Youbet 2007 Loss of $27.4 million

[trigger]

"The advance deposit wagering company’s losses were augmented by a combined $17.9 million in fourth-quarter write-offs on its defunct rebate shop, International Racing Group, and its United Tote totalizator company, which may be put up for sale by Youbet. The company’s net loss for all of 2007 was $27.4 million, a 13-fold increase over the $2.03 million loss incurred in 2006."
>>>>>>>>>>>>>>>>>>>>>
"Youbet closed IRG Feb. 15 following the fall-out from a federal investigation into certain practices of the off-shore telephone wagering entity formerly located on the Netherlands Antilles island of Curacao. Youbet has said it will not be prosecuted by the U.S. Attorney’s Office in Las Vegas after an agreement was reached on March 14, and will not contest the government seizure of $1.5 million in IRG bank accounts last October.

The federal investigation was described by Youbet as “a potentially wide net of activities of certain individuals who may have used telephone rebate wagering services, including those offered by IRG, in an allegedly illegal manner.” The company said current and former employees, officers and directors may seek “indemnification, advancement or reimbursement of expenses from us, including attorneys’ fees, with respect to current or future proceedings related to this matter.”"
>>>>>>>>>>>>>
"Youbet was also notified March 31 that it was out of compliance with NASDAQ standards because its stock price had traded under $1 for 30 straight days as of March 28."
http://news.bloodhorse.com/viewstory.asp?id=44349

[Ray2000]

I listened to the Earnings Conference Call this morning to see if there was any good reason to hold on to my measley 1000 shares. Nope!


So I logged in to my wagering account to make today's wagers and their tote service is down.

So I tried to spend some of my reward points, and the catalog is down.

What a bunch of morons!

[trigger]

Originally Posted by trigger

"
The federal investigation was described by Youbet as “a potentially wide net of activities of certain individuals who may have used telephone rebate wagering services, including those offered by IRG, in an allegedly illegal manner.” http://news.bloodhorse.com/viewstory.asp?id=44349

Anybody got any ideas on how "rebate wagering services" were used in an "allegedly illegal manner"??

[Premier Turf Club]

Originally Posted by trigger

Anybody got any ideas on how "rebate wagering services" were used in an "allegedly illegal manner"??

Yup. Exactly how so. And it's more than IRG, as Youbet alluded to in their press release. Another excellent reporting job by Ryan Conley of Blood Horse.

I can't say much of anything given the ongoing federal and state investigations, but I'd suggest you go back an read the Uvari indictment.

[Cangamble]

This is the html version of the file http://www.usdoj.gov/usao/nys/pressreleases/January05/uvarietalindictmentpr.pdf.
G o o g l e automatically generates html versions of documents as we crawl the web.
To link to or bookmark this page, use the following url: http://www.google.com/search?q=cache...n&ct=clnk&cd=1

