02/23/2009 12:00AM

Bettors' funds are safe, officials say


Wagering accounts held by customers of XpressBet will be protected if XpressBet's parent company, Magna Entertainment Corp., files for bankruptcy, regulatory officials said Monday.

XpressBet, like many other national account-wagering companies, is licensed by the Oregon Racing Commission, which requires the companies to maintain accounts under guarantees by the Federal Deposit Insurance Corp.

Another rule states that "funds of an account holder . . . shall remain the property of the account holder for all purposes."

Gordon Tallman, the commission's supervisor of account-wagering hubs, said that XpressBet was in compliance with the regulations. "[The account wagering companies] have to separate the deposits from their operating accounts," Tallman said.

Last December, when Hinsdale Greyhound Park in New Hampshire, which operated an account-wagering business, filed for Chapter 7 bankruptcy, approximately $500,000 in account-wagering deposits were placed under the control of the bankruptcy court.

New Hampshire did not require its licensed account-wagering operations to maintain separate accounts for deposits and operations, although the state has now drafted rules seeking that separation. Attorneys for Hinsdale have said that the track's account-wagering customers will likely receive 15 to 25 cents for every dollar on deposit by the close of the liquidation, which could take a year or more. In the meantime, customers cannot withdraw moneyfrom their accounts.

According to racing officials and bankruptcy attorneys, Magna will likely file for bankruptcy in March. Last week, Magna's controlling shareholder and parent, MI Developments, scrapped a plan that would have delayed the maturity dates of more than $200 million in debt. Magna has few options to raise the money to pay off the debts. The first debt, a $40 million loan from a Canadian bank, comes due on March 5.

Unlike Hinsdale, Magna will likely go into bankruptcy under Chapter 11 rules, which allow a company to reorganize while under the court's protection. Under Chapter 11, companies typically continue to operate their business units. Chapter 7 bankruptcy rules govern the liquidation of a company's assets.

Magna officials did not return phone calls on Monday. Magna has not indicated how many customers have deposits with XpressBet or the total amount of the deposits. According to Oregon Racing Commission, customers of XpressBet wagered $166 million through the first three quarters of 2008. XpressBet is one of four major national account-wagering companies in the U.S.