A look inside the federal civil lawsuit filed by New Jersey’s Borgata Casino Hotel & Spa last week against famed poker pro Phil Ivey and three other defendants reveals a complex case in which the Borgata may well be trying to seek restitution by playing off the defendants in the case against each other.

The civil action, as we’ve reported earlier, centers on four high-stakes sessions of a variation of baccarat being played by Ivey and his companion, a woman named Cheng Yin Sun. Ivey won more than $9.6 million combined during those four sessions, each of which spanned at least a dozen hours of actual play, and all of which occurred between April and early October of 2012.

In the process, Ivey requested a large number of special accommodations, which the Borgata granted, only to later learn that instead of being “superstitions” as Ivey claimed, they were instead (as alleged by the Borgata) part of a complex “edge sorting” scheme being employed by Ivey and his companion, through which they were able to gain a different sort of edge, involving the odds.

With the odds slowly shifted from a 1% house edge to more than 6.7% in Ivey’s favor, Ivey did what the casinos themselves do in their own house games: He won. And it’s the shifting of these odds and the manner in which Ivey went about it, according to the Borgata, which provides the basis for the suit.

Along with Ivey, the casino “whale” who allegedly provided the deep bankroll behind the scheme, the Borgata’s lawsuit names three other parties: Sun, another Las Vegas resident, a woman of Asian heritage who was alleged to have provided the specific edge-identifying expertise (and the sharp vision to employ it) that allowed the scheme to work; Gemaco, a Missouri-based manufacturer of high-end playing cards whose product was allegedly exploited by Ivey and Sun in the edge-sorting scheme; and a Gemaco employee, “Jane Doe,” whose identity is likely known to the Borgata but not being released to the public at this time.

The “Jane Doe” Gemaco employee, according to the civil complaint, appears to be a Gemaco quality-control supervisor whose job duties included signing off on the shipment of more than 200,000 decks of specially-printed “Borgata” cards to the New Jersey casino. The Borgata alleges that she and Gemaco were negligent in allowing the cards to be shipped at all, since they couldn’t have been free of defect if they were exploitable by Ivey and Sun.

One of the frequent misunderstandings cited by those who’ve only heard a bit about the case is an ill-formed notion that Ivey and his companion, Sun, were somehow in cahoots with someone at Gemaco. There is no evidence at all for this belief, and the Borgata case does not make that claim.

Why, then, does the Borgata lawsuit name both the Ivey-Sun pair and the Gemaco defendants in the same action? That appears to be part of the strategy of the Borgata’s lawyers, to create a causative link between Ivey and the Gemaco product.

One can already imagine the Borg’s lawyer, telling the judge, “Your honor, Mr. Ivey could only have pulled off this scheme if the cards themselves had some sort of tiny problem that he and Ms. Sun could spot, and yet Gemaco told us these cards were fine. These two things contradict each other; they cannot both be correct. Yet we ended up being the victim. One of these two owes us $9.626 million!”

Expect the defendants to file for severability in addition to other motions to dismiss, unless the Borgata can prove direct linkage between Ivey and Gemaco. Doing so would make it a bit tougher for The Borgata’s attorneys to harp on the possible either/or contrivance before a judge.

There’s no other reason for Gemaco to be a part of this action, given the actions that allegedly occurred and the manner in which the Borgata’s lawyers crafted the lawsuit, with which appendices stretches to nearly 60 pages. This is a civil action, where it’s not a question of guilt beyond a reasonable doubt, but rather a case of the preponderance of the evidence and the responsibilities involved.

It’s even possible that the presiding judge (in the somewhat unlikely event that this case goes to trial) would assign percentages of blame to all of the parties involved. That could include a share of blame for the Borgata itself, although as any lawyer would tell you, something in a settlement is still better than nothing.

The Borgata Hotel Casino & Spa in Atlantic City

Wide-ranging Civil Allegations

In its desire to find instances of conduct by Ivey and Sun that were in violation of state and federal statutes, the Borgata’s attorney grabbed a bit of everything, filing a litany of counts against Ivey and Sun that ranged from fraud and unjust enrichment to civil RICO (racketeering) conspiracy.

All told, the Borg’s lawyers filed twelve (12) different claims of action against Ivey and his companion, Sun, who is alleged by the Borgata’s attorneys to have already been 86’d from multiple other casinos for similar activities.