Google is neither affiliated with the authors of this page nor responsible for its content. These search terms have been highlighted: uvari indictment Page 1 1
United States Attorney
Southern District of New York
FOR IMMEDIATE RELEASE
CONTACT: U.S. ATTORNEY'S OFFICE
JANUARY 13, 2005
HERBERT HADAD, MEGAN GAFFNEY
PUBLIC INFORMATION OFFICE
(212) 637-2600
FBI
JOSEPH A. VALIQUETTE
JAMES M. MARGOLIN
(212) 384-2715, 2720
NYPD
PAUL J. BROWNE
(646) 610-6700
U.S. INDICTS 17 IN MASSIVE CRACKDOWN ON
MULTI-MILLION DOLLAR ILLEGAL GAMBLING OPERATION
DAVID N. KELLEY, the United States Attorney for the
Southern District of New York, PASQUALE D’AMURO, the Assistant
Director-in-Charge of the New York Office of the Federal Bureau of
Investigation (“FBI”), and RAYMOND W. KELLY, Commissioner of the
New York City Police Department (“NYPD”), announced today the
unsealing in Manhattan federal court of an 88-count Indictment
charging 17 defendants - including three associates of the Gambino
Organized Crime Family of La Cosa Nostra - with operating an
illegal gambling business that, over the last four years, brokered
more than $200 million dollars in bets on horse racing and other
sporting events. In addition to multiple gambling-related and
money laundering counts, the Indictment charges several defendants
Page 2
2
with participating in a scheme to fix a horse race at Aqueduct
Raceway in New York by providing a racehorse with a performance-
enhancing substance.
The Indictment and the arrests made early this morning
represent the culmination of a two-year investigation into a major
illegal gambling operation that operated principally in New York,
New Jersey, Florida, Nevada and New Hampshire. The FBI has already
seized significant assets of the gambling operation, including over
$400,000 in cash from the home of MARVIN MEYEROWITZ, a/k/a
“Cookie,” one of the operation’s alleged principal members.
The charges in the Indictment include operating an
illegal gambling business; violations of the Travel Act and Wire
Act, which involve transmission of bets and other gambling
information across state lines; money laundering; structuring of
bank deposits and withdrawals; extortionate collection of gambling
debts; and wire fraud. The Indictment also seeks forfeiture of
cash and property from the defendants. Many of the defendants, who
were arrested in the New York City area, will be arraigned today at
the United States Courthouse in Manhattan; other defendants, who
were arrested today in other jurisdictions, are expected to be
arraigned next week.
According to the Indictment, the illegal gambling
business was run by GERALD UVARI, GERALD’s brother CESARE UVARI,
and GERALD’s son ANTHONY UVARI, all three of whom are alleged to be
Page 3
3
Associates of the Gambino Organized Crime Family.
MARVIN
MEYEROWITZ, a/k/a “Cookie,” and DAVID APPELBAUM, a/k/a “Pebbles,”
allegedly were partners in the illegal gambling business, described
in the Indictment as the “Uvari Group.” As alleged, the Uvari
Group acted as an intermediary between bettors and various “off-
site” gambling businesses, which were establishments where bettors
placed bets by telephone or over the Internet without actually
being present at the sporting event that was the subject of the
bet. Among the off-site locations utilized by the Uvari Group were
Euro Off-Track, located on the Isle of Man in the United Kingdom;
International Racing Group, Inc., d/b/a “Racebook,” located on
Curacao in the Netherlands Antilles; Racing Services, Inc., located
in Fargo, North Dakota; and a gambling business located on the
Tonkawa Indian Reservation in Tonkawa, Oklahoma.
According to the Indictment, the Uvari Group established
betting accounts at off-site gambling locations for individual
bettors. Once a bettor’s account was established, the Uvari Group
allegedly received from the off-site gambling business account
numbers, numerical codes, and pin numbers that were assigned to
particular bettors, and a telephone number that the bettor could
use to place bets at the off-site location. Bettors could then
call the telephone numbers and use the account numbers and
Page 4
4
numerical codes assigned to them by the Uvari Group, instead of
their own personal identifying information, to place bets.
In fact, as alleged in the Indictment, the bettors’
accounts bore no personal information of the bettors who bet
through them. Each betting account allegedly had an associated
Social Security Number - for the purpose of reporting income and
losses to the Internal Revenue Service – but, in most cases, that
number did not belong to the bettor, but rather to one of the Uvari
Group’s five partners: GERALD UVARI, CESARE UVARI, ANTHONY UVARI,
MARVIN MEYEROWITZ, a/k/a “Cookie,” and DAVID APPELBAUM, a/k/a
“Pebbles.”
In addition to preserving bettors’ anonymity and
allowing the bettors to avoid reporting their own tax winnings,
this allegedly allowed the Uvari Group partners to claim on their
respective personal income tax returns gambling losses that were
not their own, resulting in massive tax windfalls. For example,
for the 2003 tax year, ANTHONY UVARI received a tax refund of
approximately $156,794, the Indictment alleges.
According to the Indictment, the Uvari Group typically
made money on every bet placed by one of its bettors at an off-site
gambling business. The amount of this “commission,” or “rebate,”
was allegedly negotiated by the Uvari Group based on the number of
accounts that the Uvari Group opened at the off-site gambling
business, and represented a percentage of the bet that the Uvari
Page 5
5
Group received regardless of whether the bettor won or lost. For
each bet, the Uvari Group allegedly returned a portion of its
commission or rebate to the bettor, as an incentive for the bettor
to continue to place bets through the Uvari Group.
The Indictment further charges that the Uvari Group
laundered and conspired to launder the proceeds of its illegal
gambling business, and engaged in financial transactions in
criminally derived property.
In addition, one of the Uvari Group’s partners, DAVID
APPELBAUM, is charged with participating in a scheme to fix a horse
race at Aqueduct Raceway by what the Indictment refers to as “horse
doping.” According to the Indictment, APPELBAUM, GREGORY MARTIN,
a racehorse trainer, and RENE POULIN, a harness driver, devised and
executed a scheme in which they fixed the first race at Aqueduct
Raceway on December 18, 2003, by giving a racehorse a performance-
enhancing substance just prior to the race. APPELBAUM then placed
bets, and encouraged others to place bets, on the artificially-
enhanced horse that ultimately won the race, it is alleged.
The Indictment seeks forfeiture of at least $200 million.
Among the Uvari Group’s assets subject to forfeiture are homes that
members of the Uvari Group own in Ardsley, New York; Brooklyn, New
York; Marlboro, New Jersey; Hackensack, New Jersey; Las Vegas,
Page 6
6
Nevada; Paradise, Nevada; Spring Valley, Nevada; Henderson, Nevada;
Coconut Creek, Florida; and Londonberry, New Hampshire.
Mr. KELLEY praised the investigative efforts of the Joint
Organized Crime Task Force of the FBI and NYPD, and the cooperation
of the Thoroughbred Racing Protective Bureau, the National Indian
Gaming Commission, the Federal Monitors of the New York Racing
Association, and all members and participating agencies of the
Indian Gaming Working Group.
Mr. KELLEY said that the investigation is continuing.
Assistant United States Attorneys DAVID RASKIN, MIRIAM E.
ROCAH, BENJAMIN GRUENSTEIN, and CHRISTINA PAGLIA BISCHOFF are in
charge of the prosecution.
The charges contained in this Indictment are merely
accusations, and the defendants are presumed innocent unless and
until proven guilty.
05-06
###
(A LIST OF THE DEFENDANTS’ NAMES, DATES OF BIRTH, CHARGES AND
PENALTIES ARE AVAILABLE IN A SEPARATE DOCUMENT.)

