By: Rich Bergeron
Arizona's gaming authorities recently took a bold stand against a company called Global Cash Access by filing a notice of intent to deny state certification for the merchant services company, which has suspiciously tight connections with Station Casinos and Fertitta Enterprises. Most news reports about the Arizona developments barely scratch the surface and can't fully quantify the WHOLE REPORT.
The bottom line? This is a big domino to be falling at this moment in time and this juncture in the history of Station Casinos.
The timing couldn't be worse for the Fertitta family as their casino empire steams toward bankruptcy despite one extension after another given to the struggling company by the banks and lenders they owe. Now, it seems their friendly bedfellows from Global Cash Access (GCA) are in a heap of trouble, and more has been revealed through an intensive investigation into how the company was run under the control of Former GCA CEO Kirk Sanford, also a central figure in the Xyience bankruptcy scandal I have been writing about here.
I met with Kirk Sanford myself at a Times Square restaurant just prior to UFC 78 in Newark, NJ. At the time he was Co-CEO of Xyience and had just been ousted from Global Cash Access due to an emerging scandal related to casino payout discrepancies. He specifically used the term "scorched Earth" to describe his plan to bankrupt Xyience.
As it turns out from the timetable emerging in new documents, at the time of that meeting Sanford and GCA were allegedly involved in a massive mis-coding scandal as well as a scheme to defraud casinos of bonuses owed to them. Though the new paperwork does not reveal which particular casino properties GCA allegedly denied due bonuses to, clearly Fertitta Enterprises was impressed by these GCA converts for some reason, and Station Casinos extended their contract with GCA even after the scandal leaked out.
It would ultimately take a great deal of GCA Founder Karim Maskatiya's money and all of Former GCA CEO Kirk Sanford's cunning to perpetrate the Xyience bankruptcy. Karim Maskatiya's nephew Omer Sattar and former GCA executive Kathryn Lever (still with GCA to this day) also made the Xyience transition and played roles in the bankrupting of the company.
The big question I find myself asking over and over again is WHY did Fertitta Enterprises bring these GCA folks in to bankrupt Xyience? There are only two possible answers in my mind:
1.) Fertitta Enterprises officials may have been conscious of the GCA skimming operation and impressed by it, and they needed similar skills to bankrupt Xyience through the perfect group of scapegoats.
.....or.....
2.) Fertitta-owned Station Casinos was on the list of casinos GCA skimmed from, and company officials were so upset that they forced the GCA rejects to pay their penance through bankrupting Xyience for them.
Looking at the whole risk and reward setup, there's no other explanation in my mind for the GCA and Fertitta Enterprises partnership. If you go to my ENRON OF MMA PAGE you can read about why the UFC needed to keep Xyience viable long enough to get a huge loan package and create a middle of the mat bidding war for potential UFC sponsors. Yet, they also needed to make their involvement in Xyience as limited as possible so as not to raise conflict of interest eyebrows. This is why they needed a few devoted fall guys to take key positions, guys who would be really compelled to do this dirty work and take all the risks involved. Yet, why these fall guys? What made GCA so special, and why risk the backlash of hiring folks so fresh off a scandal?
Global Cash Access perhaps came to be tied to the UFC and Xyience because criminal minds think alike. Consider the fact that Frank Fertitta, Junior is the on-paper CEO of Fertitta Enterprises. Yet, Frank Junior has been kept away from Station Casinos operations by his associations in the past with known organized crime figures. The Nevada Gaming Commission would rather Frank Junior's unclean past stay buried. It is widely reported that Frank Fertitta Junior helped operate a massive Vegas skimming operation glorified in the movie "Casino."
Frank Junior's history is fascinating, but his new hobby is even more intriguing. Fertitta Enterprises may not have all that much to do with Station Casinos, but it does healthy consulting work to help other casinos get started all over the country. No matter what controversy is stirred up, the folks behind Fertitta Enterprises seem to be able to squeak unwanted developments through on technicalities wherever they go.
The Fertitta family wields incredible power and influence in the Casino industry, and it shows. Even the Fertitta-led suggestions that a pre-packaged bankruptcy of Station Casinos would be the best way to go have been met by very little criticism, if any. It is my personal opinion that the Xyience bankruptcy was a trial run for the Station Casinos pre-packaged collapse. The Fertitta family has promised to put $244 million into the reorganization pot for Station Casinos, and despite the company's struggles, Frank Fertitta III just bought a $28 million home in Orange County, CA's Emerald Bay. Station Casinos just financed one of the largest 4th of July fireworks displays in Vegas history to boot.
