About 220 Little Leagues and other sports organizations in the United States face losses after an online payment company stopped handing over dues and other funds that it was collecting.
The missing payments, which Washington state-based Count Me In Corp. acknowledged Tuesday total $5 million, have left many of the organizations wondering how they will make up the difference.
"I've lost sleep over this," said Jeff Bacon, treasurer of the Encino Little League in Los Angeles, which is owed $100,000 in membership fees.
No criminal charges have been filed. But lawsuits have been filed in several states, and the Connecticut attorney general urged parents to stop making credit card payments through Count Me In's Web site.
Terry Drayton, Count Me In's founder and chief executive, expressed regret and said he was in talks with three possible investors to raise funds to pay back the money. He acknowledged mistakes but said all of the missing money went toward operating costs - primarily the software used by the company's clients - and that none was stolen.
"We made some errors with the lack of financial oversight," Drayton said. "At the end of the day, this is my responsibility."
About 600 school and sporting groups use the company's software to process online registration and other payments, Drayton said. In the nearly eight years that the firm has been in business, it collected about $175 million and disbursed $170 million, he said.
The company withholds a fee of about $3 per transaction and is supposed to return the rest to clients. But Drayton acknowledged that the accounts had been combined and that money owed to some clients was instead used to pay company salaries and third parties.
Drayton said he became aware of the problem about two years ago, but he said it took him until May to go over nearly eight years of transactions to figure out how much was owed to whom.
Not all of Count Me In's customers are willing to wait. The Alameda Education Foundation is suing the company for $40,000 in Alameda County Superior Court in California. The New Jersey-based Montclair United Soccer Club filed a complaint in Washington demanding $142,000, and the Avon Junior Athletic Association is seeking more than $47,000 in a case filed in Indiana.
Three clients in Alaska - the Nordic Skiing Association of Anchorage, Campfire USA Alaska Council and the Matanuska Soccer Club - have petitioned a Washington bankruptcy court to force Count Me In into involuntary bankruptcy. Others clients have filed complaints with their state attorneys general.
"The only thing that I am focused on right now is returning the money we owe all our clients," Drayton said. "To do that we do need to find a strategic investor or partner."
Many Little Leagues and other youth clubs rely heavily on membership dues to cover operating costs.
Sports organizations are urging families to dispute the charges on their credit card and request a refund so they can write the clubs a check. The groups said that the credit card companies were cooperating and that they were beginning to recoup some losses.
Some clubs noticed a problem in early fall, when the company began to be late with payments. The firm apologized and blamed the problem on processing delays. Soon after, the company admitted to customers who asked that it did not have the money to pay them.