09/17/2009 11:00PM

Beulah sues over Penn National deal

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The owner of Beulah Park near Columbus, Ohio, has asked a U.S. District Court to nullify an agreement allowing Penn National Gaming Inc. to exercise an option to buy all or part of the track if slot machines were allowed there.

The suit, filed by Beulah's owner, Charlie Ruma, in U.S. District Court for the Southern District of Ohio on Sept. 15, accuses Penn National of breaching a 2006 contract by lobbying against the inclusion of language in a budget measure passed in July that authorized 2,500 slot machines at each of Ohio's seven racetracks. In addition, the suit contends that a 60-day period allowing Penn National to exercise the option has already passed, despite Penn National's assertions to the contrary.

The dispute highlights the dramatic changes on the Ohio racing landscape since the budget measure was passed in July, making the state's four Thoroughbred racetracks worth tens of millions of dollars overnight to their present owners and attracting the attention of major casino companies eager to expand their operations into the state. Like many racetracks over the past 10 years, Ohio's Thoroughbred tracks have been struggling to make ends meet and would have likely closed long ago had it not been for the possibility of getting slot machines.

In the suit, Ruma contends that Penn National and Beulah reached the agreement in 2006 in order to lobby the legislature jointly for the ability to conduct slot-machine gambling at racetracks. But the suit contends that Penn lobbied against the budget measure while supporting a drive to get a referendum placed on the November ballot that would authorize casinos in Ohio's four largest cities. In addition, the suit contends that Penn officials told Ruma that they would not exercise the option following the approval of the budget and their successful sponsorship of the petition drive, but offered to purchase Beulah at a price below that stipulated in the option agreement.

Penn National officials did not return phone calls seeking comment on the suit. In addition to casino properties in seven states and one Canadian province, Penn National owns Raceway Park, a harness track in Toledo; Charles Town Races and Slots in West Virginia; Hollywood Casino at Penn National Race Course in Pennsylvania; and Black Gold Casino at Zia Park in New Mexico.

Earlier this week, Harrah's Entertainment, the gambling company that owns half of Turfway Park just south of Cincinnati, won an auction to purchase another Ohio Thoroughbred track, Thistledown, outside of Cleveland, from bankrupt Magna Entertainment Corp. in a deal that could be worth as much as $89.5 million.

Several Ohio groups have challenged the budget measure in lawsuits, contending that the state cannot authorize slot machines without a referendum and that profits from slot machines must be directed solely to education, instead of to private casino operators. Ohio's courts are expected to rule on the challenges within the next several months.