Lou Fabiano Interviewed by Gaming Portal Webmasters Association
Gambling911.com readers know all too well the public feud that has transpired between one time partners in Casino Affiliate Programs (CAP) - Lou Fabiano and Warren Jolly.
The folks at the Gambling Portal Webmasters Association recently interviewed both men to get to the bottom of the accusations that have been surfacing these last several weeks (some of which were lodged by each other)
The following is an interview with Lou Fabiano.
When did you form CAP?
I started CAP back in 2000. Either in 1999 or 2000. I'd have to go back and look, but that was about when it started.
Why did you start CAP?
At that time, it was kind of the Wild Wild West. When I first started, there were only a handful of us that operated as affiliates, especially in the vertical of gaming. I'd been working on the retail side for a while and that was my primary business for a while and that was my primary business at the time, but then I started in gaming and I quickly found out there were problems with some of the operators not paying and even more so than that, the advertising that was purchased was ineffective or just outright fraud. The traffic you purchased was worthless. At the time, I would do a $5,000 mail campaign and get nothing for it. And they'd say, "We'll do another drop for you." Or you would purchase traffic via pay per click like e-pie or the ones that were buying a lot or what have you. There were a number back then that provided an awful lot of fraudulent traffic that did not convert. There was some contact with some of my contemporaries...(But) we needed to have a way to get together to discuss matters and make sure we weren't getting the short end of the stick. And discuss good programs and bad. And if everybody shared experiences together, I thought it would more effective than all of us blindly stumbling along here and losing tens of thousands of dollars. So that's what prompted me to start CAP, to have a place where affiliates could gather and discuss what worked and what didn't and discuss who was behaving like a rogue and who wasn't.
How did CAP generate revenue in the beginning? Or was it even supposed to be a revenue-producing operation?
It wasn't a matter of generating revenue in the beginning. Initially again, CAP was formed as a community and it was not set up to be monetized. I had no intention of monetizing when I first set it up. At that time, I made a very high six -figure income per month as an affiliate, so any money I would have generated would have been trivial. So it wasn't a consideration, to be honest.
When did you first meet Warren?
This is a funny situation. This actually occurred by referral. I was working with a company by the name of Tradal. They were one of the larger programs of the time. And they were a master affiliate that worked for 888 and Casino on Net as they were known at the time and there was Cassava, the group, and they had asked me if I would set up an affiliate program for them and manage it. And I said, "Well, guys, really I'm too busy with my own portals and affairs, but whenever I can help, I will. But I just don't have the time to do it myself." So they said, "We have a couple of kids who are fresh into this business, would you mind working with them and helping them get bootstrapped?" And I said sure, and that's when I met Warren and Raj Lahoti, and they started House Winning, which is a program they designed that Tradal helped them set up to promote 888 and Casino on Net brands and a number of brands under the Cassava banner they flew, and I think they may have even had a bingo brand they were test marketing. There was no poker involved at the time. Nobody played poker online. But they set up House Winnings and asked me to go ahead and put them on CAP and get them started so that people would know about their affiliate program. And I said, "Yeah, sure, what the heck." So I met with Lahoti and Warren at Casino Affiliate Force, which was actually a cruise that you stayed over in the Bahamas and it was set up Herby Olschewski, who originally set up the Affiliate Summits, before Shawn (Collins) and Missy (Ward) took over when Herby ran off with everyone's money. I helped to promote Casino Affiliate Force, by the way, and Herby ran off with $17,000 of my money as well, and also stole Marc Lesnick's money, so that's why we ended up talking - me, Marc, and his girlfriend at the time - and set up CAC as an alternate way to do conventions. And again, I was not interested in being in the convention business for many years. I said I just don't have the time. I was tied up with portals. That was my primary form of income and so that was my focus.
When did you decide to enter into a partnership with Warren?
Well, it's a company more so than a partnership. They approached me. Tradal has a nasty habit. I hate to say it, but at the time, they weren't the most reputable guys in the world. And they ended up having a falling out with Raj and Warren and basically took over the players, and House Winnings was no longer viable. And they didn't have anything to do so Raj contacted me - not Warren - and said, "Can we do sales on CAP? We noticed that you're not doing sales and we need something to do." I said, "Well, I've never really thought about monetizing CAP." And he said, "Well, you should. It has a good bit of traffic and value. And we can extract some of that value if you want to go ahead and do that." I said, "OK. If you want to do that in a sales capacity only on CAP, that's fine." I also had retail affiliate portals including affiliateprograms.com, affiliate programs guide, webmaster programs, and a number of other ones and they were going to monetize all of these different verticals as best they could, so we set up a corporation in Nevada, which was called Affiliate Programs Inc., in 2001 or 2002.
