12/15/2006 12:00AM

NYRA files suit over track ownership and slots parlor

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Mark H. Milstein/Northfoto
New York Governor George Pataki was named as a defendant in a lawsuit filed Tuesday.

OZONE PARK, N.Y. - Struggling to survive as the proprietor of New York's three major racetracks, the New York Racing Association fought back on Tuesday, slapping Gov. George Pataki and several state agencies with a over ownership of the tracks and accusing the state of delaying the opening of a casino at Aqueduct, which eventually drove the association into bankruptcy.

The suit names as defendants Pataki, who will leave office at the end of the month; the New York Non-Profit Racing Association Oversight Board; Carole Stone, the chairman of the oversight board; the New York State Division of the Lottery; and Robert J. McLaughlin, the lottery's director.

NYRA accuses all parties of engaging "in a deliberate pattern and practice intended to ultimately destroy NYRA and to seize all of its assets."

Specifically, NYRA contends that the state has "unlawfully and discriminatorily refused to grant final approval" to construct a casino at Aqueduct that would consist of 4,500 video lottery terminals, or slot machines. Those machines are projected to bring in $657 million annually, $45 million of which would go to NYRA. Without that revenue - and without $19 million in previously agreed-upon loans from the state - NYRA filed for Chapter 11 bankruptcy protection on Nov. 2.

NYRA contends that it was treated differently from seven other racetracks in the state that were also granted approval to run casinos, and thus was denied equal protection under the law.

Scott Reif, a spokesman for Pataki, said on Wednesday: "This lawsuit filed by NYRA is just the latest sad chapter for an organization that is mired in scandal and out of options and that continues to blame others for the problems they have created. The lawsuit is completely without merit."

Also on Tuesday, NYRA filed a petition with the bankruptcy court to approve a $50 million loan agreement it has with General Electric Capital Corporation, the financial services wing of the General Electric Company. As collateral, NYRA is putting up the properties of the three tracks.

"Condition for the loan itself is in fact that the court makes a determination that we own the land," said Brian Rosen, NYRA's bankruptcy attorney. NYRA officials declined to comment.

Judge James M. Peck will hear the motion on Jan. 9 in U.S. Bankruptcy Court in lower Manhattan. It is possible that Peck could rule that NYRA does indeed own the land as of that day, but that would not necessarily be a final judgment on ownership after NYRA's franchise expires on Dec. 31, 2007. If Peck rules against NYRA, it is unclear whether it would force an interruption in racing.

NYRA officials contend that they have enough money to race through mid-January and that approval of the $50 million loan would enable them to race uninterrupted through the end of 2007. They would not speculate on whether racing would be interrupted if their land claim was denied.

"I don't want to talk about something that's going to be in front of a judge," Steven Duncker, NYRA's chairman, said on Wednesday.

NYRA has long maintained it is the rightful owner of Aqueduct, Belmont Park and Saratoga Race Course. In the suit, NYRA included the deeds to those properties as exhibits and contends that the state's claim to ownership "is unconstitutional and unenforceable."

"NYRA purchased the racetracks from third parties . . . more than fifty years ago for approximately $20 million, pursuant to an express legislative enactment empowering NYRA to acquire racing facilities, including real estate," the suit says.

Further, NYRA claims that it has been denied due process under both the Fifth and 14th amendments of the U.S. Constitution as well as the Bill of Rights to the New York State Constitution, which states that "private property [shall not] be taken for public use, without just compensation."

NYRA is in the final 13 months as the franchise holder to conduct racing at the three tracks. Earlier this year, Pataki formed the Ad-Hoc Committee on the Future of Racing in New York to solicit bids for the franchise. On Nov. 22, the ad-hoc committee made a nonbinding recommendation to the state that Excelsior Racing Associates be the new franchisee for a 20-year period beginning in 2008.

In the suit, NYRA claims that the bidding process was prejudiced against NYRA in part because bids were made on the assumption that the state owned the land as of Jan. 1, 2008. Also, NYRA contends that provisions of state law require that the three racetracks be operated by a nonprofit association and that Excelsior is a for-profit racing and gaming consortium.

NYRA contends that since 2005 the state has purposely hampered NYRA's finances by denying its right to sell unused land parcels near Aqueduct and preventing it from auctioning 19 pieces of art. Further, NYRA claims the state withheld $19 million in promised loans because state officials feared that MGM-Mirage - NYRA's partner in the slot machine casino - was not committed to the project despite letters from MGM officials to the contrary. The legislature approved the contract between NYRA and MGM in August 2005, and the subsequent delay has increased the cost of the project from $150 million to $190 million, the suit contends.

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