Don't forget things are only so bad for Station Casinos because the Fertitta Brothers went on an overzealous expansion spree resulting in too much overhead and not enough income. Also, like a teenager with his first credit card, they hid the problem by pursuing loan after loan and credit facility after credit facility. The latest estimates put the company in debt more than $5 billion.
the Arizona investigation is mind blowing as far as the conclusions that could be drawn from the associations between GCA, Fertitta Enterprises, Xyience, the UFC, and Station Casinos. This latest GCA bombshell could be the straw that broke the camel's back with Station Casinos, and it could raise some regulator eyebrows in Nevada. Ironically enough, a witness to the Xyience collapse recently informed me that the scheme to bankrupt Xyience was primarily the work of "the two Franks." This report made a great deal of sense since Frank Junior and "Frankie Three Sticks" are really consumed in many ways by the Casino industry business and lifestyle. Meanwhile, Lorenzo Fertitta has over the years been more partial to his work with the UFC and recently left Station Casinos to help Dana White expand the UFC.
Having such intimate knowledge of the casino operations, "the two Franks" should have known it if the GCA Executives were bilking them. These are two men known for their shrewd business practices and sharp minds.
So how did this whole Xyience bankruptcy plan get hatched and why did all these folks end up working together? The exact manner in which all these "usual suspects" came together under a common banner is really an unknown at this point, but their basic motivations seem plain as day now that these new GCA documents have been revealed.
It seems to me we have a classic case of "like father, like son" going on here.
Frank Fertitta Junior never went to jail for his part in casino skimming or any other organized crime endeavor he took part in over the years. Like the "Teflon Don" John Gotti, nothing stuck to Frank Junior, and he was allowed to ride off into the sunset untainted by a prison record and able to buy his first casino for just a buck as the legend is told. Frank Junior's buddies rotted in jail while he built his fortune in gaming and created a dynasty he could pass onto his sons.
Frank Fertitta III had to take the reigns at an early age when his father had no other choice but to pass the buck. Like his father, maybe Frank III devised a new-wave skim with help from GCA, or maybe he and his father muscled in on the GCA scam and took a percentage.
Either way, even a tenuous association of the Fertitta family with what looks to be a massive and purposely designed and perpetrated electronic skimming operation executed by GCA is troubling to say the least. The fact that Fertitta Enterprises would provide ousted GCA officials immediate positions in the soon-to-be-bankrupted Xyience adds more fuel to the conspiracy fire. There are a great deal of whys to be asked in this context.
Looking from the outside in, there is only one logical conclusion as to why all these entities and individuals were perpetrating this massive fraud together. It was all about the money, of course, and while all the loosely associated businesses owned by these individuals were doing well on their own, they could do better conglomerated. They would do even better than that working together under the radar as if they were still being operated by completely separated and unrelated entities and/or individuals.
These culprits had to scatter the blame and obscure the ownership connections as much as they could, and the pattern emerging now shows that they were successful at getting away with these tactics for a long time. If you look closely you can see all the lines of connectivity between these businesses, but on paper and from a distance the names are all different and the associations are hidden. The casual observer doesn't pick up on it.
Global Cash Access made recent moves to further distance itself from GCA Co-Founders Karim Maskatiya and Robert Cucinotta, both having emerged in recent months as suspects playing integral roles in the massive conspiracy run through the company and other offshoots owned by Cucinotta and Maskatiya. The most involved scheme allegedly netted in excess of $26 million based on fraudulent fee rigging by the company. The Arizona license denial paperwork claims GCA officers were not only conscious of the fraud but actively worked to conceal it, knowing that the fine would be minimal if caught in the act.
BREAKING DOWN THE DOCUMENTS
The Arizona Notice leaves room for Global Cash Access to contest the conditions for denial and prove that they are a new and improved entity, but the sheer weight of the allegations included in the document are staggering and might possibly be insurmountable.
In a release issued by GCA officials about the notice, the language is purposely vague:
"The notice summarizes the basis for the department's intention and alleges that GCA, its founding stockholders and certain of GCA's management undertook actions that demonstrate that GCA is not suitable under the department's standards to act as a provider of gaming services to Native American tribes conducting gaming in Arizona," Global Cash said in the 8-K regulatory filing.