So Raj is third partner in all of this?
Yes, he always has been.
So when you were going about setting up Affiliate Media, how did you divide up the business responsibilities?
The only thing Warren was responsible for was sales. I was in charge of managing the communities and managing the business. I'm the president of the company. Warren is just the treasurer. Raj was listed as the secretary. Raj chose to take on no duties because he and his brother formed a company called onlineguru.com, and they now held a number of domain names and one of them was dmv.org, and they had an idea to go off and be regional affiliates and set up a place where people could pull their motor vehicle records. So if you want to go pull up motor vehicle records, dmv.org pretty much dominates that as a sales service. That's what he drifted off to. Warren was involved in sales and that was about it, really. We brought in additional sales people and the company grew. As the company grew, we brought on more sales people. The decision was made to open an office to house everybody because it was silly having everybody work remotely. We opened our first offices in Huntington Beach and we quickly outgrew them so we moved to Irvine near the tech center because we wanted to be able to do some of our engineering in house. Originally everything was done out of house . . . in India. The problem
was there were communications issues, there was a time difference between us and the Indians and you would try to get a hold of them and you basically had to call in the middle of the night and it was frustrating to work that way. So we decided the best thing to do was bring in our own engineers and designers and the company grew and grew and grew and right now, at the offices in Irvine, have about 35-40 people.
Warren has publicly stated that you own 40% of Affiliate Media. Is that accurate?
Yeah. That is accurate. I own 40% of Affiliate Media. But I'm still the president. He's still the treasurer. And Raj was not listed on the board, so he's silent. He has no real voting rights on the board.
He has no real voting rights on the board?
No, no, that was by his decision and I have documentation where he asked to be removed from the board and removed from the bank accounts and everything else because he felt uncomfortable. This was around (the time) UIGEA (passed), and he felt uncomfortable being listed as a board member so he just wanted to be a silent shareholder and of course he gave up any voting rights at that time because only the board votes.
How much does Warren own?
30%. When I envisioned this, I still owned the domains and everything else. This is just a sales operation to service affiliateprograms.com. I never expected them to seize the domains like they did. What he did was he took the domains out of our account and transferred them over to eNom without my authority and basically hijacked and stole our company. I'm not saying Raj did, this was all Jolly. I've got multiple letters from him (Raj) in December and January where he said, "I have no faith in Warren Jolly. I don't want to work with the company. I want to surrender my shares and sell out if we can reach an agreement." And again in January, he made overtures that again he had no faith in Jolly and he wanted to sell the company. A lot of people felt that way out west because Warren was very abusive toward the employees and affiliate programs. I would fly out there, because I go out there quarterly, and we would make agreements about how the company was to behave, and the minute I would leave, he would go off on his own tangent. It's important to know that when I met him, he was only 18 years old. He had no previous experience in the business. He had no education as far as a degree. I don't even know if he's graduated high school, to be honest. He basically came in as an 18-year-old kid and as an intern and worked his way into a capacity where he could manage a sales team. But he started abusing that. I always stated that let's be reasonable in the amount we charge programs and I set a cap of 20% (increase) per year with a discount for the number of years you've been with us. In other words, we could raise our rates 20% a year for new clients. A new client coming on board would pay 20% more than clients had the previous year. But if you had already been on board with us, you were supposed to get a 5% discount per year you'd been with us. You'd never get down to where you'd pay nothing, but you would hit a floor around 10%. And we'd agreed to this numerous times in writing and Jolly would just go off on his own tangent and eventually I'd be on the phone with Fortune, Referback, or one of the programs screaming because he had doubled their certification fees.
It sounds like you knew that certification fees were a big problem.
I absolutely did. The theory was we had a gentlemen's agreement that he would handle sales and I would handle the events and the community, do what I did on the newsletters, and let him handle sales. He said that I wasn't an aggressive negotiator. And I conceded to that. No I'm probably not the most aggressive negotiator. I tend to like make the situation so that it's fair and equitable for both parties. But that's not Warren's way of doing business.
