03/10/2004 12:00AM

Some details emerge about rebate operation


As officials for the Thoroughbred Owners of California and Magna Entertainment prepare for a meeting on Saturday to discuss Magna's rebate policy, some details are emerging about Players Services Group, which recently obtained rebates through XpressBet, Magna's account-wagering service.

Players Services Group was founded by Don Johnson, a former racetrack executive, in the late 1990's to secure rebates from betting sites. The group has struck deals with a small account-wagering company at the Couer d'Alene Casino, a Native American casino in Idaho, and most recently with XpressBet. Players Services handles wagers for Johnson's own betting syndicate as well as wagers from other individual customers, some of whom also operate partnerships.

Players Services and its clients had been wagering through XpressBet for several weeks until March 3, when the TOC raised objections and Players Services was cut off by XpressBet. TOC officials complained to Magna that they had not been told of the agreement and requested details. Magna officials complied last Friday, and the two sides will meet on Saturday to discuss the issue further.

TOC officials have declined to discuss details of the agreement. In an interview last week, Magna's chief executive officer, Jim McAlpine, said that the agreement was intended to "maximize the returns to the tracks and horsemen" by "cutting out the middleman."

The agreement between Magna and Racing Services has opened a window into the world of rebating, where the biggest players prefer anonymity. No rebate shop has openly described details of its policies in the past five years, even as annual handle from rebated players has grown to an estimated $1.5 billion, or approximately 10 percent of the national handle on Thoroughbred racing, according to industry associations. Individual rebates can range from 10 to 18 percent of handle, depending on the type of wager.

Johnson has steadfastly declined to provide details about Players Services and about the agreement with XpressBet, saying that knowledge of the agreement would damage his company's ability to strike deals with other rebate shops.

But in several conversations since March 3, Johnson has described himself as the manager of a professional betting syndicate that focuses on trifecta, superfecta, and pick six wagers. Johnson has said that his group began seeking rebates in the late 1990's in order to compete with other professional bettors who were already receiving rebates.

"We have to get the best deal we can get because we can't compete against some of these other guys who are getting ridiculous rebates," Johnson said Tuesday.

According to the Idaho Racing Commission, handle through the Idaho casino that previously had an agreement with Johnson was $55 million in 2002. Johnson would not confirm the handle for Players Services that year but said that at least $40 million was from clients of Players Services, including his own betting group.

Rebate rates typically increase as the volume of handle grows, and the money wagered by clients of Players Services is aggregated for the purposes of obtaining the biggest rebate, racing officials said.

One player, who receives the rebates and who spoke on the condition of anonymity, said: "Once you get rebates, you can never go back."

According to the player, all clients of the company make individual wagers through their own accounts, and all payoffs on winning bets are credited to their account.

According to the bettor, at the end of each week, Players Services would distribute rebates to each of its clients, on scales that increased, as a rule, as takeout for a specific wager at a specific track increased. The bettor said that he assumed that Players Services took several percentage points of his rebate as a fee but that he was never told how Players Services was compensated.

Some racing officials have already complained about Players Services Group. Three years ago, officials of The Meadowlands accused Johnson of recruiting players at the track, and The Meadowlands eventually cut off its signal to the Idaho casino.

"I will readily admit that we had a problem with him," said Bruce Garland, executive vice president of The Meadowlands, referring to Johnson. "We called him in, he was very evasive about it, but that's exactly what happened. He took our players right from the track."

Players Services recently enlisted Jerry Brown, the owner of the popular handicapping service Thoro-Graph, to recruit players for the XpressBet operation. Brown has said that he sent hundreds of e-mails to clients of Thoro-Graph detailing some aspects of the rebate operation.