Susan Bala (KFGO file photo 2017)
BISMARCK – North Dakota’s attorney general is continuing to pursue a 17-year-old bankruptcy court battle with the owner of a Fargo-based horse betting business despite a federal judge’s blistering rebuke of the state’s actions, one of which might have been illegal.
Iowa-based federal bankruptcy judge Thad Collins last month ruled against state claims in the complicated legal odyssey that began in 2004, writing “enough is enough” and calling the ongoing litigation “a runaway process that must stop.”
The state, however, on May 6 filed a notice of appeal. The formal appeal is due next month.
Republican Attorney General Wayne Stenehjem and spokeswoman Liz Brocker did not return messages Thursday to discuss the case.
Susan Bala, owner and former president of Racing Services Inc., which handled off-track betting for horse racing, told The Associated Press that the judge’s order “speaks for itself” and litigation should have ended years ago.
Bala, 66, was convicted by a jury in 2005 of 12 felonies involving charges of running an illegal gambling business in what prosecutors said was the state’s largest illegal gambling case. She and RSI were ordered to forfeit more than $99 million. The forfeiture was reversed and a federal appeals court overturned the verdict. Bala was released from custody after serving about 17 months.
Prosecutors said Bala broke state law by failing to give money to a charity from October 2002 to April 2003. The appeals court said the state Racing Commission’s rules were not clear on how the charities were to be paid.
Stenehjem also had charged Bala and Racing Services with illegal gambling, but the federal court verdict came before the state’s case could be resolved.
Bala believes the state is likely acting out of vindictiveness because the original case against her did not stick.
In 2017, and more than a decade after Bala’s conviction was overturned, Collins, the federal bankruptcy judge, ruled the state must refund Bala’s business the money it collected for taxes.
State lawyers approved the settlement at the time and the Legislature allocated $15.8 million to be paid to Bala. The money has been held in a bankruptcy trust estate.
Part of the agreement approved by the court required the state to waive any further claims.
In 2018, a Las Vegas man, Peter Wagner, identified in court papers as a “gambler” successfully filed a $2.2 million claim against the estate for unpaid winnings. He later claimed an additional $10.8 million for so-called gambling rebates that are paid to gamblers based on the volume of their wagers. The additional claim was later denied.
The state attorney general’s office in 2018 filed a new claim, arguing the money in the original settlement should go only to charities, as required by state law.
“It remains entirely unexplained why the State would agree to split any amount of net proceeds it recovered …with (Wagner’s company) — an entity that is not a charity,” the judge wrote.
“Nevertheless, the State’s new claim essentially states that under the North Dakota Constitution and the North Dakota statutes, the net proceeds of gambling must go to a charity — not back to Susan Bala or any other party,” Collins wrote.
“Under the State’s own argument (the agreement with the gambler’s company) seems to violate North Dakota law or is invalid on its face,” the judge wrote.
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