12/18/2003 12:00AM

Ex-OTB boss indicted


Susan Bala, the former chief executive officer and founder of Racing Services Inc., a North Dakota-based off-track betting company, was indicted on Thursday by the federal government and the state attorney general's office on charges of running an illegal gambling operation, money laundering, illegal wire transmission, and conspiracy.

The indictments, announced by U.S. attorney Drew Wrigley and North Dakota Attorney General Wayne Stenehjem in Fargo, N.D., allege that Bala set up an unlicensed wagering parlor for big bettors that handled approximately $99 million during a six-month period from October 2002 to April 2003. The bets, which were taken by unlicensed tellers, were not reported to the state, even though they were commingled into mutuel pools, which allowed Racing Services to avoid paying federal and state taxes, the indictments allege.

Under North Dakota law, all off-track betting outlets have to be licensed as charities. The illegal site was not associated with any charity, prosecutors allege, and was set up deliberately to avoid scrutiny from regulators.

Bala and her attorney, Mark Beauchene, did not respond to requests for comment on Thursday. Bala was arraigned on Thursday morning, prosecutors said, and pleaded not guilty.

Also indicted with Bala was Racing Services itself; Raymundo Diaz, a Racing Services vice president; and Global Content Inc., a company formed by Diaz.

Lawyers for Diaz and Bala said Wednesday in North Dakota that their clients were not guilty and that the charges were based on a "flawed investigation," according to reports.

The indictments were the second in a week to target a major racing operation. Last Thursday, federal prosecutors indicted the New York Racing Association, two of its managers, and four NYRA mutuel tellers on charges of conspiracy to commit tax fraud.

Racing Services, which runs 10 off-track betting sites in North Dakota and handles simulcast services for sites in neighboring states, has been under investigation since April, after regulators complained about the underreported handle. The company also owed $6.5 million in taxes and fees to the state at the time, a debt that largely remains outstanding.

In earlier interviews with Daily Racing Form, Bala had described the unreported handle as an "internal mistake," but she declined to go into detail.

Bala was forced out of Racing Services in August, although she still owns the company. At that time, the state put Racing Services in receivership, effectively seizing the management and operation duties. Many of the company's high-rolling gamblers then left the company, which had approximately $220 million in handle for 2002.

Wrigley, the U.S. attorney, declined to comment on Thursday about whether the bettors knew the betting site was illegal, but said the investigation into Racing Services was ongoing. The Internal Revenue Services's Criminal Investigations Division and the Federal Bureau of Investigation will continue to assist in the probe, Wrigley said.

"I would caution people that the investigation continues, that it will continue, and that we'll look at all other potential angles," Wrigley said.

The charges of money laundering were based on the allegation that Racing Services used revenue from the illegal betting operation to further "promote" the company, the prosecutors alleged. And since the bets from the unlicensed operation were transmitted into mutuel pools across state lines, prosectors were able to add the illegal wire transmission charge.

Even before investigators raised questions about Racing Services's unreported handle and its tax liabilities, the company had raised eyebrows in the racing industry. Racing Services grew rapidly in the late 1990's after Bala lured big gamblers to North Dakota to wager through her service and receive generous cash rebates, a controversial practice in the racing industry. Many of the gamblers migrated to North Dakota from Nevada, where rebates had been outlawed.

Among the Racing Services gamblers was high-roller Peter Wagner, whose method of betting attracted the attention of racing officials in 2001, when his bets caused suspicious late-odds drops at Gulfstream Park. A subsequent investigation by racing officials did not turn up anything illegal.

Wagner sued Racing Services last week, claiming the company owes him $2.5 million. Wagner frequently wagered more than $100 million a year, but he left the company when Bala was forced out. Wagner currently lives in Las Vegas, and according to a racing official who spoke on the condition of anonymity, he is betting through a Native American gambling operation in Oklahoma.