So the question that a lot of people have is that you knew you weren't an in-your-face negotiator, yet you recognized that certification fees were a big issue and the affiliate programs weren't happy about that. Why didn't you speak up about that sooner publicly, or why didn't you make a move earlier to try to rein this is in?
I did. I did as best as I could. But you have to understand that during this process - and if you notice, it was an acceleration of this sort of abuses - I had suffered congestive heart failure after Barcelona 2 years ago due to the stress of running there and the salt in the pork and a variety of other issues pushed me into congestive heart failure. I spent nearly 6 weeks in the hospital fighting for my life. It took almost a year for me to be fully back up to speed, so to speak. Even now, I'm taking heart medication and I became a type 2 diabetic, which turns up in your later years. So I've been dealing with that. I'm located in Orlando. My team is located in Irvine. I call and interface with them and they beg and say, "Please, Lou, get out here. Please come and do something." I'll go out there and get verbal agreements and sometimes even written agreements from Jolly. And the minute I fly back, it goes back to business as usual. It's a very hard thing to manage, but I have other affairs to tend to here. I have a family and children and I have other businesses to deal with and I'm still an affiliate. He took advantage of the fact of illness and other family issues - my mother is fighting cancer; she just went into surgery recently. He took advantage of all those factors and exerted his will, so to speak, over what went on in California because I wasn't physically there.
Do you regret not having acted sooner?
I wish I would have acted sooner. But I had no idea that he had the intention of taking it as far as he did or stealing the company like he has. He took over $3 million in company funds in between January and February and moved them to banks that I had no access to, and no knowledge of - I don't know the account numbers, I don't know anything.
Warren claims that he moved them from one company bank account to another company bank account.
Yeah, but I'm president of the company. If I can't access those accounts or view them, or anything else, then it's embezzlement. I was a signatory on the bank accounts that he removed all the funds from. And our corporate bylaws require that a transfer of any funds over $25,000 be authorized by myself, even though day-to-day operations, we write bills, pay employees, we pay bills and all of those sorts of things - he was never authorized to do this. Like I said, almost $3 million has been moved. We had accounts in Washington Mutual and Wells Fargo. In Washington Mutual he took $1.24 million dollars on the Friday previous to me coming out publicly and basically cleaned the account out. Warren is now in a negative position. Then he went to Wells Fargo and cleaned out all of that money and that was $1.7 million. I do not know where that money is.
So you have no idea where that money has gone?
No. And they refuse to cooperate or tell me or be responsive. He's blocked me on the phone. He's blocked me on Skype. He's blocked my e-mails. He's shut off the telephones. He shut off my wife's phone. He knew that my wife gets all of our doctors' appointments via that phone. The guy is just vicious. He silenced me effectively at CAP. He banned me at CAP. A lot of these late-night bannings and all these different things - issues with the Casinomeister and everything else - were engineered to justify this sort of action. I had nothing to with that.
You weren't involved in the banning of Casinomeister?
I was the one that unbanned Casinomeister. When I went to bed, Casinomeister was fine. You have to understand there is a three-hour time difference (between Lou and the California offices). At night, Arjun - Arjun Jolly is Warren Jolly's brother - does a variety of things and attributes them to me. I get the heat the next day. When I came in in the morning and saw that Casinomeister had been banned, I immediately unbanned him. This has been going on for some time and also occurred over at PAP. Arjun would log in as Jeremy Enke and make wild posts on a variety of different things, log in as myself, make posts, and then what he would do is log back out. He's a moderator, administrator at both...
Let's talk about CardSpike because that's a matter of serious importance to affiliates. You said Warren owns CardSpike. Do you stand by that?