[DeanT]

Wow.

That's about all I can say about that.

[Jeff P]

I'm going to play devil's advocate. Suppose for the sake of argument that the accused did in fact do those things alleged in the indictment.

Q. How fair is that YouBet shareholders (people who had absolutely nothing to do whatsoever with race fixing and money laundering) suffer financial harm for this?

Maybe I'm just naive. But the fact that shareholders took it in the shorts here seems unfair to me.


-jp

.

[Cangamble]

Investors take it in the shorts all the time when they invest in a company in good faith that does things in a shady way.

[Jeff P]

Continuing to play devil's advocate here...

Suppose for the sake of argument that I post up significant money at an ADW. I have no criminal record and a (somewhat) clean credit report. My bets are frequent enough and of a large enough size that the ADW has no reason to see me as anything other than the kind of paying customer that all ADW's (and racetracks) would want to seek out. So far (I think) that describes me to a "T."

But suppose for the sake of argument that my post up money came from an illegal source. (BTW, that DOESN'T describe me. I'm just playing devil's advocate here.) But if I use the ADW as a conduit for "legitimizing" my money, my interpretation of current law is that I might expect to eventually be charged with money laundering. And if the ADW is a publicly traded company, their shareholders (apparently) can expect to take it in the shorts if and when I (or others like me) get caught.

