2010-04-02 / Top Stories

Smith Subpoenaed On Aqueduct Racino Deal

By Howard Schwach

New York State Senate President Pro Tempore Malcolm Smith, who represents Rockaway, has been subpoenaed by the inspector general in relation to the Aqueduct Racino deal. New York State Senate President Pro Tempore Malcolm Smith, who represents Rockaway, has been subpoenaed by the inspector general in relation to the Aqueduct Racino deal. State Senator Malcolm Smith and two other senators have been subpoenaed by the office of the state inspector general as part of the investigation into the awarding of a Racino contract at Aqueduct Racetrack in Ozone Park to a politically connected group of bidders, including former Congressman Floyd Flake and rapper Jay-Z.

The subpoenas, which the Senate is trying to quash, were issued last week to Smith, Senator John Sampson and Pedro Espada Jr.

The subpoenas reportedly sought documents relating to the contract between the State’s Lottery Division and the Aqueduct Entertainment Group.

Ever since the subpoenas were issued, attorneys for the Senate have worked to kill them.

The Senate filed papers in Manhattan Supreme Court insisting that the inspector general has no jurisdiction over the legislature and therefore has no legal right to subpoena its documents or records.

Artist’s rendition of the new Racino planned by AEG for Aqueduct Racetrack. The facility will probably never be built since Governor Paterson pulled his support for the group’s plan. Artist’s rendition of the new Racino planned by AEG for Aqueduct Racetrack. The facility will probably never be built since Governor Paterson pulled his support for the group’s plan. “They oversee the executive branch,” the court papers say. “They have no authority over the legislature.”

Sources say that the U.S. Attorney’s office in Manhattan has also served subpoenas relating to the Racino deal, but no specific targets were named by the feds.

Two weeks ago, Governor Paterson’s office withdrew its support for AEG’s plan to run 4,500 video slot machines at the Aqueduct Racetrack in Ozone Park following accusations of cronyism and a rigged bidding process.

“The Division of the Lottery has concluded that it cannot issue a gaming license to [AEG],” Paterson’s office said in a terse statement.

The statement added that the new bidding process would be “transparent and apolitical, and publically accountable.”

Officials of AEG threatened to sue Paterson and the state for taking away their right to run the Racino.

Those officials said that the decision was “without legal basis, arbitrary and capricious,” and “an abuse of discretion.”

There are four other companies that were bidding for the right to run the Racino at Aqueduct: SL Green/Hard Rock CafĂ©; Delaware North; Penn National; and Peebles/ MGM. In addition, Las Vegas casino mogul Steve Wynn dropped out of the process. At the time, Wynn said that he was “frustrated” with the political process and many believe that he will resubmit his bid now that politics is no longer involved.

Each of the bidding companies was rated in 11 areas of concern, from the ability of the management to control the Racino to the methods it would use to provide information to the public and promote their facility.

According to papers released by the New York State Lottery Division, the rating sheets compiled by those officials studying the companies rated the biddder S.L. Green-Hard Rock as the number one candidate, with seven positive features and no negative features. The other three were rated as neutral. Delaware North had eight positives and 2 negatives. AEG was fourth, with 4 positives and 4 negative factors.

AEG’s negative grades were for questionable leadership and management, licensing and legal problems involving investors, poor brand value and concerns over press and public reaction to the bid.

Political insiders say that the 11-category scorecard clearly showed that AEG was not the top candidate to run the Racino, and should not have received the nod in the first place.

A spokesperson for Paterson downplayed the scorecard, however, saying that it was only a draft document and that it was not actually used in the selection process.

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