2010-04-09 / Top Stories

Paterson Takes Reins Of Racino Decision

By Howard Schwach

Aquaduct Racetrack Aquaduct Racetrack Governor David Paterson told a radio audience on Tuesday that he will cut other prominent state political leaders out of the decision on who would run a lucrative gambling Racino at Aqueduct Racetrack despite the fact that a law governing the selection process says that the vendor must be picked by a unanimous decision of the Governor and the leaders of the other two legislative branches.

“We have switched to a procurement plan,” Paterson said in a radio interview. “That was not popular with the other two leaders, because this is going to shift authority to the executive branch.”

Paterson added that the highest bidder would be selected by the state’s Lottery Division through a standard public bid and that the decision would come “by June at the latest.” Paterson’s decision to move to a standard procurement plan for the Racino follows by a few weeks his decision to nullify an earlier move to give the Racino to the Aqueduct Entertainment Group, fronted by former Congressman Floyd Flake and rapper Jay-Z.

Governor David Paterson with rapper Jay-Z, one of the investors in the Aqueduct Entertainment Group. Paterson will now open the Racino process to competitive bidding. Governor David Paterson with rapper Jay-Z, one of the investors in the Aqueduct Entertainment Group. Paterson will now open the Racino process to competitive bidding. The decision to choose AEG for the Racino was made by Paterson, State Senators John Sampson and Malcolm Smith and Assembly Speaker Sheldon Silver.

Silver, however, demanded that AEG meet several conditions before he would sign off on the deal, and several of the AEG investors, including Flake, balked at the additional conditions. Eventually, the Lottery Division ruled that AEG was “not licensable.”

There are four other companies that were bidding for the right to run the Racino at Aqueduct: SL Green/Hard Rock Café; 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. Some insiders had earlier believed that the Governor would pick from one of the other finalists rather than start the bidding process all over again, but Paterson decided that the process was “so politically tainted that it needed a fresh start,” an aide to the governor told reporters. In fact, there was a widespread belief that this was a done deal from the beginning because of Flake’s relationship with Paterson, Senate President Pro Tempore Malcolm Smith and Congressman Gregory Meeks. There are ongoing federal and state probes into the Aqueduct process. Federal officials said that the probe would continue despite the fact that AEG is no longer in the running. That probe is focusing on claims that political connections rather than merit spurred Paterson and the legislative leaders to give the Racino to AEG in the first place. Paterson’s tactic of changing the rules in the middle of the game faces uncertainty, insiders say, due to the 2008 law governing the process that says the Governor and legislative leaders must make the decision. Both Silver and Smith declined to comment on the Governor’s decision.

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