You are completely level with the referee. He also didn't see Ward holding. He only saw Kessler hold and told him in the corner between rounds that he was about to be DQ'ed. Kessler. Not Ward! 
No doubt that Kessler underestimated Ward. Most people did. He also never knew that he'd fight two guys in the ring and I'm not talking about the butt-induced doublevision here.
No question that it was Ward's gameplan to fight dirty with wild swings of head, holding and holding and hitting. He knew that he was at home and that the homer ref would allow him to get away with it.

Just watch the fight for yourself, Ward outboxes Kessler on the back-foot, when Kessler tries to pressure Ward, Ward would slide inside on Kessler and intelligently smother him, and Kessler's not used to that due to it being more of an American unconventional style of boxing, so like I said, he would clinch Ward. Anyway you slice it, Ward embarrassed a 43 fight veteran who was an elite level fighter with only 20 fights and outclassed him in every facet of the game. And, I like Kessler I think he's a great fighter, but like Andre has said himself, Kessler came to Oakland because he thought there was no way he could lose and thought he had a green fighter in front of him. Mikkel was wrong, and he payed the very hefty price for the gamble he took. End of story.
I think Ward got rough with Kessler and out muscled him not only to prove a point to Mikkel, but to prove a point to all of the journalists/writers and everyone else who said he had a suspect chin and was nothing but a decent boxer with no power and no physical strength. They were all wrong. Like Ward also said himself right before the Abraham fight "When I'm physical, I'm dirty. When I box, I'm not physical enough. Which tells me to just fight my fight." The truth.

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