The company also harps on the stipulations that make this move by Arizona gaming regulators a preliminary one and not really a final say, explaining that they will fight for their state certification:
"The notice provides GCA with the right to an informal settlement conference as well as a formal hearing before an administrative law judge in Arizona. GCA intends to seek the holding of the informal settlement conference prior to July 15, and the holding of the formal hearing, if necessary, as soon as possible thereafter. In the meantime, absent further action by the department that prohibits GCA from doing so, GCA intends to continue its operations in Arizona in the ordinary course of business," Global Cash said.
"GCA takes the notice and the allegations made therein very seriously. GCA believes that it has taken appropriate actions during the prior 20 months that will permit GCA to fully demonstrate that it should be considered suitable for certification by the department. Many of these actions involve the termination of GCA's relationships with certain affiliated parties and have been previously publicly communicated and provide the basis for GCA's belief that GCA is in fact suitable to act as a provider of gaming services to Native American tribes conducting gaming in Arizona," the release further explains.
The Arizona report goes beyond the alleged actions involved in the perpetration of the skimming operation. Regulators also allege a conscious plan to deceive gaming regulators in Michigan in 2004 and in Arizona in 2005 by not disclosing all the required information about the mis-coding issues:
"GCA deprived a regulatory agency of material information needed to make an informed suitability determination," the Arizona report said of the Global Cash case in Michigan. Company founders Karim Maskatiya and Robert Cucinotta "both attempted to mislead the investigators to hide GCA's interchange fee fraud and their involvement in it," the Arizona report says.
Above all other allegations, charges of Maskatiya and Cuccinotta failing to disclose their questioning in the murder of Maskatiya's wife are most shocking. Here is the text of an Oakland Tribune article printed at the time of the Maskatiya murder:
=====================================
Oakland Tribune March 24, 1982
Police rule out burglary as motive in murder
Fremont- Police said Tues the fatal shooting of Laila Maskatiya was not the result of a burglary in her home because there were no signs of forced entry and nothing was taken.
Detective Dan Fuller said no motive has been established in the slaying, and there is no suspect.
Maskatiya's husband, Karim, told police he arrived home from work at 7:30 Monday evening and found his 29 year old wife in the bedroom in their $350,000 home on Guadalupe Terrace.
She had been shot twice in the head with a hand gun and several empty cartridges were found near the body. Police said the couple's 4 year old son slept through the shooting.
============================================
The Arizona documents say, "Police detectives questioned both Maskatiya and Cucinotta regarding the murder. Both were read their Miranda rights. The detectives felt that Maskatiya and Cucinotta gave inconsistent statements and did not cooperate with the investigation. They also felt that Maskatiya knew, but would not reveal, the identity of the murderer," the Arizona report said.
Yet, both men answered 'no' when asked by Arizona regulators if they had ever been questioned by a law enforcement agency, the report went on to explain.
The Arizona Gaming Department said Maskatiya and Cucinotta were on the GCA board of directors until June 2008, but resigned six weeks after being interviewed by the department. It says they continue to hold more than 25 percent of the company's stock. However, an SEC filing dated July 7, 2009 indicates Cucinotta holds no voting rights and seemingly has no control or major stock value anymore in regard to GCA.
In February, 2009 documents filed with the SEC, Maskatiya and Cucinotta both still retained more than 9 million shares in GCA. Yet, while it appears that Cucinotta may be on his way to being completely muscled out of the company he co-founded, Maskatiya unloaded 2,768,800 of his own company shares at a rate of $6.25 each as recently as a month ago (6/10/09).
In a section of the report called "ongoing matters of concern," the Arizona regulators say:
==> Global Cash Access has never acknowledged or taken any action in regard to its wrongdoing.
==> Global Cash Access has continued contacts with people and companies involved in the Visa fee fraud.
==> The former Global Cash Access principals failed to disclose information about the murder investigation to regulators in Arizona and Mississippi.
==> Cucinotta and Maskatiya failed to disclose other information including their ownership of various companies.
==> Global Cash continues to have problems with payments of fees to casinos and with payments to casino patrons.
==> Global Cash principals had contact with gaming regulators that created an appearance of impropriety.
"GCA has committed a theft, fraud and concealment," the Arizona report alleges. "It has conspired in these actions with (related company) USA Payment Systems. It has demonstrated a willful disregard for compliance with gaming regulatory authorities and has misrepresented and concealed material facts, documents and information in its dealings with the department and others."
"Casino vendors providing electronic fund access must be reputable, honest, diligent and effective. GCA has proven itself to be none of these," the report said. "Allowing GCA's continued participation in gaming in Arizona damages the public's trust in Arizona casinos and casino regulators. Casinos cannot properly operate where patrons continually suspect or assume they are being cheated, and regulators are assumed to be either involved or incompetent."
