The Missing Intabill Millions, Part 4: How Banks Identified Poker Processing

intabill-tzvetkoffAny examination of the financial morass which involved the high-flying Intabill online poker payment processing operation, along with several other connected business entities, requires an understanding the nature of the poker processing itself.

Attempts to move money between US-based poker players and online sites became exponentially harder after major US-facing e-wallets such as FirePay and NETeller were forced from the US market.  It was a fairly simple matter for US banking authorities to identify the access points where e-wallets accessed the online banking system, choke those accesses off by invoking the UIGEA, and disrupt the flow of money.

What’s surprising, in retrospect, is how easy it was for US banks to identify gambling-related transactions, because they invariably involved rounded numbers such as $50, $100, $200 and so on, going in both directions between the players and the sites.  Such transactions, especially when clustered in large processing batches, couldn’t help but raise red flags, especially since many US banks had already expressed their own preferences to not service online-gambling sites, as anyone with a BOA (Bank of America) account could attest.

Therefore, large processing houses became unwieldly by their very own size, and the move in post-UIGEA years was to use many more small, diverse, short-term channels, the concept being to replace bad channels with others once a channel had been outed.

That’s how the munging of account names and faking of web sites entered the online-gambling scene, where the “Black Friday” indictment tales of faked golf ball sales and “GreenToYourGreen” deposits showed the manipulation taking place.  It only took one or two calls from confused depositors — or unscrupulous losers, using chargebacks — to a bank’s fraud department to get the ball rolling.

Yet that unmasking usually occurred only after the fact, and it wasn’t the only way it occurred.  Another was the case of Zions Bank, based in Salt Lake City, Utah, which discovered that it had been processing poker transactions well before the rise of the also-in-Utah SunFirst bank operation.  Zions had an extensive processing arrangement with US processor John Scott Clark for his payday-loan operations, and those were dicey enough; when Clark and his business partner Curtis Pope began jamming poker processing through many of the same accounts, and Zions uncovered it, they booted out all of Clark’s business, not just the accounts connected to poker.

The Zions disruption may have contributed in its own way to the series of events that culminated in Black Friday, but it was also connected to Clark’s other shady businesses, payday-loan operations and other business ventures, which eventually resulted in investigators uncovering a $45 million shortfall in Clark’s other businesses and alleging a Ponzi scheme of new investments being used to pay off older ones had occurred.

Even before that collapse, however, some of Clark’s own employees and associates started to realize that something funny was going on.  This installment continues with a special treat: an excerpt from a deposition given by former Clark business partner and Impact head accountant Albert Brown, who unknowingly discovered Impact’s and Clark’s poker connections.

The excerpt also introduces another familiar name to the Impact tale, that of convicted Black Friday processor Chad Elie.  Elie, who was technically an employee of Clark’s partner and fellow scoundrel Curtis Pope, also maintained his own business entities and processing connections.  According to Brown’s testimony, Elie stepped up to take over some of the poker processing when Zions Bank booted John Scott Clark.

Here’s the meat of it.  “Scott” is John Scott Clark; “Jason” is Jason Asplund, a free-spending business partner of Clark’s in Impact.  It’s surprising how much of the testimony circled to poker processing in a case which alleged fraud in a payday-loan business:

Q (from plaintiff’s attorney, representing Impact’s investors). … What other companies do you remember?
A (from Brown). Impact Investors.
Q. What did they do?
A. They primarily just distributed funds to Scott and Jason and I that were still with Impact.
Q. Help me understand that. Where did it get the funds to distribute?
A. I don’t know. Scott —
Q. Scott?
A. Scott would tell me when there was money that he had put in there and how much to distribute.
Q. Okay. And it distributed money to Jason, Scott, and you; is that right?
A. Almost exclusively. Occasionally there would be another person or two that Scott would say and I would give a certain amount of something of value that they had contributed.
Q. Who owned Impact Investors?
A. I don’t know for sure. I can’t recall.
Q. Did you have an ownership interest?
A. I don’t know. I never thought there was anything there.
Q. Okay.
A. I mean, in terms of assets, other than what came and went, so. . .
Q. About how much money did it distribute?
A. Somewhere in the range of 300 to 400,000.
Q. Over what period of time?
A. About a year and a half.
Q. When was that?
A. About — it would have been probably in ’08 and ’09.
Q. Did you receive a 1099 for any distributions you got?
A. Yes.
Q. Who prepared those 1099s?
A. Let’s see, it’s called —
Q. Jones Simkins?
A. Yes.
Q. S-I-M-K-I-N-S, the Logan CPA firm?
A. Yes, right.
Q. Okay. Of the 3 or 400,000 dollars that was distributed, how much of it was distributed to you?
A. About a third.
Q. Okay. And did Mr. Scott Clark also receive about a third?
A. Yes.
Q. And Mr. Asplund about a third?
A. Yes.
Q. Did you ever ask Scott Clark where that money was coming from?
A. Yes.
Q. What did he say?
A. He said that that money was coming from proceeds of the sale of transaction processing. We had a large client earlier, and we sold that client, and then we were getting monthly payments for a year.
Q. You sold the client, is that what you said?
A. Sold the — yeah, it was an ACH processing client.
Q. Who was that to?
A. Chad Elie.
Q. Can you spell that last name for me?
A. E-L-I-E.
Q. Where does Mr. Elie live?
A. I don’t know.
Q. Is he —
A. He was in Las Vegas.
Q. Okay. What was the name of the client that was sold?
A. I don’t remember.

