03/17/2006 1:00AM

Friends official has ties to Empire

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Tim Smith defended his work for Empire as being consistent with the conclusion that horsemen would need to play a critical role in lobbying for changes.

Tim Smith, the former executive director of the nonprofit group Friends of New York Racing, has confirmed that he acted as an adviser to Empire Racing Associates, the for-profit company whose formation was announced a week ago with the goal of lobbying for changes in racing law and ultimately bidding on the franchise held by the New York Racing Association.

Smith's involvement with Empire has upset officials of NYRA and amplified a sense of mistrust among racing officials at a time when they were hoping to show a united front and secure the best possible outcome for racing interests when NYRA's franchise to operate Aqueduct, Belmont Park, and Saratoga Race Course expires on Dec. 31, 2007. A state panel, the Ad Hoc Committee on the Future of Racing, is developing recommendations on how to conduct bidding for the franchise, a process that is expected to be highly political because of a slot-machine casino planned for Aqueduct.

In an interview on Thursday, Smith defended his work for Empire as being consistent with the conclusion of Friends that horsemen would need to play a critical role in lobbying for changes.

"The primary purpose of Friends of New York was to keep all the other operating entities and bidders honest, as far as ensuring that the process will result in a pro-racing outcome," Smith said. "When a group says they want to implement the recommendations of Friends of New York, and assure the owners and trainers a voice and a seat in this process, I can tell them what I think. It's a good idea and should be encouraged and should be pursued."

Smith said that he is not an investor in the group, but he also said that he is not barred from becoming an investor in the future.

NYRA chief executive Charles Hayward said that Smith's involvement with Empire raised questions about the purpose of Friends, an advocacy group whose business model for New York racing was adopted nearly in total by Empire. When Friends was formed late in 2004 with money from a variety of racing groups, Friends pledged to remain "bidder-neutral."

Smith, a marketing and political strategist, was the first chief executive of the National Thoroughbred Racing Association. Before heading up Friends, he turned down the job of NYRA chief executive, which was taken by Hayward.

According to several officials, Smith acted as an intermediary in getting Empire on the horsemen's agenda for a board meeting on Feb. 1. Smith gave a brief presentation, saying the horsemen would need to play a crucial role in pushing for legislative changes to protect their racing interests because of the possibility that casinos would bid for the franchise, the officials said.

Richard Bomze, the president of the New York Thoroughbred horsemen's Association, said that Smith's appearance at the meeting did not influence the board's decision to endorse Empire. With the endorsement, the horsemen received a 3 percent equity stake in Empire's proposed $3 million effort to pass pro-racing legislation in exchange for a pledge that the group will lobby only through Empire.

"This was strictly a board decision, and it was a unanimous decision," Bomze said.

But Hayward said that Smith's appearance has reinforced suspicions that Friends, which was dissolved last week after releasing a model-racing law, had been set up to advance the agenda of venture capitalists who want to profit from slot machines at Aqueduct and possibly at Belmont.

"I think everyone who was involved with and contributed to Friends of New York Racing with the understanding that they were a nonprofit public-advocacy group has to be disappointed that a number of the board members, its staff, its business model, and its legislative initiatives have been rolled into a private, for-profit venture," Hayward said.

Four members of Empire were either on the board of Friends or on its business advisory council. In addition, Empire's executive director, Jeff Perlee, a former state lottery official, was on the Friends board, and Empire's executive vice president, Justin McDonald, was a vice president of Friends.

The business model adopted by Friends and Empire calls for slots to be legalized at Belmont and for investors to receive a 20 percent return on investment. NYRA officials have consistently supported a nonprofit model because of concerns over the ability of for-profit racing companies to survive in the current business climate.

Last week, Hayward wrote an open letter to New York horsemen that said he believed there was an "alarming lack of communication between the [horsemen's] board and its membership" and that the horsemen's pledge to Empire "restricts dialogue" as the bidding process goes forward. Hayward said Friday that he wrote the letter because "we felt we needed to tell [horsemen] that they are very important to us and that NYRA is not going to turn its back on them."

Several horsemen said that they were fearful of making public comments in support of Empire because of threats of retaliation by NYRA. Hayward, however, categorically denied that NYRA has made threats or would take action.

"That is absolutely wrong," Hayward said. "We have this franchise until the end of 2007, and the last thing NYRA wants to do is create a bad situation with the horsemen."