12/15/2006 1:00AM

NYRA suit turns state's corruption tables


NEW YORK - The battle for the future control of New York racing took yet another interesting turn this past week with the filing of a 155-count complaint by the incumbent New York Racing Association against the state of New York and several government officials.

There was nothing surprising in the portion of the complaint devoted to NYRA's longstanding contention that it, rather than the state, is the legal owner of Aqueduct, Belmont Park, and Saratoga. That assertion is a

technical issue that real-estate lawyers can and will debate for eternity, and one that has failed to capture the public imagination or influence the debate over the future direction of the sport.

The juicier and potentially more explosive material was NYRA's methodical presentation of an argument that the outgoing Pataki administration engaged in a systematic scheme to drive NYRA into its current bankrupt state by

illegally withholding approval for voter-approved slot machines at Aqueduct.

The state authorized video lottery terminals at tracks in 2001, and all seven non-NYRA tracks in the state are up and running.

"Defendants have withheld final approval only of the Aqueduct VLT Project, thereby setting in motion a chain of events that forced NYRA into Bankruptcy," according to the complaint. "Defendants' withholding of final approval has not only cost the State, NYRA, and the racing industry hundreds of millions in lost revenues, but it also has caused the needless run-up of $40 million in additional costs.

"Defendants withheld approval of the Aqueduct VLT Project at least in part to make the franchise to operate the Racetracks more attractive to prospective for-profit bidders . . . . Indeed, in August 2006, Defendant Governor Pataki and a senior member of his staff confirmed this, when they stated to the Chairman of NYRA's Board of Trustees that they would not permit final approval of the Aqueduct VLT Project because that would interfere [with the request-for-proposal process]."

Pataki, who will leave office

Jan. 1 after 12 years in Albany, was named as an individual defendant in the complaint, along with Carole Stone, chair of Pataki's New York State Non-Profit Racing Association Oversight Board, and Robert J. McLaughlin, director of the state Lottery Division. Pataki responded to the allegations through a spokesman.

"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," said Scott Reif, the spokesman.

If true, however, NYRA's allegations are a far more serious case of corruption and violation of the public trust than anything the beleaguered racing association has itself been accused of amid five years of federal and state investigations. If the slots had begun spinning at Aqueduct two years ago as initially envisioned, state coffers would be bulging, New York racing would be by far the nation's richest, and the NYRA tracks would be showcases with badly needed safety improvements and customer amenities.

If instead the Pataki administration willfully delayed their implementation in an effort to steer the franchise to its for-profit cronies, it not only squandered those funds but badly devalued the franchise. In fact, earlier last week, an Australian-based consortium that had shown some early interest in the franchise sought to reenter the process, arguing privately to state officials that the competing for-profit bids by Empire Racing and Excelsior Racing understated the likely potential revenue from slots and saying its group would offer twice as much as those two groups.

The timing of NYRA's complaint coincided with both Pataki's final days in office and the outgoing governor's last-ditch attempt to try to award the franchise to Excelsior at a special one-day legislative session last week. That idea was roundly rejected, officially dumping the entire franchise mess, as has been long expected, into the hands of the incoming governor, Eliot Spitzer, who has his own checkered history with both NYRA and Excelsior.

Before he ventures an opinion about horse racing, convenes a new blue-ribbon panel, or does anything else about the situation, Spitzer needs to address two pieces of old business here. First, he should begin his own investigation of why the Aqueduct VLT project has languished for years for no good reason. Second, he should approve the project, get the bulldozers running, and start the flow of cash that New York racing needs now, regardless of who will be running the tracks in 2008.