Warren actually signed the CardSpike deal without my knowledge. And then he went on to tell me, "Oh, we own CardSpike." He signed it under a fictitious name. I don't even know what the name was. Our attorney that we had on site went insane. He said, "What do you mean there isn't this person?" Now we've got a problem in that Cake Poker won't release Effective Media from this contract that they have. As far as CardSpike goes, Warren is the owner and he was the beneficiary of any monies that would have been generated, but we've never received any money. Along with the affiliates, we weren't paid. We were given a couple of advances from Cake Poker, but they've been the managers and the administrators of this program from Day 1. Warren is innocent in this matter in the sense that he was not in control of affiliate payments. All affiliate payments are performed by Cake Poker. Even though Warren signed as the licensee, the deal was Cake Poker was to manage everything. All we were to do was to act as consultants and manage the affiliate program. And we did that for a time. Greg Powell was the manager for it. But we had a problem. Cake Poker was a great poker platform. They told Warren they'd have the ability to offer casino games as well. And they said it had been tested and everything was 100%. It wasn't. All the data that came over was faulty. And a lot of the back-end data that was being received was faulty, too. Affiliates went in and viewed wild numbers that were not correct. And Cake Poker refused to pay them. Cake said, "No, we can't pay these numbers and we'll explain to the affiliates that these numbers are incorrect. But we cannot issue any payments until we get this data sorted out." Unfortunately, they told me verbally on the phone that a lot of affiliates were happy to be paid quarterly. I said, "Well, guys, I don't know of any. I'm one that's not." So they said, "Just don't worry about it. We're good for the money. We've got a ton of money. Blah, blah blah blah blah blah blah." And we would pass that along to the affiliates in hopes that the situation would get solved as quickly as possible. And there were payments finally issued in December and they were probably two months late in some cases.
The ultimate question regarding that is when people were asking who owned it (CardSpike) and who signed the license, there was a visceral sort of denial from you and Warren that you had anything to do with it. Why not just come out and say, yes, so and so signed the licensing agreement. Yes, we had something to do with. Yes, we're sorry we screwed up on the payments. And we're trying to fix it.
We didn't screw up on the payments. We had nothing to do with it. We did say over and over that CardSpike was doing their best to get the payments squared away as soon as the data was fixed. The difference is I'm working with Effective Media and I represent CardSpike, and Warren is the owner of CardSpike. Generally I will not release information on anyone that owns a property that we manage, but because of the gravity of this particular case, I went ahead and let people know who was the owner of CardSpike. But generally, it's something I wouldn't do because I prefer to maintain client confidentiality. And I was privy to the knowledge that CardSpike was not able to pay because Cake Poker was withholding payment because of these data issues, and we did state that numerous times. Here's the issue: everyone has always come out and said we want CAP to come out and admit they own CardSpike. CAP does not own CardSpike. Affiliate Media is a separate company. It's a Nevada corporation that I'm the president of. We operate a number of communities including CAP. We print magazines, we do events.
But you do understand where the perceived conflict of interest....
We don't own or operate casinos. We never did. Now the fact is Warren went off and purchased a casino and set up a separate corporation in Cyprus to represent that casino. And then he signed a contract with Effective Media to represent CardSpike. There are three different companies involved here. There's Effective Media, where I have an ownership position in. Warren has a position. I'm the CEO. He's the president of the company. There are other shareholders which I won't announce publicly for their own..
No, I understand that. But because the company personnel were linked, because it was, let's just say it was Warren (for example). Because Warren was involved in all 3 operations, you can see where there's a perceived conflict of interest. And that's why people were upset.
Yeah, but you have to understand that from a practical standpoint, affiliates think in single dimensions. They don't think of things in a business sense from the respect that there are a lot of people that sit on boards of a lot of companies. And that doesn't mean all the companies are linked or that they have common interests or do common things. Warren Buffett sits on the board of numerous companies. You wouldn't just say Warren Buffett was involved in making bad donuts because he has a majority stake interest in Dunkin' Donuts. You wouldn't say that because he owns insurance and donuts, it's a conflict of interest. He again sits on the board of numerous companies.
If he was on the board of Dunkin' Donuts and he was on the board of...
He's also on the board of Baskin Robbins! What does that have to do with ice cream?
There's a larger point. Let's say you're a senator. Most senators divest (their portfolios) or go into blind holdings because they have no idea what they're going to be writing legislation on.
We're not senators. We're businessmen.
But it's the same thing, at least in my mind. And I'm asking you to correct me where I'm wrong. Let's just say you're the CEO of GM and you're also on the board of an automotive supplier, that would be....
GM owns AC Delco. GM also owns GM Finance. GM also does mortgages. GM also has positions in a number of companies.
But that's very up front...
Ford owns Volvo. Ford had a position in Jaguar. GM owns stock. That's not a conflict of interest here. There are automotive manufacturers that own different products. I understand what your position is and what you're trying to contend, and I understand that again, in a single-dimension world, you're free to have that position, but it's not legally valid. There is no conflict of interest if I own, or Warren owns, a publishing company, which is primarily what Affiliate Media is, and we also own a consultant company and I happen to own a property management company. So again, is that a conflict of interest somehow? I don't believe it is. I own a number of companies. I'm certain Warren does, too. We don't discuss every ownership either one of us has. But we've been successful in business and it only makes sense that we broaden our horizons and do invest in other businesses.
