Updated on 09/18/2011 1:39AM

Smith says he made investment in Empire

"I'm quite confident in my mind that the work of Friends of New York and the work of Empire were two separate things." - Tim Smith, former head of Friends of New York Racing

SARATOGA SPRINGS, N.Y. - A simmering dispute between executives of the New York Racing Association and the former racing official Tim Smith spilled into the open Tuesday at a racing conference panel discussion, when NYRA's chief executive confronted Smith over his role with Empire Racing Associates, one of the groups bidding to take over NYRA's franchise.

While standing in the audience, Charles Hayward, NYRA's chief executive, asked Smith, a speaker in the panel discussion, to explain his role with Empire. As part of his answer, Smith confirmed that he had invested in Empire.

The exchange underscored the resentment that NYRA officials hold for Smith, former head of the not-for-profit advocacy group called Friends of New York Racing, as well as for Empire, whose formation was kept secret from NYRA while Empire secured the exclusive endorsement of the New York Thoroughbred Horsemen's Association, which represents owners and trainers who race at NYRA's tracks.

The incident took place during a question-and-answer session after a panel discussion about the bidding process for NYRA's franchise to operate Aqueduct, Belmont Park, Saratoga Race Course, and a slots casino at Aqueduct. The franchise expires on Dec. 31, 2007. Smith answered Hayward by saying that the conference, conducted by the Albany Law School Racing and Wagering Law Program, was not "an appropriate forum" for the question. Smith said that his role as a consultant to Empire during its formation and his subsequent investment in the group this summer were appropriate.

"I'm quite confident in my mind that the work of Friends of New York and the work of Empire were two separate things," Smith said. "I evaluated who I thought would be best, who would be most likely to implement the recommendations we came up with, and my wife and I made a modest investment and so are very limited partners in this effort."

Smith added: "I don't think this forum is appropriate, considering they are competitors of yours, Charlie."

Friends of New York folded last March after issuing several reports about the economics of the racing industry in New York and recommendations on changes to the state's racing laws to secure the best bids for NYRA's franchise.

The bidding process is being overseen by a state panel, the Ad Hoc Committee on the Future of Racing, which in June issued a request for proposals to operate the three racetracks and the slot-machine casino for the next 20 years. Four of the ad hoc committee's members were in the audience at the time of the confrontation, and its chairman, J. Patrick Barrett, opened the panel discussion.

Empire, which announced its formation in March, is headed by a handful of business and political leaders. Its business plan for the NYRA franchise embraces many of the recommendations developed by Friends, including one that slot machines be legalized at Belmont Park. In addition, both Friends and Empire shared numerous board members, and Empire's chief executive, Jeff Perlee, was a member of Friends' business advisory committee.

The formation of Empire and the horsemen's exclusive endorsement upset NYRA officials, who said privately that Friends had acted as a precursor to a for-profit model to replace NYRA. Later, NYRA officials publicly criticized Smith after he acknowledged that he had spoken at the horsemen's board meeting in February, when the horsemen voted to endorse Empire, and accused him of acting as an unpaid consultant.

After the conference Tuesday, Hayward said he was still dissatisfied with Smith, contending that Smith had never fully acknowledged his role with Empire while the group was being formed. Hayward also criticized Smith for appearing on the panel Tuesday without first disclosing that he had purchased an equity interest in Empire.

"He's trying to rewrite history, and that's just disingenuous," Hayward said. "And he continues to fail to own up to the fact that he was never fully honest with a lot of well-meaning people who contributed to a non-profit that ended up being a for-profit competitor to NYRA."

After the panel discussion, Smith said that although he believed Hayward's question was not appropriate, it provided an opportunity for Smith to answer his critics at NYRA and "was helpful in retrospect."

"It was better to have this whispering campaign, that I know [NYRA officials] have been conducting, out in the open, and to have a chance to respond to it," Smith said. "Friends of New York Racing was handled faithful to the mandate that its recommendations, conclusions, and work would never favor anyone's interest over another, but bring about positive change in New York. They engage in this personal attack, but they don't say what they disagree about in the documents."

Since Friends folded in late March, Smith has lived in Florida. He said that he and his wife bought an equity interest in Empire in late May and that he has had no ongoing role with Empire since then, although he acknowledged taking phone calls from Empire officials "to answer some small questions." Smith declined to disclose the size of the equity stake; Empire's bylaws prohibit anyone from acquiring a stake greater than 8 percent.

Earlier Tuesday, Stephen Duncker, the chairman of NYRA, appeared on a panel with representatives of two other bidding groups, Empire and Excelsior Racing Associates, which is headed by the son-in-law of George Steinbrenner, Steven Swindal. Duncker's presentation included graphs showing that seven of the tracks with the top 10 average purse distributions in North America are run by not-for-profit corporations, including the three operated by NYRA, in arguing that for-profit models, including those with slot machines, do not produce the best racing in the country.

"This is not some strange anomaly," Duncker said. "You can draw a straight line to these facts."