08/27/2004 12:00AM

Deal with horsemen approved


A federal bankruptcy court judge on Friday approved a $25 million settlement between Fair Grounds Race Course and the Louisiana Horsemen's Benevolent and Protective Association. The court deferred dismissing Fair Grounds's pending Chapter 11 bankruptcy case, though, and did not rule on a proposed partnership between Fair Grounds and Mike Pegram.

Judge Jerry Brown's ruling moved Fair Grounds's case forward, but failed to bring it to a close, as the track and Pegram had hoped. Fair Grounds must file another brief with the court concerning the partnership, according to Douglas Draper, a bankruptcy attorney working on the case. The judge is expected to issue a further ruling by Tuesday, Draper said.

Fair Grounds declared Chapter 11 bankruptcy to protect itself from a court judgment stemming from a lawsuit filed against the track by the Louisiana horsemen's association in 1994. The Louisiana horsemen's group claimed the state's racetracks had taken improper deductions from video poker machines, garnering revenue that should have gone to track purse accounts. After a protracted legal battle, the Louisiana Supreme Court ruled unanimously in favor of the horsemen and against Fair Grounds.

The legal judgment totaled more than $89 million, but earlier this month, in an 11th-hour agreement, Fair Grounds and the horsemen came to terms on a $25 million settlement, averting a bankruptcy court auction of the track's assets. The partnership between Fair Grounds and Pegram, a horse owner and businessman, was forged because Fair Grounds requires financial assistance to pay the horsemen and its other creditors. In striking the partnership deal, Pegram won a fierce contest with Churchill Downs Inc., which had avidly pursued the acquisition of Fair Grounds and had been set to enter the court auction with a lead bid for the track's assets.

The Louisiana legislature and local voters have approved Fair Grounds for slot machines, but the track's owners - when they are finally determined - must undergo a background check from the Louisiana State Police before being issued a slots license.