06/04/2010 11:00PM

New York OTB chairman resigns


Sandy Frucher, the chairman of the bankrupt New York City Off-Track Betting Corporation, has resigned, according to New York Gov. David Paterson.

Frucher submitted a resignation letter on Friday, according to several government officials who spoke on the condition of anonymity. According to one of those officials, Paterson has already selected one of his secretaries, Larry Schwartz, to take over the chairmanship of the state-owned organization.

In his resignation letter, Frucher said that he did not believe that his plan to reorganize New York City OTB under Chapter 9 of the bankruptcy code would be successful, according to the sources. Frucher's plan relied on massive layoffs, the closure of more than half of the OTB's parlors, and raising $250 million through a state-backed bond issue, a measure that has become increasingly unlikely given the state's $9 billion budget deficit.

With Schwartz at the helm, the state is expected to take a more active role in determining how to salvage OTB, according to a government official.

Frucher, reached by cell phone in Beijing on Saturday morning, declined to comment, as did spokespersons for OTB.

Frucher was brought on board New York City OTB in the middle of 2009. Formerly, he was the vice chairman of the NASDAQ OMX stock-exchange firm, and he also previously headed the Philadelphia stock exchange.

Frucher's reorganization plan had included the possibility of the installation of hundreds of betting machines at New York City's bars and restaurants. Critics of the plan had contended that the machines were stalking horses for video-lottery terminals, a type of slot machine that is currently restricted to New York's eight harness tracks and to Aqueduct racetrack in Queens.

New York City OTB filed for bankruptcy last December. Twice this year Frucher threatened to shutter the company's parlors and its account-wagering operation unless the legislature granted the company concessions on its statutory obligations to the racing industry, but both times Frucher backed away from the threat, citing progress with legislators.

Since then, the New York State Racing and Wagering Board shut off the majority of Thoroughbred racing signals that OTB was offering to its customers, claiming that it had concerns over whether the company could meet its financial obligations. The signals were restored last Friday.

New York City OTB owes the New York Racing Association $17 million, and New York's Thoroughbred and harness industries have been highly critical of the company's recent decision to delay some statutory payments to the industries. The industries have also resisted the company's proposal to slash its statutory obligations to racetracks and horsemen.

New York City OTB was taken over by the state in 2008 after New York City Mayor Michael Bloomberg threatened to close the company. Its problems have gotten progressively worse since the takeover.