CAP the big mess

Taking a leaf from the book of US President Barak Obama, the man currently pulling the strings at CAP/AMI/EMG, Warren Jolly, issued an apologetic communique mid-week on the furore centred on his companies and past activities (see previous InfoPowa reports).

Jolly, who so far appears to have out-manoeuvred and isolated his main partner in the venture, Lou Fabiano, started out with a lawyer's caveat that informed: "Please note that the below statements do not represent anything other than the facts, and/or the opinions of Warren Jolly. They do not represent the opinions of Affiliate Media, CAP, or any of its other shareholders or employees."

Addressing "Dear Clients, Business Partners, Colleagues, and Friends", Jolly first issued a personal apology and an admission of a conflict of interest, writing: "First, and most importantly, I owe all of you a huge apology. I screwed up. There is no excuse for trying to cover up my affiliation with CardSpike, other than I knew there would be a conflict of interest. I realize that I have betrayed your trust, and all that I can ask at this point, is that you give me a chance to rebuild it. Here is the truth, once and for all."

Jolly goes on to relate the formation of Effective Media Group with his partner in Affiliate Media Inc and CAP, Lou Fabiano, with the intention that it should be an entirely seperate company.

"We did this for two reasons," Jolly explains. "First, Lou wanted to manage a company from his home base in Florida. A new company would provide the revenue stream necessary to enable that. Lou would have a separate company to grow and develop, while remaining at CAP as community administrator, while I handled the day-to-day business of CAP, PAP (Poker Affiliate Programs), and Affiliate Media’s other properties from our main headquarters in California."

This statement suggests that Fabiano (and presumably the third partner in AMI/CAP, Raj Lahoti) agreed a division of responsibilities that effectively gave day to day operational control of the companies founded by Fabiano (CAP and AMI) to Warren Jolly.

Jolly continues: "Second, Lou and I were approached by a group of investors seeking our help in launching two new online properties: Absolute Slots, an online casino, and Cardspike, an online poker website. We set up EMG as a separate company through which we could offer managed consultancy operations to these clients as well as utilize EMG as a vehicle to launch our own affiliate portals – CasinoFan.com being the first – since that was our start in this business pre-2000. We did this together, as business partners."

This is where the widely criticised conflict of interest comes in, exacerbated by the fact that the partners did not declare their intentions until their involvement was uncovered by third parties when affiliate payments stalled.

Jolly explains the technical glitch which he says was the cause of the (in some cases months) delayed payments to CardSpike affiliates, and advises that commissions up to January 31st 2009 had been credited this week, and February commissions would be paid next week. Six affiliates apparently cannot be paid because their account information is not available for some unexplained reason, and these individuals are urged to get in contact with EMG immediately, or with tom@cakepokernetwork.net

The payments to affiliates allegedly started to dry up as far back as November 2008, and in hindsight this is the spark that has led to a conflagration that may yet consume CAP/AMI/PAP and indeed EMG.

It has led to unseemly incidents of physical confrontation during the CAP London conference, and massive negative publicity for both the management and the companies as the non-payments led to investigations by competitors. These led to progressive disclosures and forum bannings at CAP which exacerbated the situation and resurrected previous CAP member complaints on other fora.

More recently, the wide forum postings by Fabiano outlining the background to the CardSpike related issues and blaming Jolly have thrown more fuel on the fire, impacting the manner in which the partners and their companies are perceived by affliates, affiliate programs and the player community.

And the reported syphoning off of CAP/AMI funds whilst isolating Fabiano despite his 40 percent ownership of CAP/AMI has kept the story very much in the public eye.

Jolly goes on to refute a claim made by Fabiano that he was the owner of the CardSpike online poker room, saying: "Although I had no ownership interest in Cardspike or Absolute Slots, I did have a beneficial interest due to my involvement with EMG.

"Again, I sincerely apologize for not coming clean sooner about this. I failed to do so because of the perceived conflict of interest with the CAP and PAP operations, and because Lou and I could not come to an agreement on how to go public with this information.

"Effective immediately, I am resigning from EMG and surrendering my shares in this company. I will have no further connection with EMG, Absolute Slots, Cardspike, or any of the owners or shareholders of these entities."

Judging by the reaction on the message boards, this move to distance himself from the root cause of the opprobrium now surrounding both management and companies may be too little and too late, although it is yet too early to make an objective call on this.

Jolly then turns to the more recent events which have resulted in his partner Lou Fabiano claiming that he has been deliberately and maliciously sidelined from the company whilst money was being transferred from its accounts.

