North Dakota seizes offtrack betting firm

North Dakota will immediately take over the only betting operation in the state, Racing Services Inc., as the result of an agreement reached between the state attorney general and the beleaguered offtrack betting company.

Wayne Stenehjem, the state attorney general, announced the agreement on Thursday afternoon after discussions with RSI's chief executive officer and owner, Susan Bala, on Wednesday and Thursday. Stenehjem said that Bala agreed to the takeover after he told her that the racing commission would revoke RSI's license if she did not accept.

RSI currently owes the state $6.5 million in taxes and is under investigation by both North Dakota and federal regulators. The company has been under intense scrutiny since regulators discovered earlier this year that it had underreported handle by nearly $100 million during a six-month period from late 2002 to early 2003.

RSI operates 10 offtrack betting sites in North Dakota and provides simulcast services to wagering outlets in neighboring states. The company's handle has skyrocketed over the past decade by luring heavy gamblers who are rewarded with rebates on their wagers, a controversial practice in the racing industry.

According to commission records, RSI had handle of $172 million in 2002 without the underreported handle. Including that money, the company had handle of around $220 million in 2002.

Under the agreement with the state, Bala will not be allowed to play any role in the management of the company, Stenehjem said. Wayne Drewes, a Fargo, N.D., accountant, will be the trustee for the state at RSI, Stenehjem said, provided the appointment is approved by the courts.

Stenehjem said that the state and federal investigation into RSI and the underreported handle would continue, and that Bala will be held liable for any criminal acts that may have occurred.

In an earlier interview, Bala had blamed the underreported handle on an "internal mistake" but declined to be specific. On Thursday, Stenehjem said he had not received a satisfactory answer as to why the underreporting took place.

Drew Wrigley, the U.S. attorney who is leading the federal investigation, declined to comment on the probe on Thursday, other than to say that the FBI and Internal Revenue Service are involved.

The North Dakota Racing Commission had told RSI officials that it would revoke the company's license on Wednesday if the company did not clear its tax bill.

Earlier in the week, RSI had paid the state $1.5 million due to a special horse racing fund, but the $6.5 million bill due to the state general fund remained.