In other words: Who wants to play a game everyone knows is rigged? It seems fitting that Arizona has the designation AZ, because for Global Cash Access Arizona could be the first on an A to Z list of officials and operations who may soon 'Just Say No' to the type of underhanded tactics GCA is generating a reputation for.
It is a new era in America as the recession revealed some of the worst fraudulent transgressions against honest taxpayers and shareholders. Bernie Madoff might be the biggest of all the frauds, but he was certainly not the only massive con man involved in the economic collapse. He was not the only one making money off misrepresenting his business practices. GCA appears to be a company that grew fat off the same spirit of fraudulent activity, never worrying about getting nailed with the petty fine. They jobbed the system and got away with it, but they still expect to hold the public's trust. Arizona may only represent a small percentage of GCA's worldwide business operations, but this kind of taint could make lots of other dominoes fall.
Taking a closer look at current operations at GCA, it is clear that even if the company ousts Maskatiya and Cuccinotta from direct public roles with the company, GCA will still be intimate with the other companies these accused frauds also run and/or retain principal positions in. Consider the full text of another SEC filing from earlier this year, indicating some possible behind-the-scenes infighting going on at the company:
Item 1.02. Termination of a Material Definitive Agreement.
On February 13, 2009, Global Cash Access Holdings, Inc. (the “Company”) received written notice from USA Payments of the termination of the Amended and Restated Agreement for Electronic Payment Processing, dated as of March 10, 2004, by and among Global Cash Access, Inc., USA Payments and USA Payment Systems (the “Agreement”). The Company disputes the alleged breaches of the Agreement upon which the notice of termination was based, as well as the right of USA Payments to terminate the Agreement.
To the Company’s knowledge, Karim Maskatiya and Robert Cucinotta directly or indirectly hold significant ownership interests in, and serve on the boards of directors of, USA Payment Systems and USA Payments. Messrs. Maskatiya and Cucinotta are former members of the board of directors of the Company, and to the Company’s knowledge, they collectively hold approximately 23.6% of the Company’s outstanding common stock. At the time that the Company entered into the Agreement, Messrs. Maskatiya and Cucinotta were members of the Company’s board of directors and controlled a majority of the outstanding equity interests in the Company.
Pursuant to the Agreement, USA Payments and USA Payment Systems performed for the Company electronic payment processing services relating to credit card cash advances, point-of-sale debit card transactions and ATM withdrawal transactions, including transmitting authorization requests to the relevant networks or gateways, forwarding transaction approvals or denials to the Company, and facilitating the settlement of all funds in connection with approved and consummated transactions. Pursuant to the Agreement, USA Payments and/or USA Payment Systems were subject to a service level guarantee; were required to enter into agreements with card associations, networks, gateways and financial institution sponsors necessary to provide services to the Company; were entitled to fixed monthly fees plus volume-based transaction fees; and, subject to limited exceptions, were prohibited from providing similar services to third parties in the gaming industry.
This Agreement was to expire according to its terms on March 10, 2014. In its notice of termination, USA Payments alleged that the Company breached the Agreement due to two technology issues involving one of the Company’s other business partners. The Company has worked diligently and closely with the affected business partner to ensure that all necessary technology remediation has been performed. USA Payment Systems and USA Payments have acknowledged their obligation pursuant to the Agreement to continue to provide services to the Company during a 180-day transition period. The Company disputes the right of USA Payments to terminate the Agreement. If this dispute is resolved with the mutual agreement of the Company and USA Payments, the Company may continue to receive services under the Agreement or a successor agreement with USA Payments or USA Payment Systems. If the Company and USA are unable to resolve the dispute, the Company will transition to another provider of electronic payment processing services in the 180-day transition period. To prepare for the potential need to transition to a new provider, the Company is already engaged in discussions with an alternate provider.
So it seems USA Payment Systems sought to separate from GCA rather than the other way around. Perhaps this was a tit for tat response to the company trying to shut out Cucinotta. At any RATE (pun intended), whatever decision Arizona ultimately makes regarding GCA could completely transform the merchant services industry. If the appropriate attention is paid to this disaster, the needed regulation and oversight to prevent a repeat of this behavior could save billions of dollars in bogus fees in the long run.
To learn more about the GCA, Fertitta, Zuffa, & Xyience scandal you can check out XYIENCESUCKS.COM or my other stories here.
