08/07/2003 11:00PM

NYRA tempest mostly hot air


SARATOGA SPRINGS, N.Y. - If you believe what you read in the upstate newspapers and hear from the political hangers-on at the track these days, the New York Racing Association is about to lose its franchise, its officials will be led away from their box seats in handcuffs, and the Saratoga simulcast signal will be shut off to the rest of the country. Any day now.

All this talk of indictments, investigations, corruption, and scandal is sexy stuff. Unless there's a lot more to the real story than anyone is letting on, though, it all seems as reliable and substantial as a hot tip from the elevator operator on a three-legged 50-1 shot.

A feeding frenzy of speculation has descended upon the dregs of the three-year state and Federal investigations of misbehavior by NYRA mutuel clerks and NYRA's possibly lax oversight of them. The clerks who laundered money and cheated on their taxes have been prosecuted, and NYRA has implemented new money-room procedures. NYRA has even managed to make peace with Attorney General Eliot Spitzer's office after its self-serving and showboating investigation. A management review is in order, a civil fine may be appropriate, but otherwise the story should be winding down.

Instead, it has spiraled into a dominant, daily crisis because the Federal equivalent of Spitzer's investigation is still active, and the United States Attorney's Office is supposedly considering a conspiracy indictment against NYRA and its officers for being in the vicinity of a situation where mutuel clerks could cheat on their federal income taxes. That is the sole possible pending charge remaining in this messy affair, and the more you look at it the more preposterous it seems that this could topple NYRA.

Here's the big scheme: Mutuel clerks whose cash boxes came up short at the end of the day, whether through honest errors or using the boxes as an interest-free bank, were allowed to repay their shortages through weekly payroll deductions. This procedure, negotiated by the clerks' powerful union, is hardly unique in racing and is similar to other general employers' practices for allowing employees to repay loans or make restitution.

The problem came when some of the clerks apparently decided to report their net pay after the deductions, rather than their gross pay, as their taxable income to the Internal Revenue Service. No evidence has been revealed that NYRA participated in this deception, and there is no plausible reason they would. So what this whole "scandal" seems to boil down to is whether NYRA is criminally responsible because some of its former employees chose to cheat on their personal tax returns.

The idea that this is a matter of indictable criminal behavior by NYRA seems far-fetched, but it is enough to have caused hysterical speculation about NYRA's imminent demise. Helped along by leaks from ambitious politicians and regulators with longstanding personal dislikes of NYRA and its managers, the idea of pending federal indictments has been invoked to suggest dire implications.

First came the story that NYRA's simulcast signal was in jeopardy because receiving sites in states with heavy casino-based gambling regulations would not do business with an indicted NYRA. Those news organizations that bothered to check this story quickly learned that conviction rather than indictment was necessary even to raise the issue, and that even a conviction for such low-level "crimes" would not affect anyone's business relationships.

Next came the World War III-sized front-page headline in Thursday's editions of The Saratogian: "Magna moving in on NYRA." Officials of Magna Entertainment, in town for a racing symposium, had reiterated their longstanding desire to bid on the NYRA and New York City OTB franchises at some point in the future. The story ominously quoted anonymous sources to document a 3-year-old matter of public record.

Later on Thursday, NYRA added fuel to its supposed pyre by issuing an odd after-hours press release that it was temporarily suspending construction of the video lottery terminal facility at Aqueduct because partner MGM-Mirage had "advised NYRA that in the event that NYRA is indicted," it would have to pull out of the project. NYRA has been arguing in private meetings with the U.S. attorney's office this week that it should pay a civil fine rather than face an indictment because the latter action would do nothing but cost the state money. The press release seemed like a public extension of that "please don't indict us" request, arguing in effect that an indictment would ultimately hurt schoolchildren by delaying the onslaught of VLT revenues earmarked for education.

It does seem more than happenstance that this entire hubbub coincides with the widespread realization that Aqueduct is (or was) about to get a virtual monopoly on virtual slot machines in New York City. Local politicians and special-interest groups are starting to argue that their communities and businesses should be getting the machines too, especially given the supposed cloud of investigations and indictments hanging over NYRA.

There's a handy mantra to invoke these days in the racing industry whenever there's less than meets the eye, whether it's the apparently harebrained purchase of a racetrack or some odder-than-usual politics: "It's all about the slots." Maybe it turns out that this is really what all the fuss has been about.