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DOJ (Finally) Reaches Agreement with Absolute Poker

The deafening silence has ended.  Yesterday, the Department of Justice issued a press release announcing an agreement entered into with Absolute Poker to facilitate the return of funds to U.S. players.  Read the actual agreement here.  The announcement comes just less than a month after the DOJ seized the U.S. domains of Absolute Poker, Full Tilt Poker, and PokerStars.

Unlike the agreements the DOJ reached with Full Tilt Poker and PokerStars, this agreement does not expressly allow for Absolute Poker to utilize its U.S. domain to facilitate the return of player funds.  Instead, the U.S. Attorney’s Office provides “all necessary assurances” to third-party entities engaged with Absolute Poker that these third-party entities may work with Absolute Poker to facilitate the return of funds to U.S. players.  Because the U.S. domain of Absolute Poker has not been restored, it appears that players will not be able to request withdrawal of funds directly through Absolute Poker, but instead via some third-party site.  Whether or not this structure makes it more or less likely Absolute Poker players will ever see their funds returned, I cannot say.  I suspect poker bloggers Grange95, Billrini, or F-Train to weigh in on this issue in the near future with quality insight.  These gentlemen possess as strong an understanding of the online poker industry as anybody.

One common aspect among all three agreements is the “Records Preservation” clause.  It is paragraph 3 in the Absolute Poker agreement.  The wording of this paragraph is unsurprisingly identical (besides the name of the companies, of course) in all three agreements.  Last night, I discussed various possible purposes of this paragraph with @AgentMarco on the live QuadJacks radio show.  In my opinion, there are two primary purposes:

  • 1) The DOJ doesn’t want the companies to start shredding documents that may contain incriminating evidence pertaining to the allegations in the indictments;
  • 2) The DOJ wants to leave open the possibility of handing these records over to the IRS.

Regarding #2, I explored the likelihood of this possibility at length by comparing the Poker Company case to a recent tax evasion case involving a giant offshore bank and many of its account holders.  My stance on the issue hasn’t changed since then, not that much time has passed.  While I haven’t heard of any online poker players recently receiving audit letters from the IRS, it’s still probably too soon to expect any that relate to the indictments.

As I say time and time again, the IRS typically treats taxpayers far more favorably when they voluntarily come forward to declare previously unreported income as compared to the IRS making that discovery.  Keep in mind that just because frozen online poker funds have not yet been withdrawn does not necessarily mean the funds are not considered income that tax should have already been paid on.  If a taxpayer has frozen funds that should have been reported as income in prior years, he/she should strongly consider consulting a tax professional experienced in the area to discuss particular facts and circumstances.

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