Arizona's gaming authorities recently took a bold stand against a company called Global Cash Access by filing a notice of intent to deny state certification for the merchant services company, which has suspiciously tight connections with Station Casinos and Fertitta Enterprises. Most news reports about the Arizona developments barely scratch the surface and can't fully quantify the WHOLE REPORT.
The bottom line? This is a big domino to be falling at this moment in time and this juncture in the history of Station Casinos.
The timing couldn't be worse for the Fertitta family as their casino empire steams toward bankruptcy despite one extension after another given to the struggling company by the banks and lenders they owe. Now, it seems their friendly bedfellows from Global Cash Access (GCA) are in a heap of trouble, and more has been revealed through an intensive investigation into how the company was run under the control of Former GCA CEO Kirk Sanford, also a central figure in the Xyience bankruptcy scandal I have been writing about here.
I met with Kirk Sanford myself at a Times Square restaurant just prior to UFC 78 in Newark, NJ. At the time he was Co-CEO of Xyience and had just been ousted from Global Cash Access due to an emerging scandal related to casino payout discrepancies. He specifically used the term "scorched Earth" to describe his plan to bankrupt Xyience.
As it turns out from the timetable emerging in new documents, at the time of that meeting Sanford and GCA were allegedly involved in a massive mis-coding scandal as well as a scheme to defraud casinos of bonuses owed to them. Though the new paperwork does not reveal which particular casino properties GCA allegedly denied due bonuses to, clearly Fertitta Enterprises was impressed by these GCA converts for some reason, and Station Casinos extended their contract with GCA even after the scandal leaked out.
It would ultimately take a great deal of GCA Founder Karim Maskatiya's money and all of Former GCA CEO Kirk Sanford's cunning to perpetrate the Xyience bankruptcy. Karim Maskatiya's nephew Omer Sattar and former GCA executive Kathryn Lever (still with GCA to this day) also made the Xyience transition and played roles in the bankrupting of the company.
The big question I find myself asking over and over again is WHY did Fertitta Enterprises bring these GCA folks in to bankrupt Xyience? There are only two possible answers in my mind:
1.) Fertitta Enterprises officials may have been conscious of the GCA skimming operation and impressed by it, and they needed similar skills to bankrupt Xyience through the perfect group of scapegoats.
.....or.....
2.) Fertitta-owned Station Casinos was on the list of casinos GCA skimmed from, and company officials were so upset that they forced the GCA rejects to pay their penance through bankrupting Xyience for them.
Looking at the whole risk and reward setup, there's no other explanation in my mind for the GCA and Fertitta Enterprises partnership. If you go to my ENRON OF MMA PAGE you can read about why the UFC needed to keep Xyience viable long enough to get a huge loan package and create a middle of the mat bidding war for potential UFC sponsors. Yet, they also needed to make their involvement in Xyience as limited as possible so as not to raise conflict of interest eyebrows. This is why they needed a few devoted fall guys to take key positions, guys who would be really compelled to do this dirty work and take all the risks involved. Yet, why these fall guys? What made GCA so special, and why risk the backlash of hiring folks so fresh off a scandal?
Global Cash Access perhaps came to be tied to the UFC and Xyience because criminal minds think alike. Consider the fact that Frank Fertitta, Junior is the on-paper CEO of Fertitta Enterprises. Yet, Frank Junior has been kept away from Station Casinos operations by his associations in the past with known organized crime figures. The Nevada Gaming Commission would rather Frank Junior's unclean past stay buried. It is widely reported that Frank Fertitta Junior helped operate a massive Vegas skimming operation glorified in the movie "Casino."
Frank Junior's history is fascinating, but his new hobby is even more intriguing. Fertitta Enterprises may not have all that much to do with Station Casinos, but it does healthy consulting work to help other casinos get started all over the country. No matter what controversy is stirred up, the folks behind Fertitta Enterprises seem to be able to squeak unwanted developments through on technicalities wherever they go.
The Fertitta family wields incredible power and influence in the Casino industry, and it shows. Even the Fertitta-led suggestions that a pre-packaged bankruptcy of Station Casinos would be the best way to go have been met by very little criticism, if any. It is my personal opinion that the Xyience bankruptcy was a trial run for the Station Casinos pre-packaged collapse. The Fertitta family has promised to put $244 million into the reorganization pot for Station Casinos, and despite the company's struggles, Frank Fertitta III just bought a $28 million home in Orange County, CA's Emerald Bay. Station Casinos just financed one of the largest 4th of July fireworks displays in Vegas history to boot.
