07/02/2007 11:00PM

NYTHA withdraws endorsement of Empire


The New York Thoroughbred Horsemen's Association has withdrawn its endorsement of Empire Racing Associates, one of four companies bidding on the franchise held by the New York Racing Association, horsemen's officials confirmed Tuesday.

Richard Violette, president of the NYTHA, confirmed that the horsemen's board had voted a week ago to disassociate itself from Empire in order to pursue its own interests in the franchise process. He said the horsemen's positions could not be properly communicated to government officials and regulators through Empire, a for-profit company that granted NYTHA a 3 percent stake in exchange for its endorsement last March.

"From the horsemen's perspective, we believed it was necessary to re-establish our independence as an organization so that we can represent our membership in the best interests of itself and racing," Violette said.

Last Tuesday, the horsemen's board voted to withdraw the endorsement after a long meeting, according to officials.

Empire, in a letter sent to Gov. Eliot Spitzer's general counsel, Richard Rifkin, on July 3, acknowledged that the horsemen's association had withdrawn from the company. The letter said that Empire officials were "sympathetic to the fact that NYTHA has a number of pressing issues, unrelated to its interest in Empire, which it must be free to pursue and advocate for in Albany."

Empire provided the letter in a response to a request for comment about the horsemen's withdrawal.

Asked whether NYTHA's board felt that Empire failed to represent horsemen's interests, Violette said "there wasn't any one issue" that led to the decision.

In the last two months, both the horsemen's association's president, Richard Bomze, and its executive director, Robert Flynn, resigned. Both were involved in the association at the time that the NYTHA board voted to endorse Empire.

Since NYTHA voted to join Empire, the process to award the franchise has taken several turns politically, most notably after Gov. Eliot Spitzer took office early this year. Most recently, Spitzer's representatives have indicated they are favoring a plan that would give the racing side of the franchise to NYRA, while seeking bids for the right to operate a casino at Aqueduct in Queens and oversee any related redevelopment of that property or Belmont Park.

The plan to split the franchise complicated the horsemen's involvement with Empire because any plan to only involve Empire on the casino side of the business would have rendered the horsemen's endorsement moot.

Empire was officially launched last year in March after receiving the NYTHA's endorsement. However, the principals behind the company had spent months preparing the company's formation, including the offering of equity stakes in the organization. Empire's partners currently include Magna Entertainment, Churchill Downs Inc., Scientific Games Racing, Woodbine Entertainment Group, Delaware North Companies, and several upstate businesspeople. Its chief executive, Jeff Perlee, is the former executive director of the New York Lottery.

The horsemen's association never paid for an equity stake in Empire. According to public reports, Empire valued the horsemen's stake in the company at approximately $120,000.

Empire has consistently identified itself as a company that was created "by horsemen for horsemen." However, on Tuesday, prior to NYTHA confirming its withdrawal, a report released by the Office of the Inspector General in New York took issue with that claim.

The report, prepared by the New York business-information company Thacher Associates and included in a summary of the inspector general's integrity review of the four companies seeking the franchise, claimed that "the weight of the evidence supports the conclusion that Empire was not created by New York horsemen for the benefit of New York horse racing," and that the horsemen would "likely lose control to the investors representing out-of-state horse racing interests" if Empire were awarded the franchise.

An Empire spokesman, David Vermillion, disputed the report's conclusion, and said that the report contained "factual errors and other misleading information." Asked to identify the errors, Vermillion said the report erroneously identified two officials as having positions at the company. He also said Empire was in discussions with Spitzer to "correct the record."

NYTHA's endorsement of Empire led to a public feud between NYRA and the horsemen's group. NYRA, a non-profit company, accused the horsemen of aligning itself with a company whose primary interest was profiting from slot machines at Aqueduct, while abandoning NYRA at a time when it was the only non-profit company seeking the franchise.

The Thacher Associates report details the chronology of the formation of Empire, and it largely reiterates material that had already been reported, including the perception that Friends of New York Racing, a non-profit group officially launched in February 2005 to offer recommendations on the franchise process, was established for the sole purpose of laying the groundwork for Empire's bid and taking NYRA public. Many of the companies that contributed to FNYR ended up being investors in Empire.

* The Inspector General's report can be found at .