How the PokerStars six-month plan went awry

By Jon Ralston

Wednesday, April 20, 2011 | 2 a.m.

The timeline for the PokerStars plan to come to Nevada, buy influence, lower licensing requirements and gain a foothold before federal legislation passed is coming into focus.

And the more information I obtain, the more obvious it is that the company believed for a relatively small investment for a multibillion-dollar enterprise, it could grease the way for a new law that would fundamentally undermine the system of gaming regulation in Nevada and circumvent a federal ban on Internet gambling.

This is the kind of fantastic overreach and juice amassing that the land-based state casinos surely must appreciate as they, through their lobbying arm, the Nevada Resort Association, thwarted the PokerStars gambit. Beginning in September, the Isle of Man-based company attempted to set the table for a legislative coup designed to overthrow the ruling party based on Las Vegas Boulevard South, a group beset by the usual internal schisms but one that does not take kindly to interlopers on its turf — financial or political.

My guess — and it’s an educated one — is that PokerStars believed that it could eventually partner with Steve Wynn and thus divide and conquer the NRA, then slide the noxious bill through a Gang of 63 and governor plied with $272,000 in contributions.

If it weren’t so heavy-handed and clumsy, if the company had only not Pearl Harbored the NRA folks, if it had simply tried to work with the gamers and, perhaps, Senate Majority Leader Harry Reid, also blindsided by the legislation, this might not have ended as badly as it will.

Other than those small errors, it was a well-executed plan:

• On Sept. 23, a man named Richard Kulis, a principal in a sports and marketing company with ties to the poker industry, filed paperwork with the secretary of state for a new political action committee. Considering the PAC was designed to hook lawmakers and other key legislative players, its name was fitting: REEL PAC. Kulis has not responded to efforts to contact him.

• That same day, Rational Services Ltd., the foreign PokerStars parent based in the Isle of Man, funded the PAC with one payment of $299,970. Former U.S. Attorney Greg Brower, now a state senator, and many others believe this is patently illegal — foreign money cannot fund a PAC. In the space of two weeks, PokerStars lobbyist Alfredo Alonso, who denies any knowledge of the money’s foreign provenance, disbursed most of the money in the PAC to 48 out of 63 lawmakers and some others, according to the report. (In a bizarre twist, and perhaps testament to the shoddy nature of the operation, a handful of legislators say they never received the checks.)

• In late October, apparently having been provided with a list of contributions after Alonso claimed a conflict and withdrew, former Assembly Speaker Richard Perkins filed the required report with the secretary of state — without noticing, apparently, that the PAC was funded with foreign cash. (One question lingers: Why would any of these politicians take money from a company conducting a business the Justice Department considered illegal? Greed? Ignorance? The answer: Yes.)

• Contributions apparently weren’t enough for the company’s access-buying plan, so in late fall, an overseas trip was arranged for Assemblyman William Horne, chairman of the committee who would introduce the bill. Others were invited but only Kelvin Atkinson, the Commerce chairman, tagged along. (Senate Majority Leader Steve Horsford was later treated to a trip to the Bahamas, where the PokerStars principals were at a conference.)

• By the time the Legislature convened in February, PokerStars was lining up more juice. Former regulators Randy Sayre and Scott Scherer were on board. Perkins was also registered for Wynn Resorts, fueling rumors that the Nevada company had made or was about to make a deal with the online giant. Wynn, an avowed web gaming foe, had changed his mind after meeting PokerStars boss Isai Scheinberg on a boat in the Mediterranean, according to Forbes’ Nathan Vardi, and later being persuaded by Reid, a convert himself who had once said anyone who played online should see a psychiatrist.

• On March 10, Horne dropped the PokerStars bill. That same day, unbeknown to most, I assume, the grand jury in New York was indicting the principals of PokerStars and others. The trajectory was nonetheless assured. Two weeks later, the NRA folks were ready and despite a phalanx of lawyers to bolster their cash and junkets, the PokerStars folks never had a chance and the bill was gutted. When I found the PAC last weekend, it simply added to a sleazy sheen and with legislators returning the money amid the disclosure of the foreign cash and those pesky indictments unsealed, this is one influence-peddling attempt that has badly backfired.