08/03/2003 11:00PM

NYRA meets with feds, tries to avoid indictments


SARATOGA SPRINGS, N.Y. - Representatives of the New York Racing Association were scheduled to meet with federal prosecutors on Tuesday morning to discuss ways in which NYRA might avoid indictments of several of its top employees, an industry official said Monday.

The meeting, which was first reported by the Albany Times Union on Sunday, will take place at the U.S. attorney's office for the Eastern District of New York in Brooklyn, according to the official, and will include NYRA chairman Barry Schwartz and NYRA's top attorneys, Robert B. Fiske and Denis McInerney. It will be the second meeting between NYRA officials and the U.S. attorney's office since February.

If issued, the official said, the indictments would charge members of NYRA's management with crimes related to several investigations conducted over the past three years by the office of New York Attorney General Eliot Spitzer.

Those investigations have resulted in the convictions of 16 NYRA mutuel tellers for tax evasion and three for money laundering.

It was unclear on Monday whether the U.S. attorney's office had already decided if or when it would issue indictments, which officials would be indicted, or for what crimes.

William J. Muller, the executive assistant to Roslynn Mauskopf, the U.S. attorney for the Eastern District of New York, said Mauskopf would have no comment about NYRA.

According to the industry official, one issue to be discussed at the meeting will be a proposal from NYRA's attorneys that the association be allowed to pay a fine in order to avoid any criminal indictments related to the convictions secured by Spitzer's office. The proposal, a copy of which was obtained by the Times Union, was sent to the U.S. attorney's office before the last meeting in February.

The proposal contends that NYRA should not be held criminally liable for the mutuel tellers' crimes because the current management was not in place at the time of the convictions; that NYRA had discovered the problems before the investigations were launched; that NYRA cooperated fully with the investigations; and that its employees and horse racing in general would be damaged by indictments.

McInerney, NYRA's attorney, did not return a phone call Monday. Schwartz, the NYRA chairman, said that NYRA officials would have no comment because "the investigation is ongoing."

The possibility of federal indictments has intensified recent scrutiny of NYRA operations. In June, Spitzer released a report that harshly criticized NYRA for having inadequate controls over its mutuel tellers. The report, which stemmed from a three-year investigation, called for the removal of NYRA's chief operating officer, Terry Meyocks.

At first Schwartz was highly critical of Spitzer's report, but in July, NYRA announced that it had hired a consulting firm, SafirRossetti, to analyze the association's security operations and mutuel department. The announcement came after NYRA officials met with Spitzer.

The criticisms leveled in the attorney general's report, combined with the possibility of federal indictments, have raised questions about the future of NYRA's license to operate Belmont Park, Aqueduct, and Saratoga Race Course. NYRA, a nonprofit company, is licensed by the state, and its franchise is approved by the Legislature. The current franchise expires in 2007, but the Legislature has agreed to extend it to 2013 if NYRA can begin slot-machine operations at Aqueduct by April 1, 2004.

Specifically, the possibility of indictments has raised questions about whether NYRA's ability to send its simulcast signal to other states could be threatened. In the proposal that NYRA lawyers sent to the federal prosecutors, NYRA said that casinos in Nevada and Atlantic City may be forced to shut off the signal because of strict regulations governing simulcast betting.

However, a regulatory official in New Jersey said on Monday that NYRA's simulcasting license would not be threatened unless an indictment resulted in a conviction. The official, who spoke on condition of anonymity, said that New Jersey and Nevada have the power to suspend a simulcasting license without a conviction, but only in cases in which "strong evidence" pointed to crimes related to improper conduct involving a race. A suspension for an indictment of management officials would be highly unlikely, the official said, and would generally arise only after a thorough review of the association's license and a full hearing.

"An indictment is not a crime, it's an allegation," the regulatory official said. "[State regulators] would have to be very, very careful if they wanted to do that, because if it turns out there's no crime, then you've got a lawsuit, and they're going to win."

The industry official disputed that interpretation of the law and called the possibility that NYRA might lose its ability to simulcast in some states "a very real threat."