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eCOGRA concludes the Grand Prive investigation, and chaos immediately follows


Tuesday, February 16, 2010

eCOGRA concludes the Grand Prive investigation, and chaos immediately follows


I reported on the eCOGRA investigation into Grand Privè a few weeks ago.

Yesterday, 15th February, the eCOGRA report on the Grand Prive affiliate programme investigation was released...and immediately provoked quite a storm of controversy.


Report

History

Analysis

Further reading



15 February 2010 -

Following a number of Internet-based allegations concerning the closure of the Grand Privé Affiliate Program ('the Program') on 1 December 2008, eCOGRA's Compliance and Advisory Services department was engaged by the management of the company on 17 November 2009.

Pursuant to an independent and fair resolution of the issues involved, eCOGRA was tasked with:

• Independently investigating the manner in which the Program was terminated and the reasons therefore.

• Carrying out a full and independent review of the program software and data to confirm amounts owed to claimants.

• Determining a fair settlement for claimants, taking into consideration the potential lifetime earnings of each affiliate’s respective players; and
• Compiling a full and transparent report which will be publicly released on conclusion of the investigation.


According to our mandate, the following actions were taken in order to ensure the maximum number of affiliates were afforded the opportunity to submit legitimate and verifiable claims:


• On 7 December 2009 both eCOGRA and Grand Privé issued widely distributed press releases advising affiliates of the opportunity to submit claims, and also urging affiliate watchdog organisations to assist in ensuring their respective affiliate members were informed of this opportunity.

• After noting affiliate concerns regarding the limited reach of affiliate representative bodies and webmasters, Grand Privé management expanded the communications exercise by emailing every affiliate who had active players on the Program's records during the 3 months prior to 1 December 2008 when the Program closed; and

• An online Claim Submission Form for affiliates was made available from 7 to 31 December 2009 and claims were collated by eCOGRA.


Our investigation included confirming the accuracy and completeness of the database list of emails used in the expanded communications exercise in 2. above.


Our findings are as follows:


1. Termination of the Affiliate Program and reasons therefore:

Following various meetings with management and an onsite investigation at the Grand Privé operational base during the months of January and February 2010, an inspection of supporting evidence allowed eCOGRA to substantiate that:

• For commercial reasons, in August 2008 a decision to close the Program effective 1 December 2008 was taken.

System problems were being experienced on an ongoing basis due to the Program using software in Beta testing. In order to maintain the integrity of the data three permanent employees were required to manage the Program software. In addition the software provider was required to spend an extensive amount of time assisting and troubleshooting ongoing system problems. This resulted in escalating costs, deteriorating service levels and reputational damage.

Due to the high operational overheads and the relatively small portion of income being derived from the affiliate business associated with the Program, losses were incurred by the Program over a period of more than 12 months.

After carefully considering alternative courses of action, management decided to close the Program in order to protect other areas of the organisation from further losses.


• All affiliates were informed of the intended closure by email on 7 November 2008 and encouraged to move their accounts and players to the Villa Fortuna Affiliate Program, which used improved affiliate program software. A follow up email with the same message was sent again on 21 November 2008. Termination was conducted according to the termination clauses stipulated in the affiliate contracts.

• During November 2008 management entered into mutually agreed compensation arrangements for related future player activity with the majority of affiliates who at that time had players considered to be reasonably active. We have however confirmed that certain affiliates were overlooked in this process.

• On 1 December 2008 all affiliates were paid November commissions, and the Program was officially closed.


2. Review of the program software and data to confirm amounts owing to claimants

58 claims were submitted to eCOGRA, of which 7 were found to be invalid, and 26 earned commissions during the period 1 December 2008 to 31 December 2009. The following steps were taken by two eCOGRA employees, both qualified Chartered Accountants with substantial industry experience, in order to substantiate amounts owing to claimants during this period:

• A comprehensive completeness and accuracy audit on the affiliate database provided by the Program was conducted.

• The relevant claimants' information was located in the database and information used for the linking and tracking of players associated with the claimants was obtained, in part using information supplied in the claim submissions received from affiliates.

• This information was used to manually source all players linked to the relevant claimants within the casino back office database.

• The underlying data for the players linked to the relevant claimants was scrutinised to identify players who were still active in the period 1 December 2008 to 31 December 2009.

• The actual commission amounts per affiliate were then recalculated using the gaming data, from 1 December 2008 to 31 December 2009, for the linked active players.


3. Determination of a fair settlement for claimants

We have been able to accurately calculate the commission accruing to each claimant for the period 1 December 2008 to 31 December 2009.

In order to take into account any potential future earnings, we have added to this amount an additional commission amount for any claimant's players that were active during the 6 month period prior to 31 December 2009. The effect of this is that we have implied an average lifetime value for each of these players of at least 3.5 times the actual2 average lifetime of all Grand Privé players.

In our opinion, this is fair and reasonable compensation for the likely future earnings of these players.

