Unobtained Mark Scheinberg Deposition at Core of $290M Kentucky Judgment

Flushdraw has obtained a copy of the November 20th, 2015 judgment issued by Franklin County (Kentucky) Circuit Court Judge Thomas D. Wingate against PokerStars parent Amaya Gaming (Amaya Group Holdings) and another corporate entity in the amount of $290,230,077.94 in damages.  The $290 million judgment issued by Wingate is a partial summary judgment in the ongoing case, rendered in large part by Wingate on a single development: The failure of former PokerStars co-founder Mark Scheinberg to provide himself for deposition, as ordered by the court in 2014.

(This update corrects an earlier version of the story, in which Mark’s father, Isai, was incorrectly identified as the target of the July 3rd deposition hearing below.  Wingate’s orders contain multiple references to “the Scheinbergs” and Pinhas Schapira and may also contain significant factual errors regarding alleged directorships at various PokerStars entities, as we’ll detail in a separate story today.  FlushDraw and this writer apologize for the error.)

kentucky-stampA reading of the 18-page decision provides the basis for a summary of the case’s important developments, as extracted from Wingate’s own “Statement of Facts” accompanying his opinion and order in the matter.  Here are those major points:

  • August, 2010: Lawsuit brought against several US-facing online-poker firms by a private law firm working in conjunction with Kentucky commonwealth officials;
  • 2010, later: Two of the defendants, PartyGaming PLC (PartyPoker) and Pocket Kings Ltd. (Full Tilt), file motion to dismiss action on several grounds, including that the Commonwealth of Kentucky did not have standing to sue;
  • November, 2011: Wingate ultimately rules that Kentucky does have standing to sue in the case.  (Eventually, in 2013, PartyGaming post-merger successor bwin.party pays the commonwealth $15 million to resolve its involvement in the case);
  • March 10, 2014: Wingate issues order to PokerStars-related entity PYR Software to provide Mark Scheinberg and PYR company director Pinhas Schapira to make themselves available to be deposed, before the end of the following calendar month, April;
  • April 10, 2014: PokerStars ownership entity Oldford Group succeeds in having the case removed to a US federal court on jurisdictional grounds.  It’s the same day that written discovery from PYR, the PokerStars software entity, was due to the Kentucky court, and the removal stops the deposition effort in its tracks;
  • August, 2014: The sale of PokerStars, Full Tilt and all related corporate entities to Canada-based Amaya Gaming is completed.  Pyr and Rational Entertainment Enterprises Ltd. [REEL] are among those entities;  According to Judge Wingate’s opinion, Amaya and REEL at this point argued that the sale “effectively severed Messrs. Scheinberg and Schapira’s interest in the suit, and thus Amaya and REEL’s ability to require them to appear for depositions.”  Scheinberg, at the same time, remained under the 2011 US federal-court indictment in the “Black Friday” case;
  • March 31, 2015: Oldford Group’s arguments for removal of the case to a US federal court are declared moot by that court, and the case is returned to the Kentucky court system;
  • April 15, 2015: Wingate orders REEL (Rational Entertainment) to respond to the court’s discovery requests by May 31, 2015;
  • May 22, 2015: Wingate again orders REEL to produce Scheinberg and Schapira for deposition by May 31st, allowing the Commonwealth of Kentucky to file for summary judgment if the two men do not appear.  In that order, Wingate also finds that “REEL’s argument that they could not produce Messrs. Scheinberg and Schapira due to the buyout” were “nothing more than a delaying tactic.  REEL was unable to obtain cooperation from Scheinberg to have him deposed before the May 31st deadline, but did receive leave from Wingate to be deposed remotely (from London), on June 3rd.  However, according to the summary, Scheinberg failed to appear for the deposition;
  • August 12, 2015: Wingate grants partial summary judgment in favor of Kentucky.  Wingate also grants a default summary judgment as a sanction against REEL and Oldford Group for failure to comply with the court’s discovery orders;
  • September, 2015: The Commonwealth of Kentucky submits a motion for partial summary judgment in which it estimates damages to be $535,951,020 — and that figure is before the trebling of damages that Kentucky also seeks.  The figure is derived from a combination of public data and information received from a “previous litigant,” PartyGaming (later bwin.party), which had earlier reached its own $15 million settlement with the state.  The figure is believed to be derived from computing each player’s wins and losses on a daily basis, thus multiplying the alleged damages by many multiples due to the natural ebb and flow of players’ bankrolls.
  • October, 2015: Amaya provides gaming data to the court for Kentucky players on PokerStars from October 2006 through April 2011, and Wingate subsequently revises the total damages downward, to $290 million, by including only daily losses of Kentucky players that amounted to $5 or more;
  • October, 2015: Amaya and REEL file motions for Wingate to reconsider the judgment;
  • November 20, 2015: Wingate denies the motions to reconsider, writing, “The Defendants have engaged in what can only be characterized as a pattern of delay and obfuscation throughout the course of this litigation.”  Wingate also confirms the summary judgment in the amount just over $290 million.

 

“The rules of civil procedure and judicial discretion are not tools ripe for the manipulation of the fair and efficient administration of justice,” added Wingate.  “First the defendants refused to satisfactorily comply with discovery orders despite the Court’s continued patience.  Then, the Defendants attempted to remove the case to federal court, during the pendency of which they completed the sale of their respective companies to Amaya.”

Amaya, in a statement issued earlier today, has already announced its plans to “seek recovery against the former owners of the PokerStars business” in the event that all future expected appeals in the case fail and the company is ordered to fork over a settlement that would represent a major slice of its net worth.

FlushDraw will return to the story as events warrant, and as continued examination of the relevant court documents provides an insight into the Kentucky-based legal events.

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