive is PartyGaming's founder, a one-time backer of the porn
industry named Ruth Parasol. She and her husband had the good sense to
start cashing out more than a year ago. More about them later.
IF NOTHING ELSE, the collapse in the gaming shares bespeaks an
obtuseness on the part of investors in the stocks. First of all, it's
no secret that the Justice Department has long considered companies
offering online gaming to U.S. residents to be violating existing
federal laws, such as the Wire Act and the Illegal Gambling Business
Act. Moreover, some eight states have specific bans on online gambling
and most other states prohibit all forms of unlicensed gaming (needless
to say, none of the Internet-gambling companies has such a license).
Perhaps Party Gaming (ticker: PRTY.London) posed the issue most starkly
- and brazenly - in its prospectus for its initial public offering
of stock in 2005: "Offshore gaming companies rely on the apparent
unwillingness or inability of regulators generally to bring actions
against businesses with no physical presence in the relevant country."
Likewise, there have been plenty of warning signs of a coming U.S.
crackdown. In July, BetOnSports chief executive David Carruthers, a
British citizen, was arrested by federal agents in a Dallas-Fort Worth
Airport lounge during a short layover en route from London to the
company's headquarters in Costa Rica.
The company fired him immediately for his blunder. And Carruthers was
held on a previously-sealed indictment charging him, the company and 10
other of its operatives with mail and wire fraud, money-laundering, tax
evasion and taking in more than $3.3 billion in illegal wagers from the
U=2ES. over the life of the company. Carruthers is now living in a hotel
outside St. Louis, sans passport and sporting an ankle bracelet, grimly
awaiting his next hearing date in federal court in that city.
Last month, Peter Dicks, non-executive chairman of Sportingbet, was
likewise arrested at JFK Airport when he nonchalantly showed up in the
Big Apple to attend a directors meeting of a tech company. His arrest
was a result of a sealed warrant issued by Louisiana state authorities,
charging him with "gambling by computer" offenses. Louisiana is rumored
to have dozens of other sealed warrants covering virtually the entire
executive rosters of the online-gambling industry.
In any event, Dicks was able to beat the Louisiana warrant in late
September when New York Gov. George Pataki refused to order his
extradition. Perhaps this was because Dicks had already resigned his
position. He's now safely back in Great Britain.
THE ARRESTS FOLLOWED a heady growth spurt for the industry (see "Full
House: Suddenly, the Whole World is Playing Online Poker," the Barron's
cover story of Feb. 21, 2005). And they quickly changed the behavior of
executives. A number of industry figures, including Party Gaming
chairman and English "suit" Michael Jackson, disclosed that they no
longer planned to travel to the United States. World Gaming Chairman
James Grossman and Director Clare Roberts both resigned their positions
with the London-listed and Antigua-based concern. Both had business
interests in the U.S. that required continued access to America.
Party's Over: Shares of once-promising online gambling concerns have
been under increasing pressure this year as legal and regulatory woes
have mounted. Congress' move - banning the transfer of U.S. funds for
betting - was the capper. Likewise, CryptoLogic, a provider of
online-gambling software, saw fit to announce plans to move its
headquarters in January from Canada to Ireland. At the same time, its
Canadian CEO announced he was stepping down "for family reasons." The
company said that the change of domiciles was dictated by the need to
be nearer to its customers. No mention was made of the U.S. regulatory
mortar fire that seemed to be landing steadily closer to the company's
Offshore Internet-gaming companies and their major operatives had long
lived in a world of denial, assuming that their operations were beyond
the long reach of U.S. regulators. For one thing, such industry figures
as PartyGaming's Parasol and BetOnSports founder Gary Kaplan, an ex-New
York bookmaker, were assumed to be extradition-proof. After all, they
were living in domiciles - Gibraltar in the case of Parasol and Costa
Rica for Kaplan - where online gaming is legal. Moreover, all their
company computer servers, cash balances and other assets are also in
offshore locations that the government would likewise find all but
impossible to access.
But the Leach-Kyl measure hits the Internet gaming industry where it
hurts the most. It effectively cuts the companies off from all U.S.
wagering, the very lifeblood of the business. The bill makes any
transfer of U.S. funds for the purpose of wagering or settling accounts
illegal. Among other things, financial institutions will receive
ongoing assistance from the Treasury, the Fed and the Department of
Justice to identify new domain names and other conduits used by
online-gaming companies to circumvent the rules for U.S. funds. A
fairly ironclad "coding and blocking" system will be capable of
identifying and thwarting Internet-gambling transactions.
For example, Party Gaming of late has directed U.S. gamblers to send
money to a phone-card company front called PccPay.com, apparently to
disguise the real purpose of the transfer requests from U.S. financial
institutions. Other companies that probably will be targeted are such
offshore "electronic wallet" concerns as Neteller and FirePay, which
have become popular payment conduits for the offshore gaming industry
since eBay's PayPal service, under regulatory pressure, stopped
facilitating such transfers.
The legislation also will impose severe civil and criminal penalties on
online-gambling companies and officials accepting illegal U.S. wagers.
Seizing executives or gaming-company assets in their offshore redoubts
will, as always, be difficult. But any major U.S. legal action against
industry players, particularly those publicly held, would severely
damage the companies' reputations and force them to incur heavy legal
At a minimum, U.S. authorities under the new ban would be able to
easily win injunctions and default judgments in U.S. courts against
offending gaming companies that fail to close down their U.S.
operations, virtually eliminating the companies' abilities to advertise
or maintain a U.S. Web presence. U.S. officials are also exploring
whether international tax treaties might allow regulators to go after
companies and executives on their home turfs for U.S. tax evasion.