We wish to thank all those representing affiliates' interests for their feedback and support throughout the investigation. We would also like to note that the investigation team received the full cooperation of the Grand Privé management.



A little history of eCOGRA's involvement.

Towards the end of 2009, affiliate interest watchdog Affiliate Guard Dog had been engaging with Grand Privè, with a view to resolving the conflict by conducting an audit of the affiliate programme in question. eCOGRA was mooted as a possible auditor, but rejected on the basis that their close ties with Microgaming represented potential impartiality.

However, in their Grand Prive and eCogra announcement of December 11th, AGD explained that Grand Privè had rejected their services and engaged eCOGRA directly themselves, ending at a stroke the prospect of a genuinely impartial set of eyes on the process.

Why they chose to do this remains unclear. However, assuming it wasn't based on a desire to keep any and all data concealed from the view of anyone outside the immediate Microgaming family, it was a very strange decision, as to let the AGD team in would have ended any possible suggestion of lack of impartiality of the investigation.

Neither eCOGRA nor Grand Privè have ever explained why they chose to keep the trusted affiliate auditor at arms' length.


In the report, eCOGRA refers to "technical system problems" in the old programme, and that affiliates were encouraged to move to promoting new casino Villa Fortuna, which was, apparently, problem-free:



System problems were being experienced on an ongoing basis due to the Program using software in Beta testing...all affiliates were informed of the intended closure by email on 7 November 2008 and encouraged to move their accounts and players to the Villa Fortuna Affiliate Program, which used improved affiliate program software.



Why not simply shift the ostensibly "clean" Villa Fortuna programme back to application of the original casinos? Why simply dump the other casinos? The new programme could only have made more money with all the other casinos included.

This I find odd.


Another worrying statement:



58 claims were submitted to eCOGRA, of which 7 were found to be invalid1, and 26 earned commissions during the period 1 December 2008 to 31 December 2009.



The first issue is that claims had to be submitted at all. eCOGRA had access to the database; why could they not use this to establish who was owed what?


The second issue was raised by another affiliate organisation manager in this forum post:



"some 26 legitimate commissions were overlooked. These omissions were most definitely unintentional and are regretted."

Unintentional? Are they unable to read the data from their own software? Surely if eCogra representatives are able to do so, then they must have the ability to do so.



eCOGRA is evidently being a tad euphemistic in the use of the word "overlooked". Although, that said, the entire "settlement" claim appears to be something of a farce anyway, with no affiliate acknowledging receipt of such a thing (see point below). As such, how Grand Privè justified their non-actions seems rather beside the point.


This statement is frankly ludicrous:



During November 2008 management entered into mutually agreed compensation arrangements for related future player activity with the majority of affiliates who at that time had players considered to be reasonably active. We have however confirmed that certain affiliates were overlooked in this process.



They refer to the overlooking of certain affiliates, but a satisfactory resolution with the majority.

This simply cannot be.


Not one former member of the Grand Prive programme came forward, in the twelve months or so between the closure of the programme and the launch of the investigation, to claim any form of settlement. Not a single one. None of the many people who complained received any kind of settlement.

Yet eCOGRA claims that a majority was settled with, leaving only an outstanding minority - an absolute reversal of the truth.


Even accepting the caveat that not all affected members would have had "players considered to be reasonably active" as per the stipulation, this claim by eCOGRA is impossible. It may be the case that they are simply passing on a claim from Grand Prive, who are, in their turn, lying; but this would nevertheless represent extremely sloppy investigation on the part of eCOGRA.


eCOGRA says:



The relevant claimants' information was located in the database and information used for the linking and tracking of players associated with the claimants was obtained, in part using information supplied in the claim submissions received from affiliates.



And yet, looking at the immediate fallout from the report, noone received a satisfactory settlement. Clearly, the database is wrong.


On that note, a technicality was raised about the possible loss of data from a predecessor affiliate programme, one "Referspot", which very likely would explain the discrepancy - see this GPWA forum post. This may or may not be the case, but at best some very sloppy accounting has taken place here, on the back of the withholding of vital information on the part of Grand Privè.

And on a sidenote: all this brings the issue of the trusted third party, AGD, back into the frame: their input would have headed off any such discrepancies or red herrings, as well as guaranteeing overall impartiality. The eCOGRA findings fell apart at the seams almost before they were issued precisely because just such a voice was not present.

Even assuming the most cynical of motives for chosing to keep them out, this was a blundering mistake on the part of the Grand Prive / eCOGRA / Microgaming triangle.


At this moment in time, thirty six hours after the release of the findings, eCOGRA appears destined to be going back to the drawing board and redressing the matters resulting from their less than successful accounting practices on view to date, described by one GPWA employee as representing a "botched audit", which seems a pretty fair description.


For discussion on this matter, see also:

Final report: Grand privé affiliates program investigation at CAP

GP claim & eCOGRA at AGD

eCOGRA report on the Grand Privè affiliate programme investigation at Casinomeister

eCogra final report on Grand Prive at the GIA.


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