Youbet to Close IRG
IRG has also agreed to surrender its operating hub license in Oregon, an official with the state's racing commission confirmed Feb. 13.
IRG, which had $1.5 million seized by agents in October 2007 in relation to a federal investigation that Youbet says partly involves its subsidiary’s employees and customers, will cease taking wagers on or before Feb. 15, according to the SEC filing.
Youbet cited a “severe and adverse downturn” in IRG’s business since the investigation started, and promised that IRG’s business would be “unwound in an orderly and businesslike fashion.”
William Schmitt of ICR, a Connecticut investor relations consultant firm that works with Youbet, said the investigation played a key part in the decision to close IRG. He acknowledged that some tracks didn't renew agreements with IRG at the first of the year, but said he didn't know the exact number.
"Since the investigation of the customers was initiated in October, some of the tracks didn’t want to renegotiate their content Jan. 1," he said. "So that was an issue going forward."
Schmitt, who called Youbet's decision-making plan to close IRG a "fluid business development," said he couldn't comment on the status of the federal investigation, which is believed to be based out of the U.S. Attorney's Office in Las Vegas.
"All I can say is that the company continues to fully cooperate with the investigation," he said.
Youbet’s headquarters were also the subject of a search by federal agents last October. The company self-reported both the IRG funds seizure from three Nevada bank accounts and search of its headquarters in subsequent SEC filings.
Youbet also said one of its lenders, Wells Fargo Foothill, has agreed to let the company fund up to $500,000 in legal fees for the government investigation. Youbet said it would also pursue recovering the $1.5 million in seized funds, but said “management has concluded that the likelihood of recovering these funds is uncertain.”
A few weeks after the investigation became public, IRG received from the Oregon Racing Commission a notice of intent to suspend its operating hub license in the state. IRG appealed that decision, and the parties were waiting for the dispute to be placed on the docket of an administrative hearing court in Oregon.
But ORC executive director Randy Evers said IRG agreed to surrender its license during the commission’s Feb. 13 meeting. Evers said ORC attorneys had recently had discussions with IRG attorneys about the decision to surrender its license.
In the recent SEC filing, Youbet said it would record a $9.9 million impairment charge in relation to IRG losses in its pending 2007 fourth quarter financial report. It also said it would incur up to $800,000 in severance costs of the IRG operation and "to cover lease obligations, outside services, asset disposals and other miscellaneous costs."
Appearing before ORC officials in October, a Youbet executive said IRG had about 200 customers at the time. Through the third quarter of 2007, the hub has processed nearly $520 million in wagers from IRG since the off-shore entity began working in the state in late 2005. Totals haven't been released for the fourth quarter of 2007, which would include wagering activity IRG realized following the start of the investigation.
IRG, which was purchased by Youbet in 2005, is based in the Netherlands Antilles island of Curacao. It’s Web site (www.betirg.com) was still active Feb. 13.
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