Don't forget things are only so bad for Station Casinos because the Fertitta Brothers went on an overzealous expansion spree resulting in too much overhead and not enough income. Also, like a teenager with his first credit card, they hid the problem by pursuing loan after loan and credit facility after credit facility. The latest estimates put the company in debt more than $5 billion.
the Arizona investigation is mind blowing as far as the conclusions that could be drawn from the associations between GCA, Fertitta Enterprises, Xyience, the UFC, and Station Casinos. This latest GCA bombshell could be the straw that broke the camel's back with Station Casinos, and it could raise some regulator eyebrows in Nevada. Ironically enough, a witness to the Xyience collapse recently informed me that the scheme to bankrupt Xyience was primarily the work of "the two Franks." This report made a great deal of sense since Frank Junior and "Frankie Three Sticks" are really consumed in many ways by the Casino industry business and lifestyle. Meanwhile, Lorenzo Fertitta has over the years been more partial to his work with the UFC and recently left Station Casinos to help Dana White expand the UFC.
Having such intimate knowledge of the casino operations, "the two Franks" should have known it if the GCA Executives were bilking them. These are two men known for their shrewd business practices and sharp minds.
So how did this whole Xyience bankruptcy plan get hatched and why did all these folks end up working together? The exact manner in which all these "usual suspects" came together under a common banner is really an unknown at this point, but their basic motivations seem plain as day now that these new GCA documents have been revealed.
It seems to me we have a classic case of "like father, like son" going on here.
Frank Fertitta Junior never went to jail for his part in casino skimming or any other organized crime endeavor he took part in over the years. Like the "Teflon Don" John Gotti, nothing stuck to Frank Junior, and he was allowed to ride off into the sunset untainted by a prison record and able to buy his first casino for just a buck as the legend is told. Frank Junior's buddies rotted in jail while he built his fortune in gaming and created a dynasty he could pass onto his sons.
Frank Fertitta III had to take the reigns at an early age when his father had no other choice but to pass the buck. Like his father, maybe Frank III devised a new-wave skim with help from GCA, or maybe he and his father muscled in on the GCA scam and took a percentage.
Either way, even a tenuous association of the Fertitta family with what looks to be a massive and purposely designed and perpetrated electronic skimming operation executed by GCA is troubling to say the least. The fact that Fertitta Enterprises would provide ousted GCA officials immediate positions in the soon-to-be-bankrupted Xyience adds more fuel to the conspiracy fire. There are a great deal of whys to be asked in this context.
Looking from the outside in, there is only one logical conclusion as to why all these entities and individuals were perpetrating this massive fraud together. It was all about the money, of course, and while all the loosely associated businesses owned by these individuals were doing well on their own, they could do better conglomerated. They would do even better than that working together under the radar as if they were still being operated by completely separated and unrelated entities and/or individuals.
These culprits had to scatter the blame and obscure the ownership connections as much as they could, and the pattern emerging now shows that they were successful at getting away with these tactics for a long time. If you look closely you can see all the lines of connectivity between these businesses, but on paper and from a distance the names are all different and the associations are hidden. The casual observer doesn't pick up on it.
Global Cash Access made recent moves to further distance itself from GCA Co-Founders Karim Maskatiya and Robert Cucinotta, both having emerged in recent months as suspects playing integral roles in the massive conspiracy run through the company and other offshoots owned by Cucinotta and Maskatiya. The most involved scheme allegedly netted in excess of $26 million based on fraudulent fee rigging by the company. The Arizona license denial paperwork claims GCA officers were not only conscious of the fraud but actively worked to conceal it, knowing that the fine would be minimal if caught in the act.
BREAKING DOWN THE DOCUMENTS
The Arizona Notice leaves room for Global Cash Access to contest the conditions for denial and prove that they are a new and improved entity, but the sheer weight of the allegations included in the document are staggering and might possibly be insurmountable.
In a release issued by GCA officials about the notice, the language is purposely vague:
"The notice summarizes the basis for the department's intention and alleges that GCA, its founding stockholders and certain of GCA's management undertook actions that demonstrate that GCA is not suitable under the department's standards to act as a provider of gaming services to Native American tribes conducting gaming in Arizona," Global Cash said in the 8-K regulatory filing.