Under the Internal Revenue Code, there's a 2% excise tax imposed on all
wagers not authorized by state law. Such an imposition on Party Gaming
last year on the U.S. portion of its $48 billion in wagering would come
to about $800 million before penalties and interest. That alone
would've nearly wiped out its net revenues of $977.7 million for the
Representative Leach, for one, thinks that the industry's prospects
have been blighted by his legislation. "This may well be the death
knell of offshore Internet gambling," he tells Barron's. "Only time
will tell, however."
THE DOMINANT FIGURE in the online-gaming business remains the
39-year-old Ruth Parasol. In this month's Forbes 400 Richest Americans
list, she and her husband, J. Russell DeLeon, are shown to have a
combined net worth of $3.6 billion, which exceeds that of even longtime
Las Vegas gambling mogul Steve Wynn, who weighs in at $2.6 billion. The
magazine hit the newsstands just the week before the collapse in the
stock, which lopped an estimated $1.5 billion off the couple's net
Parasol has long shunned the spotlight and today lives a quiet life
with her husband and two kids on Gibraltar. A Party Gaming spokeswoman
told us curtly that Parasol doesn't grant interviews.
Too bad. For hers is one fascinating life story. An excellent profile
from the Los Angeles Times last year describes her unconventional
upbringing in San Francisco's Marin County as the daughter of a
holocaust survivor, Richard Parasol, and his Swedish wife.
Ruth Parasol went to an exclusive private school in the area where in
her senior year she posed in a fur coat, with the caption underneath
proclaiming that "Diamonds Are a Girl's Best Friend." Then it was on to
the Jesuit-run University of San Francisco, followed by law school at
Western State University in Fullerton.
Her father, according to The New York Times, had a long career in the
porn industry, starting out with a chain of successful San Francisco
massage parlors. The apple didn't fall from the tree: Shortly after her
graduation from law school, Ruth joined her father as a legal adviser
to his phone-sex billing operation. And soon she branched out into her
own business, investing in, among other things, a porn Internet site
that made a killing in 1996 by distributing a sex video featuring
actress Pamela Anderson and her then-husband, rocker Tommy Lee, in
As regulators turned the heat up on the sex industry, Parasol
diversified into online gambling in 1997. Her venture, Starluck Casino
(now Party Gaming), was strictly small potatoes until she teamed up
with a bright young Indian computer programmer, Anurag Dikshit, who
devised the software for online poker players to join remotely in games
involving literally thousands of other players. Internet poker exploded
in popularity, creating a tidal wave of demand that the company has
ridden ever since.
But if Parasol has learned nothing else operating in the demimonde of
the business world, no good thing goes on forever. One must always have
an exit strategy to get out of Dodge before the regulators arrive.
Thus, she and her husband have been monetizing their ownership in Party
Gaming as fast as possible in recent years, even with the company's
booming business and succulent operating margins of about 60%.
The year before the company's IPO, Party Gaming bought an entity called
ElectraWorks for $826 million. While ownership of ElectraWorks wasn't
revealed at the time, Parasol and her husband were clearly major
holders of the unit. The transaction was similar to the way
private-equity firms often pay themselves huge special dividends before
taking their controlled company public.
Then, in the IPO last year, which raised =A31 billion, Parasol and her
hubby sold 40% of the shares in the offering, reaping 436 million
British pounds, or $815 million dollars at current exchange rates. The
IPO was followed in June of this year with another insider sale of 200
million shares of Party Gaming stock for =A3232 million. In that sale,
Parasol and DeLeon dumped exactly 66,666,666 shares for =8077.3
million, or $145 million. The share total implies a certain puckish, if
not devilish, intent. The insider secondary issue would have been far
larger if market conditions had permitted.
So all in all, it appears that there will be no tag days for Parasol
and her husband, even as Party Gaming shareholders are suffering huge
losses. The pair has already cashed out an estimated $1.5 billion from
the company. That certainly reduces much of the pain of the $1.5
billion loss they've taken on their remaining 30% stake.
MORE TROUBLE COULD LIE ahead for Party Gaming. Gamblers anxious to
clear out their accounts could cause a run on the bank. For according
to the company's June 30, 2006, balance sheet, Party Gaming owes its
clients $192.6 million in liabilities and prize pools, while having
only $132.9 million in cash and cash equivalents to meet that
obligation. And those cash holdings are likely to have fallen sharply,
because of $130.5 million of cash spent on an acquisition in August.
Meanwhile, The Financial Times reported the cancellation of a $500
million bank credit line that the company had made some use of. Party
Gaming recently cancelled a $115 million special dividend to shore up
The problem all this poses for gamblers is that, unlike the brokerage
industry, customer accounts aren't segregated and insured. Your money
and the house's money tend to be one.
Several phone inquiries by Barron's to Party Gaming on its current cash
situation went unanswered.
Of course, the company could make good on its obligation with its
retained earnings and shareholders equity, if there were any. But
unfortunately the company has a negative tangible net worth of minus
$53 million. And after what happened in Washington, one can bet that
its servers and other physical assets are no longer worth the $58.3
million shown on the balance sheet. Nor are its goodwill and other
intangible assets likely worth anywhere near their $144.4 million
balance-sheet value. Not when the business has just gone up in smoke.
Party Gaming offers a sad tableau. Investors have already lost a ton.
Its players may have their money frozen, or never get all of it back.
There are no winners in this sordid tale, except Parasol and the other
insiders. You don't beat the house.
All Content Copyright Iggy 2003-2007
Information on this site is intended for news and entertainment purposes only.
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