Updated on 09/18/2011 2:39AM

Horsemen sue NYRA over purses


OZONE PARK, N.Y. - The New York Thoroughbred Horsemen's Association has filed a lawsuit against the New York Racing Association to stop it from using any purse money to pay operational expenses or expenses related to NYRA's financial reorganization.

The suit was filed last week in U.S. Bankruptcy Court in the Southern District of New York. Last month, the NYRA filed for Chapter 11 bankruptcy protection.

In the suit, the horsemen's group alleges that NYRA "has willfully ignored, and continues to willfully ignore" state racing law that mandates specified percentages of bets be used for the sole and exclusive purpose of funding purses. The horsemen's suit alleges that NYRA is diverting some of that money to pay operational and reorganization expenses.

A major part of the suit focuses on what is known as the purse cushion, which is the difference between money allocated by statute and in contracts for purses and the amount that is actually paid out in purses.

That cushion, which is estimated to be in the neighborhood of $15 million, is funded in large part by wagering revenue that often takes significant time to be collected. For example, New York City Off-Track Betting Corp. last week sent NYRA a check for $2 million for handle on races conducted during the month of August. According to NYRA officials, NYC OTB owes NYRA another $8 million.

The horsemen and NYRA have basic disagreements as to who is the rightful owner of the money in the purse cushion. The horsemen, citing state law, contend the cushion is their property. NYRA disagrees.

"If NYRA were to stop racing at its tracks today, NYRA would have no obligation to pay the cushion to any party other than New York State," NYRA said in a Nov. 20 response to the horsemen's objection of a bankruptcy court order establishing procedures for NYRA to pay expenses of professionals.

"We don't believe that the suit has merit, and NYRA will respond when appropriate in context with the litigation," NYRA senior vice president Bill Nader said Monday.

In 2003, when NYRA was under indictment for tax fraud, it was revealed that NYRA had used $11.5 million in horsemen's funds for operational expenses. That deficit has since been paid back and now a fully segregated account has been set up strictly for owner's purse money, Nader said.