The office of Governor David Paterson is refusing to comment on a recently published report alleging that the bidding process for the Racino at Aqueduct racetrack in Ozone Park is being manipulated.
On Monday, October 12, the report cited “sources close to the high-stakes selection,” as saying Paterson “flip-flopped” on whether one of the bidders, Aqueduct Entertainment Group (AEG), could be qualified to contend for the operating franchise by the State Lottery Commission, which is vetting the bidders.
The article alleged that Paterson had said that AEG “couldn’t be qualified by Lottery because of problems with one of its partners,” several weeks ago, but “last week the governor told people that AEG could be qualified.”
One of the partners in AEG is the Darman Group (TDG), which would be working on the project “in joint venture with Empowerment Development Corporation as co-developer of the project,” according to the AEG web site.
“Empowerment Development Corporation was created by Reverend Floyd H. Flake to pursue private community development initiatives,” the site says.
Flake, a former U.S. Representative and pastor of the Greater Allen A.M.E. Cathedral in Jamaica, is declared to have “close ties” to Senate President Malcolm Smith and Paterson, two of the three who will decide who operates the Aqueduct facility.
However a knowledgeable Albany source told The Courier that, “That’s nonsense. It was probably written by one of the other bidders.”
On Wednesday, September 30, Paterson said that he had instructed the Lottery Commission and the Racing and Wagering Board to “look at some of the proposals which may have structural defects. It may eliminate [a number of the] six applicants that are trying to get that contract and after that, we will choose from who’s left.”
Five days later, Morgan Hook, a Paterson spokesperson told The Courier “No bidders have been removed from consideration.”
According to available information, AEG’s bid, with a reported $251 million in “front money,” was based on the state upping the number of video lottery terminals (VLT) to 7,650 from the current 4,500. This would require new legislation.
Of the eight principal partners in AEG one, Clairvest Group Inc., is a Canadian-based merchant bank with its stock listed on the Toronto exchange. The company has investments in two casinos in Canada and four in Chile.
During the Spitzer-era bidding, one contestant, Capital Play, dropped one partner, Australian firm International Racing Management, and accepted the resignation of Australian national Karl O’Farrell, its president and chief executive officer, because of concerns about “foreign ownership” being prohibited.
However, in that consortium, the foreign company would have been more than a mere capital source.
In other developments, published reports say that Aqueduct bidder Steve Wynn recently sold $500 million in corporate bonds – 43 percent more than planned – seen as a “show of strength [with] cash [and] the ability to raise cash” to sway Paterson, Smith and Assembly Speaker Sheldon Silver in his direction.
Further, a recent study by the Rockefeller Institute of Government in Albany indicated that, despite declining gambling nationally, New York’s lottery and VLT venues are outpacing last year’s sales, particularly at Yonkers in Westchester, Finger Lakes in Ontario County and Batavia Downs in Genesee County.
Lottery officials said sales of traditional games and revenue from the video-lottery terminals grew by 3.3 percent in the first half of the 2009-10 fiscal year compared to the same period last year, according to the report.