Which brings me back to the following questions:

1. Is the ADW supposed to somehow KNOW the source of my post up money and report me?

2. Or, if I am a winning player not through my own talent and hard work but because I fix races - is the ADW supposed to know THAT too?

3. Or, if the bets I place are not in fact my own but instead belong to people that I am placing bets for - how on earth is the ADW supposed to know THAT?

I haven't read anything anywhere that suggests YouBet management had any inkling whatsoever of ongoing criminal activity. If they did, that's a completely different scenario from what I think happened here.

Given the scenario that YouBet management knew nothing and cooperated fully with authorities during their investigation, it seems pretty unfair to me that YouBet shareholders took it in the shorts here.


-jp

.

[Cangamble]

1. If you read the idictment, and it was true, IRG had to know it was doing something very wrong when it came to personal IDs of those betting with them.

2. Race fixing suspicion should be reported. Betfair reports these things, and it helps clean up the game. But it shouldn't be held against the company as long as the company reports suspicions.

3. Again, how fair was it to Enron investors, etc. ? Sure, most people invest in companies hoping they are doing everything by the book, but it is always buyer beware.

[Kelso]

Originally Posted by Jeff P

I haven't read anything anywhere that suggests YouBet management had any inkling whatsoever of ongoing criminal activity. If they did, that's a completely different scenario from what I think happened here.

Jeff,
I think all of your questions are fair and important. They are, moreover, the same questions I am willing to assume the YouBet lawyers asked themselves.

Given how quickly and completely YouBet management rolled over on the $1.5 million ... they even appear to be thanking the feds for the opportunity ... it seems clear enough that some of the honchos at IRG (YouBet, too?) committed and/or sanctioned acts which they knew to be illegal.

[Javagold]

lets just hope charles champion is found guilty of fraud and spends a long time in jail....i would think the rot of the fish starts at the head and this lying thieving POS knew exactly what he was doing when he ran UBET into ground with acquisitions of IRG and UT and allowed for computer robot wagering to drive up revenues at next to nothing margins, just to inflate his annual bonuses and damn to the shareholders and the wagering public as well !!!

[trigger]

"The loss also includes an $8 million impairment charge on United Tote, a bet-processing company that Youbet purchased early in 2006 for $31.9 million in cash and the assumption of $14.7 million in debt. In a release accompanying the financial statements, Youbet said that it was considering selling United Tote, which was purchased in part to facilitate computerized robotic-wagering programs that customers of IRG use to make bets. "http://www.drf.com/news/article/93353.html

Of course, this "facilitation" created an unfair advantage for CRW operators over other bettors......isn't this illegal also?

[PaceAdvantage]

Originally Posted by trigger

Of course, this "facilitation" created an unfair advantage for CRW operators over other bettors......isn't this illegal also?

Why? I wrote a program that allowed the computer to submit my bets automatically into BrisBet (before it was purchased by TwinSpires). Was that illegal? No.

Did it give me an unfair advantage? No. You could do the same thing manually. Except you're too slow compared to the computer. It's more efficient, nothing else...

[Pace Cap'n]

Originally Posted by PaceAdvantage

Why? I wrote a program that allowed the computer to submit my bets automatically into BrisBet (before it was purchased by TwinSpires). Was that illegal? No.

Did it give me an unfair advantage? No. You could do the same thing manually. Except you're too slow compared to the computer. It's more efficient, nothing else...

I think there is a big difference in what you are doing with your program and what was being done by the IRG bettors. You are "batch betting". Nothing wrong with that. These IRG guys were wired into the tote, imo. Heck, they practically owned the tote.

Your program does not allow you to analyze exotic pools and wager accordingly. I would bet my bankroll that they had complete and total access to all pool totals in real time, and, for all we know, a little extra time.