Here’s the list of counts filed by the Borgata against Ivey and Sun:

(1) Breach of Contract

(2) Breach of Implied Contract

(3) Breach of Implied Covenant of Good Faith and Fair Dealing

(4) Fraudulent Inducement

(5) Declaratory Judgment for Recission Based Upon Unilateral Mistake

(6) Fraud

(7) Declaratory Judgment for Recission Based on Illegality of Purpose

(8) Unjust Enrichment

(9) Conversion

(10) Civil Conspiracy

(11) Participation in a RICO Enterprise [Racketeering] in Violation of US Federal Statute

(12) Participation in a RICO Enterprise [Racketeering] in Violation of New Jersey State Statute

The remaining counts were filed against the cardmaker Gemaco, and/or its “Jane Doe” employee:

(13) Breach of Contract (against Gemaco only)

(14) Breach of Express Warranty (against Gemaco only)

(15) Breach of Implied Warranty (against Gemaco only)

(16) Negligence (against Gemaco and “Jane Doe” employee)

(17) Respondeat Superior (against Gemaco, as employer of “Jane Doe”)

(18) Request for Declaratory Judgment and Indemnification (against Gemaco)

As one can see, there’s no overlap. The summations attached to each of the counts listed makes it clear that the Borgata knows of no directions between the alleged edge-sorters, Ivey and Sun, and Gemaco, the cardmaker.

It just so happened that Gemaco was the manufacturer of the decks that Ivey and Sun identified as having an inherent weakness within their card-back design, which when rotated 180 degrees – a request made in Mandarin by Sun that the Borgata and its own dealers complied with – presented the slight variation that allowed Ivey and Sun to identify the general range of the first card of each hand before it was turned face-up. Since the version being played allowed Ivey to bet on either the “player” or “dealer” hand, this knowledge provided the statistical edge, and the basis for Ivey’s near-eight-digit win.

However, while the Borgata admits to complying with the special requests made by Ivey, the case as filed shows the Borgata accepting no responsibility for having agreed to those requests nor for ignoring (or not being aware of) the longstanding practice of gaining an edge in a card game by being able to identify something different on certain cards’ backs.

That’s what edge-sorting really is, after all – a method of marking the cards without physically marking them. The Borgata’s case has plenty of holes and open questions, meaning that despite the extensive effort its lawyers have put into trying to play off Ivey against Gemaco, the whole gambit is anything from a sure bet.

Don’t Peek Under the Borgata’s Sheets

For all its detail, the Borgata lawsuit against Phil Ivey and others has multiple soft spots that offer easy points of counter-attack for the lawyers representing Ivey, Gemaco and the other defendants.

As in most major civil cases, the alleged aggrieved party presents itself as a pillar of innocence against whom various nefarious acts have been committed. There’s nothing at all new in the Borgata’s case in that respect, but it turns out there are a whole lot of things about this case that the Borgata should have known about, or shouldn’t have allowed, or probably wanted but was unwise in doing so… and all those things added together created the opportunity that Ivey and his companion exploited.

There seems little doubt at this point that Ivey and Sun actually did do a form of edge sorting as the Borgata alleged, but that’s not really the deciding point. Ivey himself admitted to doing the same sort of edge sorting in connection with his own lawsuit against London’s Crockfords Casino, over a similar eight-digit win at a different baccarat variation, that Crockfords refused to pay.

Therefore, the safe assumption, barring some unexpected revelation, is that Ivey and Sun did the edge-sorting as alleged, even though they never touched the cards themselves. It still doesn’t answer many of the questions involved in this case.

Let’s look at a few of them:

The Borgata’s mystical ignorance of the history of edge sorting. Edge sorting is just one form of marking or identifying cards, and it’s been around for at least a couple of decades. Full-bleed card designs, such as that used on the purple Gemaco cards specifically requested by Ivey, have long been known to be susceptible to this type of player identification.

Edge sorting, in fact, can trace its roots all the way back to one of the earliest forms of marking cards, called “longs and shorts.” Centuries ago, cards were cut by hand, and decks weren’t as uniform as today. Some early sharps simply left certain cards a little bit wider or a little bit taller during the hand-trimming, and those cards could easily be identified by handling during the deal. One could choose whether what to cut, too – a high or low card, for example, cutting the deck by gripping it by its sides or by its ends.

Various forms of marked cards and magician’s desks employ similar tricks. For the Borgata’s security staff to not be aware of any of this stuff, decades after its infiltration into the pop culture of card playing, is either incredibly naïve, nonsensical… or negligent. None of the three conditions help the Borgata’s case.