If you had a microphone right now, and you had 1,000 affiliates in front of you, what would you say to them right now? What would you want them to know?
Nothing, really. I want them to understand the fact that number 1, CardSpike, I'll publicly apologize. We had no idea that we represented a company that had issues with the software that were present with CardSpike.
I want you to broaden this out beyond CardSpike. If you had 1,000 affiliates in a room and a microphone and you wanted to talk to them about what was going on right now, what couple of things would you really want them to know about what's going on right now?
Number 1, I'd want them to look at history. I was the one that started CAP. I started it 8 years ago. I started it as an affiliate to represent affiliates. We've always believed that's what we were there to do. Over the years, we've done our best to service affiliates, to provide them with a great forum, great events that were free, free magazines. MYCAP is one of my new branding initiatives. CAPTV was one of our new initiatives; originally I had hoped to have that as a full network channel. In other words, my whole modus operandi and purpose in life was to represent affiliates in a professional way where the programs would respect us as independent business owners and deal with us as such. I also felt collectively as I did when I started CAP that we could achieve more together than we could as individuals. So that was my vision of CAP. Over the years, if you are at all familiar with CAP, you'll know that Warren Jolly never had a presence on CAP, never posted on CAP, never did much of anything other than handle sales in the background. And that was it. That was his primary role. He never took an interest in the community. He doesn't have any interest in affiliates whatsoever. I need to be returned to power at CAP so that I have the ability to keep CAP headed in the right direction. With Warren Jolly's theft of the company - or his attempting to steal the company at the moment - it's not going to benefit affiliates and it's certainly not going to benefit programs. Last I checked, it's going to be a bad situation. And CAP has a long and illustrious history that I don't want to sacrifice. I'd like the opportunity to have my voice heard in my own community again. I don't think that's too much to ask. I mean, now Warren talks about bans and then bans me, when he and his brother were the ones actually doing most of the bannings. It's a very awkward situation. I don't know what to say to affiliates to address what's going on internally because it raises other questions of how I allowed this to happen, what have you. It happened because I was located in Florida, he's located in California, and a lot of the things were done without my knowledge. I woke up on a Monday morning expecting everything was cool like usual, and I was getting ready for CAP Spring Break, life was good, and everything else, and I find out all of sudden my money is removed from the bank and all of our money is removed from the bank and I have no idea where it went. And then, when I make a post to let people know what's going on, it's immediately moved and I'm banned from CAP. And then my phones are shut off, my cell phone, my credit cards, my company credit cards - it's ridiculous. Even my e-mail that I've had for 8 years that everyone knows how to get a hold of me he hijacks and was no longer sending on my e-mail. There's nobody worse that can be charge of CAP than him (Warren). And I'd really like the opportunity again to go back and push CAP forward again in the right direction, servicing affiliates like we always did. I'd like to work cooperatively with Michael; we discussed this in London at length. That's my ultimate goal here. I'd like everybody' support to make that happen.
If you were talking to Warren directly right now, what would you tell him?
I would tell him please return our funds that you've stolen from our company or make them transparent so that I can see them and certify that they exist and didn't go into personal accounts. Also, I need access to the books now. Unfortunately, shame on me, but I depended on shareholder agreements to monitor the income and outflow of the cash flow over the years and I didn't look at individual bank statements. Even though I'm a signatory on all the accounts, I would check them periodically just to spot check them to see how the money was doing in the bank. I didn't check them daily, I didn't even check them weekly. Had I not been tipped off internally that something was going on and that he removed the money - they did that over the weekend - when I checked Monday morning and found that out, that's when the fireworks went off. But this is something he's been engineering for a while, so I need the ability to review all of the company records and audit everything and see exactly how much money has been siphoned off from our company over the years. If he can steal $3 million in two months, over the course of 8 years can you imagine how much money he's probably taken that I'm not aware of?
Are there legal negotiations going on right now?
I've retained counsel and I'm waiting to receive direction on this... So there are criminal and civil actions being pursued vigorously.
Editor's note: Lou said if you need to reach him, the best way to do so is via his skype account.
