02/08/2010 12:00AM

Aqueduct casino group drops partner

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Aqueduct Entertainment Group, the sprawling partnership that has been selected by New York government leaders to operate a casino at Aqueduct racetrack, moved on Monday to stem growing criticism over its selection by severing ties to a controversial partner and reiterating its commitment to the project.

The partnership said on Monday that the Darman Group, a real-estate consulting company headed by Daryl Greene, had been dropped from AEG. The Darman Group had a 0.6 percent share in the casino project, according to a spokesman for the partnership, Davis Hodge.

Greene had drawn scrutiny to the group because of his close political ties and checkered background. A former business partner of the state senate's president, Malcolm Smith - one of three politicians to make the decision to select AEG - he pleaded guilty in 1999 to charges that he stole $500,000 from city agencies, a conviction that would have jeopardized Greene's ability to remain in the partnership under conditions attached to the selection by the assembly speaker, Sheldon Silver.

"I believe very strongly in the abilities of Aqueduct Entertainment Group, particularly the local development team," Greene said in a statement. "It is for that reason that I will step aside and relinquish all interest and potential interest in the project, and with Aqueduct Entertainment Group."

After the selection of AEG was announced, Silver said in a statement that he had attached conditions to the group's selection that included a ban on anyone who had been "convicted within the past 15 years of a felony or other crime or offense involving fraud, larceny of any sort, theft, misappropriation or conversion of funds, or tax evasion."

Gov. David Paterson announced the selection of AEG among six bidders on Jan. 29, more than eight years after slot machines were legalized at Aqueduct. Gambling analysts expect that the 4,500-slot machine casino will be the highest-grossing casino on the East Coast, principally because of its location within the New York City metropolitan area. The operator of the casino will be entitled to approximately 30 percent of the net revenue, a number that is expected to hit $150 million annually.

State officials and AEG are working on a memorandum of understanding, or MOU, that would lay out the terms for the partnership's 30-year operating agreement for the casino, including provisions requiring AEG to pony up $300 million on March 31.

"We will pay the $300 million upfront licensing fee by March 31, 2010, and we are working toward signing the MOU and breaking ground as soon as possible," said Jeffrey Levine, the chief executive of Levine Builders, a partner in AEG.

Morgan Hook, a spokesperson for Gov. Paterson, said on Monday that criticism surrounding the selection was not influencing the state's efforts to get the MOU signed.

"There is no reason not to go forward," Hook said.