Phil Ivey in action at the poker table during the 2013 World Series of Poker (Photo: PokerNews)

The Borgata continued to agree to and honor the complete series of Ivey’s strange, superstitious requests. According to the filing, (1) Ivey got to play by himself, with just one hand in play; (2) was allowed a guest at the table, who actively participated in the hand; (3) provided dealers who spoke Mandarin Chinese; (4) allowed Ivey’s companion to give instructions to the dealer in Mandarin; (5) allowed the use of an automatic card shuffler, which doesn’t change the orientation of individual cards within the deck; (6) allowed Ivey and Sun to demand that the dealer handle and rotate the cards in a very precise manner; and (7) allowed the same eight-deck shoe, once tacitly “approved” by Ivey and Sun, to stay in play for hours.

In a nutshell, that’s ridiculous. And it doesn’t even include the biggest ignorance-related kicker:

The Borgata agreed to the same series of ridiculous requests, and suffered four large-scale losses over a six-month span, without somehow ever being able to connect a very obvious series of dots. Whether or not Ivey scammed or cheated or shot an angle or simply took advantage or an edge willingly provided by a gullible, possibly over-greedy casino is very much in the eye of the beholder. In legal terms, such things have yet to be decided, despite the Borgata’s throwing around of such charges as fraud, conversion, unjust enrichment and racketeering.

But what is clear to anyone but the simplest of rubes is that the Borgata, this billion-dollar giant of East Coast casinos, had an obvious, long-term scheme being used profitably against it. The Borgata’s whole profit model is based on odds and probability, and yet the casino couldn’t see that Ivey’s wins were quite clearly violating the same odds that normally provided a thin house edge.

Yes, variance occurs; that’s why we gamble, after all. But in this writer’s opinion, to have this sort of winning go on in four successive sessions over six months, and to not examine very closely what was going on, appears to be nonsensical and negligent of the Borgata on its own. One of the implied slam-dunks in this case is that eventually, lawyers for Ivey, Gemaco and the other defendants will allege contributory negligence by the Borgata, and this is why.

Criminal statutes were cited, but no criminal charges were filed. One doesn’t have to be guilty of criminal conduct to be targeted in a civil case, but since the Borgata cited several statutes in the filing of its case, it’s curious as to why the Borgata made no criminal complaint against Ivey.

It’s a good bet that they tried, but that New Jersey and USAO prosecutors declined to pursue the case, due to all the mitigating factors listed above. Add in the fact that nearly 18 months have passed since Ivey’s final session at the Borgata and the Borgata’s concurrent discovery that Ivey was involved in a very similar legal situation with Crockfords.

This is conjecture, and it could easily be wrong, but it appears as though the civil case is the fallback position, originally conceptualized to go along with a possible criminal matter. And yet, no criminal charges. The civil claims are themselves weaker as a result.

Regarding Gemaco, and the request for full-bleed card designs. Is Gemaco liable or negligent for providing the decks with the design that Ivey and his companion exploited? In this writer’s non-lawyerly opinion, probably not. The weaknesses with full-bleed designs are widely known, yet it is the casinos themselves who continue to demand them, on the grounds that they appear more distinctive, elegant and upscale.

Edge sorting is all but impossible to do with decks featuring a “no bleed” or bordered design, and every card manufacturer I know of is fully aware of this. So, if Gemaco has any sort of documentation showing that they previously advised the Borgata about the inherent weaknesses of full-bleed card designs, and that the Borgata opted for a full-bleed design anyway, that’s another blow to the Borgata’s claims.

Add in the fact that the Borgata willingly allowed the same decks to stay in play for hours, and that preventing edge sorting is one of the primary reasons that decks are rotated and replaced to begin with. This is all elementary stuff when it comes to casinos and card security, and the Borgata’s claims against Gemaco appear designed more to negotiate for a partial insurance settlement than anything else.

The purple Gemaco decks being used, according to the image the Borgata itself supplied in appendices to its lawsuit, appear to show side-to-side card-trimming variation of about 1/32”. This is small by card-trimming standards, and in the context of an order of more than 200,000 decks, such variations will inevitably occur. It’s hard to imagine a casino choosing to ignore its own protocols that are designed to help get off-cut decks out of play, and then blame the manufacturer when off-cut decks are exploited.

Yet that’s exactly what the Borgata has done.

All told, the more the specifics of the case are examined, the more rickety the Borgata’s claims appear. It’s going to be interesting to see if the lawsuit’s nuisance factor allows them to wrest some sort of partial settlement from Ivey or Gemaco, but one’s thing already clear: The Borgata didn’t do its own job of security properly, and now it’s looking to the courts to help clean up the mess.

Front page photo credit: PokerNews