Sports book operator ordered to pay $2 million to adviser

Monday, Feb. 21, 2000 | 11:09 a.m.

Las Vegas-based American Wagering Inc. was ordered by a federal jury last week to pay $2.15 million to a former consultant who assisted the company in its 1996 initial public offering.

The jury in Las Vegas found Thursday that Leroy's Horse and Sports Place, a subsidiary of American Wagering, breached a written contract with Chicago businessman Michael Racusin. The jury found Racusin was entitled to receive $2.03 million in American Wagering stock, plus $150,000 cash.

Leroy's already paid Racusin $735,910 under a previous court decision and any judgment against the company will be reduced by that amount. In its sole statement on the matter, American Wagering said it "may appeal the judgment."

The case began in August 1995 when Leroy's asked the court to throw out several written agreements between Racusin and the company, saying the contracts were "vague, ambiguous and unenforceable." Racusin had performed advisory services for Leroy's, and had introduced American Wagering officials to several underwriters. One of these underwriters, Equity Securities Trading Co., was an underwriter of the company's IPO in May 1996.

Racusin had signed an agreement calling for payment of 5 percent of the purchase price of Leroy's, or 4.5 percent of the final valuation of Leroy's stock plus $150,000 in the event of an IPO of Leroy's.

Racusin argued in court documents that Leroy's was, in fact, the same business entity as American Wagering, entitling him to the commission when American Wagering went public.

American Wagering had argued that the agreements specifically related to Leroy's, not to American Wagering, a much larger company. The company also argued that, if Racusin was to be paid, he should be paid a commission on the 30 percent of the company's stock sold in the IPO, rather than based on the company's entire valuation.

In August 1997 a federal judge ruled that Racusin was entitled to receive a commission of $735,910 based on his role in locating an underwriter for Leroy's. After Racusin appealed, a federal judge threw out the 1997 decision in March 1999 and ordered a jury trial.

In its decision last week the jury held that American Wagering and Leroy's were, in fact, legally the same entity, and that Racusin was entitled to payment based on 4.5 percent of $45 million, the entire valuation of American Wagering after the IPO.

The judge overseeing the case has 20 days to enter a final judgment against American Wagering.