The company also harps on the stipulations that make this move by Arizona gaming regulators a preliminary one and not really a final say, explaining that they will fight for their state certification:
"The notice provides GCA with the right to an informal settlement conference as well as a formal hearing before an administrative law judge in Arizona. GCA intends to seek the holding of the informal settlement conference prior to July 15, and the holding of the formal hearing, if necessary, as soon as possible thereafter. In the meantime, absent further action by the department that prohibits GCA from doing so, GCA intends to continue its operations in Arizona in the ordinary course of business," Global Cash said.
"GCA takes the notice and the allegations made therein very seriously. GCA believes that it has taken appropriate actions during the prior 20 months that will permit GCA to fully demonstrate that it should be considered suitable for certification by the department. Many of these actions involve the termination of GCA's relationships with certain affiliated parties and have been previously publicly communicated and provide the basis for GCA's belief that GCA is in fact suitable to act as a provider of gaming services to Native American tribes conducting gaming in Arizona," the release further explains.
The Arizona report goes beyond the alleged actions involved in the perpetration of the skimming operation. Regulators also allege a conscious plan to deceive gaming regulators in Michigan in 2004 and in Arizona in 2005 by not disclosing all the required information about the mis-coding issues:
"GCA deprived a regulatory agency of material information needed to make an informed suitability determination," the Arizona report said of the Global Cash case in Michigan. Company founders Karim Maskatiya and Robert Cucinotta "both attempted to mislead the investigators to hide GCA's interchange fee fraud and their involvement in it," the Arizona report says.
Above all other allegations, charges of Maskatiya and Cuccinotta failing to disclose their questioning in the murder of Maskatiya's wife are most shocking. Here is the text of an Oakland Tribune article printed at the time of the Maskatiya murder:
=====================================
Oakland Tribune March 24, 1982
Police rule out burglary as motive in murder
Fremont- Police said Tues the fatal shooting of Laila Maskatiya was not the result of a burglary in her home because there were no signs of forced entry and nothing was taken.
Detective Dan Fuller said no motive has been established in the slaying, and there is no suspect.
Maskatiya's husband, Karim, told police he arrived home from work at 7:30 Monday evening and found his 29 year old wife in the bedroom in their $350,000 home on Guadalupe Terrace.
She had been shot twice in the head with a hand gun and several empty cartridges were found near the body. Police said the couple's 4 year old son slept through the shooting.
============================================
The Arizona documents say, "Police detectives questioned both Maskatiya and Cucinotta regarding the murder. Both were read their Miranda rights. The detectives felt that Maskatiya and Cucinotta gave inconsistent statements and did not cooperate with the investigation. They also felt that Maskatiya knew, but would not reveal, the identity of the murderer," the Arizona report said.
Yet, both men answered 'no' when asked by Arizona regulators if they had ever been questioned by a law enforcement agency, the report went on to explain.
The Arizona Gaming Department said Maskatiya and Cucinotta were on the GCA board of directors until June 2008, but resigned six weeks after being interviewed by the department. It says they continue to hold more than 25 percent of the company's stock. However, an SEC filing dated July 7, 2009 indicates Cucinotta holds no voting rights and seemingly has no control or major stock value anymore in regard to GCA.
In February, 2009 documents filed with the SEC, Maskatiya and Cucinotta both still retained more than 9 million shares in GCA. Yet, while it appears that Cucinotta may be on his way to being completely muscled out of the company he co-founded, Maskatiya unloaded 2,768,800 of his own company shares at a rate of $6.25 each as recently as a month ago (6/10/09).
In a section of the report called "ongoing matters of concern," the Arizona regulators say:
==> Global Cash Access has never acknowledged or taken any action in regard to its wrongdoing.
==> Global Cash Access has continued contacts with people and companies involved in the Visa fee fraud.
==> The former Global Cash Access principals failed to disclose information about the murder investigation to regulators in Arizona and Mississippi.
==> Cucinotta and Maskatiya failed to disclose other information including their ownership of various companies.
==> Global Cash continues to have problems with payments of fees to casinos and with payments to casino patrons.
==> Global Cash principals had contact with gaming regulators that created an appearance of impropriety.
"GCA has committed a theft, fraud and concealment," the Arizona report alleges. "It has conspired in these actions with (related company) USA Payment Systems. It has demonstrated a willful disregard for compliance with gaming regulatory authorities and has misrepresented and concealed material facts, documents and information in its dealings with the department and others."
"Casino vendors providing electronic fund access must be reputable, honest, diligent and effective. GCA has proven itself to be none of these," the report said. "Allowing GCA's continued participation in gaming in Arizona damages the public's trust in Arizona casinos and casino regulators. Casinos cannot properly operate where patrons continually suspect or assume they are being cheated, and regulators are assumed to be either involved or incompetent."