Later, where Impact’s poker business really began to leak out:

Q. I see. Was Impact ever involved in loans involving the gambling industry?
A. It appeared that way to me.
Q. It appears that way now or it appeared that way then?
A. No, it did then.
Q. Okay.
A. Go ahead.
Q. About when was that?
A. About 2008.
Q. When you say it appeared that way to you, what was it that made it appear that way?
A. Well, it became — originally Scott said, We’ve got a new client, it’s an Australian based company [referring to Intabill], and they have a huge amount of transactions to be processed, and they do all kinds of sales worldwide. They sell all kinds of products. So, of course, that’s great. As we got into that several months, we began — the main operator was in our office here in Bountiful [Utah] on the phone system, so she would periodically get overflow calls that didn’t go to the normal customer service center, which was, I guess, in Las Vegas, handled by that client. And people that called would talk about poker transactions sometimes. And as that accumulated, I began to hear about it. And so I said to Scott, This is — sounds like there really is a bunch of poker transactions here, and I have a problem with that. And so he said, Well, we will sell that to Chad Elie, like I was talking about. So he told me it was sold, and then we got checks into Impact Investors over the next year.
Q. Was Impact providing any of the financing for those poker transactions or was it only doing the ACH
A. I don’t know of any funding activities going on with them…

Later on, Brown, who was then in his late sixties and whose troubles with Impact and Clark’s financial manipulations led him to leave Impact, described under questioning his simple attempts to unravel the probable poker transactions that were popping up in the Impact accounts:

Q. … [T]hese are notes that were taken by you or made by you?
A. I made notes, yes.
Q. Okay. So let’s begin with this first page. At the top it says “Public” and then arrow down to “Web sites” and arrow down to “Insta-bill” and arrow down to “Process,” is that “Companies”?
A. Yes.
Q. Then arrow down to “Quasar.”
A. Yes.
Q. Then an arrow to “Hugo”?
A. Yes.
Q. An arrow to “Payday Loans,” and “Quasar” another arrow, “ODL” with a question mark, and another arrow to “IPS.” What’s this about?
A. I think it was an effort from me to understand what was happening with that billing volume that we got that turned out to have poker transactions in a lot of it.
Q. When did you make these notes?
A. It would have been probably about somewhere between June of ’08 and probably June of ’09 — no, it wouldn’t have been way earlier than that, I don’t think. Let me stop and think rather than talk. Let’s say summer of 2008, best I can recall.
Q. The summer of 2008, is that what you said?
A. Yes.
Q. So beginning on page 3 where the cursive starts, there’s some dates that appear to me 5/8, 5/9?
A. So that’s probably ’08.
Q. May of ’08?
A. Uh-huh.
Q. Okay. All right. So on the first page of Exhibit 48, over on the left-hand side you wrote “Money Laundering” with a question mark?
A. Yeah.
Q. Did you have reason to believe that this transaction was money laundering?
A. I really don’t know what money laundering is. I’ve heard of it and read about it in the paper. So I asked our company attorney if any of this could be money laundering, and he said, no, so. . .
Q. Who did you ask?
A. Gary Henrie.
Q. Did you give him a copy of this?
A. No.
Q. Why did you make this; was it for somebody else?
A. I was — I was probably trying to understand. I — it’s part of why I was becoming uncomfortable with my role, because I didn’t understand all this stuff. I sat down with Brandon [Cowley], I remember, and we went through one morning what we understood about what entities were involved and trying to understand what it was about, what it meant, and these seemed to be notes that I had made for that. I don’t remember making them.
Q. Okay. But you think you made them in connection with a meeting you had with Brandon?
A. Yes.
Q. Was anybody else in that meeting?
A. Well, I don’t know. I had a meeting with Brandon trying to understand this stuff. Jeff Nelson also —
Q. Who is Jeff Nelson?
A. — was in part of that.
Q. Oh, sorry.
A. Jeff was helping line up banks to process those transactions.
Q. Who was Jeff Nelson?
A. Jeff was playing a role outside of Impact to find places to process those transactions.
Q. Was he an Impact employee?
A. I don’t think so.
Q. Did he have an office at Impact?
A. He had an office of his own.
Q. Not at Impact?
A. It was in the same building, but it was under a different lease payment and everything.
Q. Was he being compensated by Impact?
A. No, I don’t believe so. He was under Quasar.
Q. I see. Who owned Quasar?
A. Well, I don’t — I don’t know. I can only read the note that’s there.
Q. And that says that Scott [John Scott Clark] —
A. “Scott is the only shareholder and chairman.”
Q. Okay. What’s Hugo?
A. I don’t know. I remember — Brandon would know more about what Hugo was, but that was out of my league.
Q. In your conversation with Mr. Henrie, did he explain to you why he did not believe it was money laundering?
A. No, he didn’t go into any details. He just said, No, with emphasis, so. . .
Q. Okay. The second page says “How the money may flow, Why do I care? A, I want to live by earning morally upright and though it will be much less than not. B, I am legally liable if IPS [Impact] is considered to be engaged in an illegal activity as a manager and as CFO.” Does that accurately reflect your thinking at the time?
A. Yes.
Q. Then it says, “What might be illegal or immoral?” Under B it says, “How does money seem to flow?” And then there’s something written under that.
A. It’s just a P, a 1 and a P, but I never completed whatever that was going to say.
Q. Oh, I see. So do you know how the money did seem to flow?
A. I would suppose that that’s what this page was.
Q. The first page?
A. Yeah, because it starts with P, too, so. . .
Q. I see. So is it about this time you decided it was time for you to get out of Impact?
A. Let’s see, this was May of ’08, and that is when I — I was — like I mentioned before, I was feeling like this looks like there may be a lot of poker transactions, and I don’t think we ought to continue doing it. And that’s when Scott said, Well, we’ve sold it to Chad Elie, and we’ll get monthly payments for a year, then it will be over. And I asked Gary about that, and he said, That’s fine, you can do that. He said, You can sell a client that you don’t want to keep anymore, and so that was what I thought we did.
Q. Okay. Page 3, I’m going to need your help with some of your handwriting, if you will.
A. Okay.
Q. 5/8, is that Dan?
A. Yes.
Q. Who’s Dan?
A. He’s the programmer that developed the system. Dan that I can’t remember his last name.
Q. Dan the programmer?
A. Yes.
Q. And which system is this that it’s talking about?
A. This would be the transactions that we were processing for that big client, that’s where I’m becoming aware, on that date, that it’s starting to sound like poker payouts rather than installment loans.
Q. Okay. So it says, “Dan says there are lots of duplicate” — what’s that next word?
A. Names.
Q. “Names in the” —
A. “Credit transactions.”
Q. Okay. “This sounds like poker payments rather than installment loans.”
A. Right.
Q. Okay. The next entry is 5/9. Since the instability?
A. Intabill.
Q. Intabill?
A. Yeah, there’s this name, Intabill, back over here.
Q. What is Intabill?
A. I think that was the name of the client that I couldn’t recall.
Q. “Since the Intabill transactions are generally more” —
