IRG, which is involved in a federal investigation that is looking into certain segments of its operation, will either have to come into compliance with Oregon statutes regulating the operation of a hub, or can appeal the decision by the state’s racing commission to suspend its license.
The off-shore rebate shop is out of compliance with Oregon law because it does not have an active bank account working to carry out transactions on behalf of its customers. Federal officials in early October seized three IRG bank accounts in relation to the investigation, which has been reported by Youbet as involving certain IRG customers, employees, and possibly a former owner of the wagering entity.
“They have to come into compliance, or they can request a hearing in front of an administrative law judge,” said Oregon Racing Commissions executive director Randy Evers.
The ORG in a special session voted Oct. 19 to give notice of license suspension on IRG, which has funneled more than $447 million in wagers through the Oregon hub since it started operating in the state in the third quarter of 2005, according to public documents updated through June 30.
Evers signed the intent to suspend IRG’s license Oct. 22, and a 21-day grace period for compliance or appeal began ticking. An appeal hearing would be heard by an independent administrative law judge in Oregon.
A transcript of the public portion of the Oct. 19 special session contains some interesting tidbits. In it, Youbet’s vice president of development, Victor Gallo, said IRG has “less than” 200 customers, and estimated the liability amount to customers is “somewhere around” $3 million. Youbet originally reported $1.5 million had been seized by the federal government.
“Are your funds still frozen?” asked one of the commissioners, Charlie Williamson.
“Well, to be clear, the funds in issue were seized by the government and so in that sense, the original bank accounts remain in the custody of the United States,” responded Youbet’s legal counsel, David Schindler. “We have opened a new FDIC insured account as required…and, therefore, believe that we are in compliance.”
Schindler said Youbet was in the process of making sure IRG’s customers would have “access to all of their funds.” He said Youbet would be replacing the seized funds.
Gallo at the time asked the commissioners to hold off with the license suspension vote so the company could work out the final details of its plan to get customers their funds.
“We’re prepared to make those payments, but at the same time, we don’t want to offend, in any way shape or form, the U.S government in how we make those payments,” he said. “For instance, if they believe payments to certain of our customers are OK and certain are not, we want to make sure we satisfy the government in that regard.”
Williamson asked if suspending the license immediately would cause any hardship to Youbet and IRG.
“That would be debilitating for us,” Gallo responded. “Our shareholders would react quite negatively; I’m sure, about such an incident. Second, I’m not sure once we closed those doors we can reopen them. Our customers would all leave.”
A publicly-traded company since 1999, Youbet’s shares have fallen nearly 45% since the company announced Oct. 9 that its California headquarters were the subject of a search by agents with the federal Immigration and Customs Enforcement agency. Trading at $2 Oct. 9, the shares closed Nov. 1 at $1.11 on the NASDAQ board, a 52-week closing low.
Several other advance deposit wagering entities have betting hubs in Oregon, including America Tab, Oneclickbetting.com, Pay dog, TVG, Twinspires.com, and XPressBet.
Separately, Youbet announced it realized a 1% drop in handle on the two days of the Breeders’ Cup World Championships at Monmouth Park when compared against the Friday and Saturday of the same event held at Churchill Downs a year ago, falling from $4.4 million to $4.3 million. The Breeders' Cup expanded for the first time this year to two days.
The company also reported it handled $7.3 million on all tracks over the two-day Breeders’ Cup weekend, another 1% drop over last year. IRG was not extended a contract to handle wagers on the Breeders' Cup.
Breeders’ Cup Ltd. reported a decline of about 17% in handle on the Saturday portion of the event at Monmouth.