Racing Services Assets May be Sold
Updated: Sunday, June 6, 2004 1:31 PM
Posted: Friday, June 4, 2004 9:13 AM
A bankruptcy judge is considering a motion to sell off the assets of Racing Services Inc. and put the money toward claims from creditors, including $6.5 million in uncollected state taxes.
Timothy Moratzka, a trustee who is administering the bankruptcy case of Racing Services Inc. of Fargo, has asked that the business be liquidated. The company's owners are asking instead to restructure the business' debts, and allow it to continue operating.
Bankruptcy Judge William Hill made no decision on the request after a hearing Thursday. Hill scheduled another hearing June 10.
Attorney General Wayne Stenehjem said Racing Services has been headed toward liquidation since December, when its owner, Susan Bala, was indicted by a federal grand jury on charges of illegal gambling and money laundering.
The state Racing Commission subsequently took away Racing Services' license to broadcast horse races to North Dakota wagering sites, and gave it to another Fargo company, Lien Games.
"It's just time to pull the plug and move on," Stenehjem said.
Stenehjem put a state-appointed receiver in charge of Racing Services' operations last August, hoping the company would be able to make enough money to pay its back taxes. Stenehjem says the company owes $6.5 million in taxes on unreported wagers that were collected through an illegal betting site.
In December, Bala, RSI and a company vice president, Raymundo Diaz, were indicted on 12 felony charges of illegal gambling and money laundering. Federal prosecutors said RSI set up an illegal betting shop that took in $99 million in unreported bets over seven months.
Diaz's company, Global Contact, also was indicted. Bala, Diaz and the companies have pleaded not guilty to the federal charges, and a state charge of illegal gambling.
Bala filed a bankruptcy petition in February in an attempt to reorganize RSI's debts. Stenehjem said it was an attempt to regain control of the company from the state receiver, Wayne Drewes, with whom Bala had clashed about how RSI was being run.
Moratzka assumed control of the company's bankruptcy estate April 23. "I thought it was pretty obvious the company could not operate," he said.
Racing Services has lost $35,000 to $50,000 per month since January, and its simulcast sites in South Dakota are trying to cancel their contracts, he said. The company does not have the funds to make deposits to acquire simulcast signals from racetracks, which it needs to attract bettors, he said.
Bala said Racing Services is still capable of rebuilding. She questioned Moratzka's decision to recommend that the company be sold off.
"He's coming out with an opinion, but it's an opinion in somewhat of a limited financial picture," she said.
North Dakota has little chance of recovering its overdue taxes, Moratzka said. On May 17, Racing Services had $243,000 in cash and $250,000 in uncollected bills, he said. Its equipment and furniture would be valued at $50,000 to $100,000 in a sale, he said.
The bankruptcy estate does have more than $4 million in claims against former affiliates and company insiders, including Bala, Moratzka said. However, collecting that money would be difficult, because some of the creditors are foreign corporations, he said.
Stenehjem said the state, which is first in line among Racing Services creditors, expects to receive only a fraction of its $6.5 million claim. Stenehjem and U.S. Attorney Drew Wrigley said liquidating the business would not affect their criminal cases.
Bala started Racing Services 15 years ago and built it into an international business with operations in Mexico and Venezuela. Using a system of rebates to attract high rollers, Racing Services processed more than $170 million in wagers in 2002.
FREE! E-Newsletters from The Blood-Horse!...
Follow the top stories of major racing events, racing previews and results with FREE e-newsletters from bloodhorse.com. As news develops, we'll deliver updates to your inbox. Follow important events moment by moment, step by step!