12/05/2003 12:00AM

NYRA said to reach deal with prosecutors


NEW YORK - Federal prosecutors and the New York Racing Association have reached a deal in which the association and several of its top officials would be indicted on tax fraud and conspiracy charges but the association itself would not be prosecuted, according to published reports.

The deal, reached between NYRA and the office of the U.S. Attorney for the Eastern District of New York, would spare the association from going to trial and allow it to retain its franchise over racing at Aqueduct, Belmont, and Saratoga. The association would have to pay a heavy fine. Details were reported in Friday's editions of Newsday and The New York Times.

The deal would put an end to a 10-month ordeal in which NYRA officials have fought a barrage of public criticism from state and federal prosecutors while seeking to avoid criminal charges that would threatened its ability to run racing in New York.

The indictments, according to the reports, would charge NYRA with allowing mutuel clerks to evade federal income tax. The clerks were permitted to remove money from their cash boxes for personal use, and the money was deducted from the clerks' paychecks, thus reducing their taxable income. The reports suggested that the association allowed the practice to secure a labor agreement with the union representing the mutuel tellers.

In the past three years, 21 NYRA mutuel clerks have been indicted on charges of tax fraud, forgery, and money laundering, and 20 have been convicted. The convictions have grown out of a three-year investigation by New York Attorney General Eliot Spitzer, who has been highly critical of the association since releasing a report earlier this summer that accused the association of allowing corruption to thrive in the mutuel room.

The U.S. Attorney for the Eastern District of New York, Rosslyn Mauskopf, has been pursuing a potential criminal case against NYRA related to the mutuel clerk convictions since the beginning of this year. William Muller, the executive assistant to Mauskopf, said on Friday that he could not comment on the office's investigation or confirm any report.

Racing association officials did not return phone calls on Friday. A lawyer for the association, Denis McInerney, also did not return phone calls, and calls to the group's other lawyer, Robert Fiske, were referred to McInerney.

The association's lawyers have been discussing a deal with the U.S. Attorney since February, according to NYRA board members. In recent weeks, several top NYRA officials have said privately that they believed the U.S. attorney would issue indictments before the end of the year.

According to the reports, the indictment of NYRA will take the form of a deferred prosecution, which would allow the association to avoid a trial and retain its franchise as long as the association demonstrates to the attorney's office that the problems leading to the crimes have been eliminated.

The association's franchise is awarded by the state legislature and is set to expire in 2007. The franchise will be automatically extended to 2013 if the association begins taking slot-machine wagers by May of 2004.

The renewal of NYRA's franchise is fraught with political overtones, and the stakes have risen substantially since slot machines were legalized at a handful of racetracks in 2001. The association's biggest supporters in the legislature are Republicans, and many of its harshest critics this year have been Democrats, including Spitzer and New York State Comptroller Alan Hevesi.

The association began a construction project for slot machines at Aqueduct earlier this year, but the plans were put on hold when NYRA's partner, MGM Grand, pulled out because of the association's ongoing legal problems.

Despite the deal with prosecutors, the reports said, several association officials will face potential indictments, and those officials would be charged and forced to stand trial.

It is unclear if the U.S. attorney's indictments will target existing NYRA officials or former employees.

Earlier this year, NYRA restructured its management, replacing its president, Terry Meyocks, with two board members. Meyocks, a NYRA employee since 1993 and its president since 1996, was brought in by the association's former chairman, Kenny Noe, who retired in 2000. Noe was replaced by Barry Schwartz, the former president of Calvin Klein.

Also, the association hired J. William Byrne as a chief financial officer. That position had been vacant since the former CFO, Alec Ingle, left in August 2002. A week ago, NYRA named a new security director, Kenneth T. Cook, a former deputy superintendent of the Internal Affairs Bureau of the New York State Police. Cook replaced longtime director John Tierney, who was reassigned.

The association's mutuel clerks are represented by the International Brotherhood of Electrical Workers, Local 3, in Queens, N.Y. The former president of the union's division for mutuel employees, Robert Lodati, was one of the tellers who was convicted of money laundering.

Representatives of the union did not return phone calls on Friday.