03/07/2006 12:00AM

N.Y. horsemen support new franchise bidders


A group of New York horse owners and businessmen with ties to the horse racing advocacy group Friends of New York Racing announced the formation of a new company Tuesday that will seek to raise money to bid on the franchise currently held by the New York Racing Association.

The company, called Empire Racing Associates, is initially seeking $3 million from horse owners and breeders in New York to lobby for changes to New York's racing law and pave the way to a bid for the NYRA franchise, which expires on Dec. 31, 2007. The company has hired Jeff Perlee, a gambling company consultant who was once the head of the state's lottery corporation, to be its chief executive, and has also hired Justin McDonald, the former vice president of FNYR.

The board of directors of the New York Thoroughbred Horsemen's Association has unanimously endorsed Empire, according to the horsemen's president, Richard Bomze. Although details were not announced, the horsemen received a 3 percent equity stake in the company and two seats on Empire's board, according to a confidential offering memorandum that was sent to potential investors, a copy of which was obtained by Daily Racing Form. In return, the offering said, Empire will be the "sole and exclusive vehicle" for the horsemen's lobbying efforts and any bid for the franchise. The horsemen can rescind their support for Empire if their two board members object to any policy adopted by the company.

"We want to make sure that whoever comes in to run racing in New York puts horsemen first," Bomze said. "We need a guarantee that horsemen's interests are going to be represented, and that the next racing operator doesn't just create [slot machine] palaces and forget about us."

A press release listed three members of the horsemen's association as Empire board members or investors: Terry Finley, chief executive of West Point Thoroughbreds; Charles Reiss, a Manhattan real estate executive; and Marty Cunningham, chief executive of Hudson Holding Corp.

The racing franchise to operate NYRA's three tracks - Aqueduct, Belmont, and Saratoga - along with a slot-machine casino at Aqueduct is expected to be awarded by the legislature sometime next year, but only after legislators contemplate what could be significant changes to the state's racing law.

According to the offering, Empire will lobby for a business model that is nearly identical to that recommended by Friends of New York Racing, the racing advocacy group headed by Tim Smith that plans to dissolve this month after the release of a model racing law.

"We are not affiliated with FNYR, but we believe the proposals of FNYR point the way to making Thoroughbred horse racing in New York a world-class industry," the offering said.

Perlee said Tuesday that Empire will focus on changes to the racing law that will give New York's six offtrack betting companies incentives to merge with the racing operator. He said that Empire strongly supports the legalization of slot machines at Belmont Park, which is in Nassau County.

FNYR's business model relied in large part on revenues from slot machines at Belmont. Current law in New York contains a specific prohibition against slot machines at Belmont, in large part because of objections from local businesses and legislative leaders.

"There's no reason why Belmont wouldn't make a great location for slot machines," Perlee said.

Perlee said Tuesday that Smith was not involved in the formation of Empire but did not rule out the possibility that Smith would eventually work for the company. Smith, the former head of the National Thoroughbred Racing Association, turned down the chief executive's job at NYRA in favor of the Friends of New York Racing.

"We're going to be working very hard, just like everyone else, to get his endorsement," Perlee said.

The $3 million in start-up funds is a far cry from the amount that Empire would need for a competitive franchise bid, according to the group's own estimate. In the offering, Empire estimated that it would need to raise "between $500 million and $1 billion" to bid on the franchise and that "substantial additional capital will be needed to capitalize the business."

"No one is going to be ruled out," Perlee said, referring to potential partners. "Obviously, there are key principles you have to agree to, such as 'racing first.' The quality of racing is going to be the cornerstone."

The offering lists a minimum investment of $25,000 and a cap of $250,000.