2010-06-25 / Top Stories

Aqueduct Deal: ‘It Stinks, But It’s Probably Not Illegal’

Odds Against Racino Principals Getting Jail Time
By Howard Schwach

Insiders say that political leaders such as Malcolm Smith, Gregory Meeks and Floyd Flake may face shame, but it is unlikely that they will face criminal charges in relation to the politically-driven decision to name the Aqueduct Entertainment Group as the winners of the Aqueduct Racino bidding process.

Governor Paterson and state leaders tapped the AEG partners to run the lucrative gambling video lottery terminals, but the deal fell apart when the state’s lottery division said that AEG was “unlicensable.” Losing bidders and insiders complained that the fix was in, prompting a state probe that is ongoing. Daily News Albany Bureau Chief Kenneth Lovett has been covering the story from the beginning.

On Tuesday, he wrote that it would be unlikely that the probe would find for criminal charges against the principals because lawmakers approved a law creating a political selection process to pick the winner rather than relying on the state’s standard bidding process.

“Ethically, it stinks and is unseemly, but it just may not be illegal,” an inside source told Lovett. “There is nobody who has distinguished themselves in this process.” A half-dozen companies, including a Malaysian powerhouse that owns many international casinos, have thrown their hats into the ring in the latest round of bidding to become the developer and operator of the Aqueduct Racino, a gambling facility with more than 2,000 Video Lottery Terminals (VLTs).

As anticipated, previous losing bidders in the earlier round — Manhattan’s largest commercial landlord SL Green; Penn National Gaming; and Delaware North & Saratoga Gaming and Raceway — rounded out the other parties that submitted the entry fee by the June 1 deadline.

The other two bidders are Genting; and Clairvest.

Clairvest was part of the controversial AEG consortium whose winning bid was disqualified in the last go-round following accusations of favoritism and licensing problems.

The Malaysian-based group, with headquarters in Manhattan, financed the launch of the Foxwoods Casino in Connecticut and recently acquired controlling interest in the Empire Resorts, which operates the Monticello Casino and Racetrack in the Catskill Mountains and poured more than $200 million into Atlantic City’s Mirage Casino. It runs the world’s largest gambling casino in Malaysia and is the largest casino operator in Great Britain.

Bidders faced new upfront costs of $300 million to help bail out the state’s ailing horse-racing industry.

The winning bidder would have to assume payment of a $25 million loan to the cash-starved New York Racing Association and pay it an additional $2 million per month even before the Racino opens, experts say.

None of the six bidders could be reached immediately for comment.

The latest request for proposals included provisions that prohibit public comment on the bidding, as well as lobbying, to avoid issues that arose during the selection of AEG, observers noted.

The Lottery Division will score bidders and present recommendations to Paterson and legislative leaders for final approval. Unlike the previous round, however, sources say Paterson will be bound by Lottery’s pick this time. Assembly Speaker Sheldon Silver and Senate Majority Conference Leader John Sampson will also have to sign off on the recommendation.

All proposals are due by June 29. Bidders are required to make a minimum $300 million upfront payment.

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