Watching these interviews with Howard I kept flashing back on the ‘39 culture-classic “Babes in Arms” with Judy Garland and Mickey Rooney.

The kids put on a show, in a barn. It turns into a hit but you know that they’re just two teenagers singing and dancing in a barn. If this thing were ever to get big, if it somehow made it to Broadway, you can’t shake the feeling that they’re just not ready for prime time.

Howard, Chris and Ray start a company and, well, when it got big all I could think of was two teenagers staring in open-mouthed wonder at the Great White Way.

Lederer does his best to put a good spin on events, alternately claiming innocence and embracing ignorance, defending some decisions he made and questioning others, supporting some colleagues and condemning others.

Some of this feels contrived and self-serving (how could it be otherwise?). Some of it feels honest and compelling. And what it left me with was the feeling of a couple of smart, basically nice guys who got in way over their heads, trusted untrustworthy people and then naively accepted tales told to them – because believing those tales was easier, less-demanding and far more lucrative than asking hard questions.

Lederer Unable to See What Was Right in Front of Him

Eventually Howard does seem to begin to grasp what has gone on but it’s like a wife who’s been washing lipstick off her husband’s shirt collars for two years being surprised when she encounters him in bed with another woman.

But let’s push the Garland-Rooney thing a bit. Let’s suppose that their play does become a hit and makes it to Broadway and, importantly, that they hold the copyright. The producers ask them to give up the starring roles which are handed over to others, suggest that they allow the show’s backers to handle the ticket sales, take care of the accounting, advertising and distribution of proceeds.

From what Lederer says, Chris Ferguson was the least money-motivated of the group.

Sure kids, we’ll hold meetings over the phone so you’ll all be part of the process but you can just go back to your small town. We’ll send you checks….

Even if we give them the benefit of the doubt, it is fascinating that he and Chris were unable to see what was going on. These guys are poker players. They made a living reading their opponents, sensing subterfuge, spotting deception, reacting appropriately to misplaced efforts to convince.

Yet they accepted Bitar’s explanation that all player funds were covered, that the Utah bank was sound and above-board, that no money was being laundered or otherwise misused, that all deposits were being handled transparently.

Full Tilt Poker starts out as a baby LLC in California, with a license issued by an autonomous tribe in Canada with offices in Ireland and administrative control in Alderney in the Channel Islands. The CEO is a guy who, a couple of months back, was a day-trader (wasn’t everybody then, in the days of the dot-com wave of the late ‘90s?).

The initial investors are poker pros who wouldn’t know a corporation balance sheet if it spit tobacco juice in their eye and it’s being run on what seems to be a hand-shake and a couple of conference-calls.

The company, almost overnight, becomes mind-bendingly successful. It has a reach in the growing worlds of gaming and poker that is second only to PokerStars. It is damn near printing money and growing faster than they can control.

And what do the executives of this firm do?

They begin laundering money through phony credit-card accounts, misrepresenting transactions by setting up nonexistent businesses, violating banking-transparency laws, co-mingling funds, loaning money to owners without standard collateral, failing to keep sufficient resources on hand to cover player deposits and, in a display of mind-bending stupidity, allowing a backlog of unsecured deposits to accumulate that amounted to well over one-hundred million dollars – and, while all this financial legerdemain was going on, they were shipping millions of dollars in profits to the share-holders.

It’s pretty clear at this point that other FTP owners didn’t support Ray Bitar.

Explosive Success Outpaces Management

I don’t mean to suggest that Howard, Chris and some of the other owners and board-members were utterly absent. It appears from the interviews that Howard, at least, was trying to stay abreast of company activity. But it’s hard to shake the feeling that so long as these untold riches were coming their way they had little incentive to probe, to ask hard questions or to pull back the tent flap.

Howard, Chris and several other owners are currently under scrutiny by the US Department of Justice, charged with taking tens of millions of dollars that they “knew” was money accumulated by illegal means. Will they make this stick? I don’t know. Right now no one does but if I were in their shoes I would not be feeling comfortable.

What’s the bottom line here? Given what we know, I see two possibilities.

Either Howard and the other owners and members of the board are crooks who countenanced inappropriate or even illegal financial dealings and got caught or they were a couple of naïve kids putting on a play that became so successful that they lost track of everything including, alas, their sense of ethics, their curiosity and their ability to read the cards the guy across the table from them was holding.

It’s worth nothing that they over-ruled investors, like John Juanda, who were suspicious of Bitar. John, I suspect, spotted the bluff.

For ongoing updates Howard Lederer, Chris Ferguson and Full Tilt Poker keep an eye on our Black Friday Bulletin Board.