In other words: Who wants to play a game everyone knows is rigged? It seems fitting that Arizona has the designation AZ, because for Global Cash Access Arizona could be the first on an A to Z list of officials and operations who may soon 'Just Say No' to the type of underhanded tactics GCA is generating a reputation for.
It is a new era in America as the recession revealed some of the worst fraudulent transgressions against honest taxpayers and shareholders. Bernie Madoff might be the biggest of all the frauds, but he was certainly not the only massive con man involved in the economic collapse. He was not the only one making money off misrepresenting his business practices. GCA appears to be a company that grew fat off the same spirit of fraudulent activity, never worrying about getting nailed with the petty fine. They jobbed the system and got away with it, but they still expect to hold the public's trust. Arizona may only represent a small percentage of GCA's worldwide business operations, but this kind of taint could make lots of other dominoes fall.
Taking a closer look at current operations at GCA, it is clear that even if the company ousts Maskatiya and Cuccinotta from direct public roles with the company, GCA will still be intimate with the other companies these accused frauds also run and/or retain principal positions in. Consider the full text of another SEC filing from earlier this year, indicating some possible behind-the-scenes infighting going on at the company:
Item 1.02. Termination of a Material Definitive Agreement.
On February 13, 2009, Global Cash Access Holdings, Inc. (the “Company”) received written notice from USA Payments of the termination of the Amended and Restated Agreement for Electronic Payment Processing, dated as of March 10, 2004, by and among Global Cash Access, Inc., USA Payments and USA Payment Systems (the “Agreement”). The Company disputes the alleged breaches of the Agreement upon which the notice of termination was based, as well as the right of USA Payments to terminate the Agreement.
To the Company’s knowledge, Karim Maskatiya and Robert Cucinotta directly or indirectly hold significant ownership interests in, and serve on the boards of directors of, USA Payment Systems and USA Payments. Messrs. Maskatiya and Cucinotta are former members of the board of directors of the Company, and to the Company’s knowledge, they collectively hold approximately 23.6% of the Company’s outstanding common stock. At the time that the Company entered into the Agreement, Messrs. Maskatiya and Cucinotta were members of the Company’s board of directors and controlled a majority of the outstanding equity interests in the Company.
Pursuant to the Agreement, USA Payments and USA Payment Systems performed for the Company electronic payment processing services relating to credit card cash advances, point-of-sale debit card transactions and ATM withdrawal transactions, including transmitting authorization requests to the relevant networks or gateways, forwarding transaction approvals or denials to the Company, and facilitating the settlement of all funds in connection with approved and consummated transactions. Pursuant to the Agreement, USA Payments and/or USA Payment Systems were subject to a service level guarantee; were required to enter into agreements with card associations, networks, gateways and financial institution sponsors necessary to provide services to the Company; were entitled to fixed monthly fees plus volume-based transaction fees; and, subject to limited exceptions, were prohibited from providing similar services to third parties in the gaming industry.
This Agreement was to expire according to its terms on March 10, 2014. In its notice of termination, USA Payments alleged that the Company breached the Agreement due to two technology issues involving one of the Company’s other business partners. The Company has worked diligently and closely with the affected business partner to ensure that all necessary technology remediation has been performed. USA Payment Systems and USA Payments have acknowledged their obligation pursuant to the Agreement to continue to provide services to the Company during a 180-day transition period. The Company disputes the right of USA Payments to terminate the Agreement. If this dispute is resolved with the mutual agreement of the Company and USA Payments, the Company may continue to receive services under the Agreement or a successor agreement with USA Payments or USA Payment Systems. If the Company and USA are unable to resolve the dispute, the Company will transition to another provider of electronic payment processing services in the 180-day transition period. To prepare for the potential need to transition to a new provider, the Company is already engaged in discussions with an alternate provider.
So it seems USA Payment Systems sought to separate from GCA rather than the other way around. Perhaps this was a tit for tat response to the company trying to shut out Cucinotta. At any RATE (pun intended), whatever decision Arizona ultimately makes regarding GCA could completely transform the merchant services industry. If the appropriate attention is paid to this disaster, the needed regulation and oversight to prevent a repeat of this behavior could save billions of dollars in bogus fees in the long run.
To learn more about the GCA, Fertitta, Zuffa, & Xyience scandal you can check out XYIENCESUCKS.COM or my other stories here.
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