"Over the past weeks, because of certain irrational and potentially dangerous decisions on his [Fabiano's] part, a rift has developed between my former business partner and me," Jolly claims. "Several days ago, Lou chose to take these private disagreements into the public arena, by posting harmful allegations and sensitive company information here at CAP and on other public message boards (as well as emailing this information to hundreds of other people).

"I felt that Lou’s decision to make our business disagreements public was not only unprofessional, but also potentially damaging to CAP and the entire iGaming affiliate community.

"While Lou originally founded Casino Affiliate Programs.com, he has since made the decision to share the ownership and business direction of CAP with other parties via a corporate vehicle.

"Lou has recently accused CAP employees of failing to post his CAP TV videos, in which case the accusations were simply incorrect. The truth is, he failed to meet the deadline for content submission, which is the same every week. He has displayed unwarranted hostility towards community members and has even posted forum threads under other users’ names — even under my own name.

"He has chosen to circulate throughout the iGaming world a letter in which I am accused of illegally channeling Affiliate Media funds into my own personal accounts. This is absolutely untrue. The transactions in question were simply the transferring of company funds from one corporate account to another.

"This was done in order to limit access to these funds and protect the company and its shareholders from rash and potentially damaging actions (such as posting sensitive financial information on public message boards)."

The latter is an apparent reference to an attempt by Fabiano (it was blocked by a moderator) at the Casinomeister.com message board to publish a bank document allegedly showing certain bank transfers initiated by Jolly.

To back his statement, Jolly includes a statement from Larry Ernst, Affiliate Media’s Vice President of Finance. In it, Ernst reveals that the WAMU Business Analysis Checking account is used for general business purposes for all divisions of Affiliate Media, Inc.

"Regarding the transactions circled on the WAMU Business Analysis Checking Account Transaction History document [presumably a reference to the transfers disputed by Fabiano in his forum postings - ed.], funds were transferred to the WAMU Money Market account ending in 2410 to maximize return on funds since the Business Analysis Checking Account was non-interest bearing," Ernst reports.

"The funds withdrawn by the PC Initiated Outgoing Wire on February 20, 2009 were transferred to the Wells Fargo Business Cash Management Account for Affiliate Media, Inc. and subsequently transferred to the Affiliate Media, Inc. Comerica Business Checking account for safekeeping.

"In no event have company funds been co-mingled with personal funds by any officer of Affiliate Media, Inc."

Jolly says he was "personally appalled" to find the corporate records of the company being posted in account number and transaction level detail, potentially compromising the privacy and integrity of the accounts.

"This kind of irrational and damaging behavior is why Lou has been banned from the CAP Forum. I cannot allow such unprofessional behavior to further jeopardize this company or the interests of its owners, employees, and community members."

It appears from the next statement that Jolly seeks to oust Fabiano from the company; he says: "In light of his recent behavior, I strongly feel that Lou’s exit will only improve the CAP community. Those of you who have been around CAP for a while know that I truly do care about this community, and have been an integral part of its growth. Yes, as a businessman and entrepreneur, I want to see it generate revenue. However, I am not willing to jeopardize my relationships with clients, affiliates, or colleagues to make that happen."

Jolly concludes with a forward looking statement on measures he intends to implement at CAP/AMI, which include:

* Changes to the Affiliate Program certification program - much criticised for its alleged lack of de facto inspection and monitoring and uneven pricing.

* A free speech approach allowing members to speak their minds without unjust banning (several have already been reinstated)

*Termination of hostile CAP [competitive] efforts, such as the T&C alert monitoring and CAP audits. Jolly promises: "Instead, we will partner with folks who already do this well, such as AGD and APCW.

* Evaluating the establishment of an independent “Advisory Board” consisting of influential members that will help ensure CAP makes the right decisions in the best interest of all.

Jolly ends his communication with an apology for the public nature of the events at CAP/AMI and indicates that he will be curtailing this practice going forward. He also expressed the wish to get back to business as usual and encouraged interested parties to communicate privately with comments or suggestions.

Whether Jolly's radical about turn in CAP/AMI attitudes and policies is sufficient to ensure its continued success and prosperity following the extensive disclosures of recent months is still unclear.

Jolly has also avoided mentioning the position of the reportedly third partner in the structure, Raj Lahoti. Should Lahoti throw in his lot (and his 30 percent shareholding in the companies) Jolly's position would presumably be substantially reinforced; according to posts made by Fabiano the shareholding split is Fabiano 40 percent, Jolly 30 percent and Lahoti 30 percent.

Fabiano has also asserted that he is taking legal advice regarding what he perceives as an attempt to hijack control of the company without full shareholder consent - that is a legal element in the struggle that has still to evolve.

This story has a way to run yet...

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