A. Rounded.
Q. — “rounded amounts of $50, $25, they do not sound like normal sales events.” Okay.
A. Okay.
Q. 5/9. “The large number of credits and up to ten day” —
A. “Backlog.”
Q. What’s a ten day backlog? Maybe we should read the rest of this entry, maybe you can help me.
A. Okay.
Q. “Ten day backlog, the” — what’s that next word?
A. “ElectraCash backlog sounds like poker payments more than purchased installment loans.”
Q. What’s a backlog?
A. I’m not sure. It would — I don’t know. It could have been a couple of things, I guess, but I would only be guessing. It really doesn’t mean anything.
Q. The next entry also says 5/9. “It also sounds like” —
A. Uh-huh.
Q. — “Intabill has” —
A. Lost.
Q. — “lost credibility” —
A. Uh-huh.
Q. — “with other processors and so came looking for someone else to help them cover their processing needs.”
A. Yes.
Q. “Hence several things, one, split up,” is that what that says?
A. Uh-huh.
Q. “Split up processing across multiple companies” —
A. Uh-huh, yes.
Q. — “and banks to avoid being noticed.” Are you saying that that’s what they want to do?
A. I am just trying to be logical about what I think they may be trying to do.
Q. Do you remember multiple processing companies being set up?
A. Yes.
Q. What did those multiple processing companies do?
A. I wasn’t involved with what they do.
Q. What were some of those processing companies; do you remember their names?
A. No.
Q. For instance, does Desert Processing mean anything to you?
A. That term is familiar.
Q. Okay. All right. Two says — I can’t read that first word, actually.
A. Claim.
Q. “Claims to be processing normal purchases”?
A. Yes.
Q. Three, what’s that word?
A. Start.
Q. “Start with debits and all credits later,” oh, “and add credits later”?
A. Right.
Q. “Under an installment loan or payday loan” —
A. Cover.
Q. — “cover.” As a third party, e.g.?
A. Use a third party.
Q. I’m sorry, “Use a third party, e.g., FBOD.” Is that Federal Bank of Delaware?
A. I think it is.
Q. “To” quote, “service,” end quote, “the loans. Four, to avoid bank investigation.” What does that say next?
A. E.G.
Q. E.G.?
A. Uh-huh.
Q. “Reported to me by John” — what’s that name?
A. Prygoda.
Q. P-R-Y?
A. G-O-D-A, I think.
Q. Okay. And then what’s that next word?
A. Teledraft. [Teledraft was one of several intermediary firms used by Impact to process some of Intabill’s poker business.]
Q. Okay.
A. That was the company that we did some ACH processing through.
Q. Okay. And then it says “Of several” —
A. “Consecutive daily payments arriving in a new bank account and resulting calls to the account
holder reporting poker winnings and a subsequent call to Teledraft followed by Intabill.”
Q. Intabill, what’s that next word?
A. I can’t read it, but it could be termination.
Q. Okay. Do you recall having a phone call with John Prygoda?
A. I talked to several people at Teledraft. I think — Teledraft had gone through some problems that I remember. I remember that they had some problems. I don’t remember what they were.
Q. Do you remember when you were talking with them what you were talking about?
A. Well, I was making an effort to have a backup processor besides Bay Cities Bank, and Teledraft could process transactions for us economically and had some advantages over Bay Cities.
Q. So Teledraft was an ACH processor?
A. Yes.
Q. Let’s go to the next page. The first word on that says “Today.” So can you tell, is this a continuation of the paragraph on the prior page?
A. I’d have to try to make sense out of it. It’s been so long. I doubt that those are connected.
Q. Okay. Then let’s go to that last page of this Exhibit 48.
A. Okay.
Q. It says, “Today, 5/9, we received email” —
A. Yes.
Q. — “from Andrew McLeod”?
A. Right.
Q. Do you know who he is?
A. He was a representative of Intabill who we were instructed to work through regarding things with Intabill.
Q. “Notifying us that Intabill’s system will only allow payments once in a 72 hour period,” exclamation point. Why would that be significant?
A. I’d just be guessing. I’m not sure why that would be except it may relate to frequency of a person playing poker, maybe. It may have been some kind of — have something to do with whether or not I thought they were doing poker.
Q. Okay.
A. That’s all I can guess.
Q. Then it says, “5/10, See also MSNBC article at,” then there is a Web address, “re online gaming executive arrested in 2006. TPP’s,” is that what that is?
A. Third party processors.
Q. “Are liable as”, quote, “financial” —
A. “Transaction providers.”
Q. End quote. “Check out other Google references.” Okay. So is it fair to say that by May of 2008 you were quite concerned about what was going on?
A. The poker possibilities, yes….

Brown’s testimony, which stretches to over 200 pages of deposition, makes it clear that not only were US-based employees themselves becoming uncomfortable with this presumed poker processing, but that it was actually poker processing going on, and not something else, was woefully easy to determine.

Brown himself can be accused of being minimalist in his responses to some of the questions, given that he was more than just the company’s CPA; he was a co-owner in Impact, and proclaimed not to be particularly interested in some of the diciest issues that turned up.  Nonetheless, he distanced himself from Impact and John Scott Clark in late 2009, unfortunately leaving Impact’s financial paperwork in the hands of even less experienced workers, whom Clark easily manipulated as a part of his own Ponzi-styled fraud.

It’s all an untold chapter from the dark post-UIGEA days of online poker processing, and shows the unfortunate depths that US-facing sites were forced to sink to keep servicing American customers.

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