What if NYRA is indicted ? - Horse Racing Forum - PaceAdvantage.Com

karlskorner · 11-18-2003, 08:36 AM

http://news.bloodhorse.com/viewstory.asp?id=19097

Valuist · 11-18-2003, 09:28 AM

If they're indicted look for the Magna or CDI to buy NYRA rumors to be in full force. Why not? They own just about everyone else.

doophus · 11-18-2003, 10:37 AM

If the NYRA is indicted....

Will Bill Clinton's "friendship" with Madame Magna win the day for Magna?

Will Meeker's appointment by Bush win the day for CDI?

Damn, as usual, politics prevail!!!!

George

VetScratch · 11-18-2003, 04:21 PM

Some Other Links:

NYRA debt estimate tops $100-million as the press digs deeper into NYRA's murky finances. MGM seeks payment of $4-million from NYRA and announces alternative projects for VLTs. Deficit in Horsemens' accounts now upwards of $25-million. http://www.hbpa.org/NewsDisplay.asp?STORYID=2326

Levin and Hevesi allege that NYRA, after falsely claiming that it had been granted loan repayment deferrals, has been taking federal tax deductions for interest that it never paid to NYS Thoroughbred Racing Capital Fund (CIF). http://www.timesunion.com/AspStories...storyID=171352 and http://www2.als.edu/glc/wagering/compvnyra.pdf

The interesting aspect of the interest deduction controversy is that someone must suffer consequences. If the IRS allows the NYRA deductions for accrued but unpaid interest, CIF is in a pickle because it never recognized the other side of these transactions (i.e., the forgone interest income). This same issue looms over the $25-million that NYRA claims to have "borrowed" from the Horsemen. If the Horsemen acknowledge that NYRA "borrowed" the funds, IRS Below-Market-Rate loan rules would apply, and NYRA could deduct accrued but unpaid interest on the $25-million while the Horsemen would be liable for taxes on the forgone interest income. This would seem to be an opportune time for the Horsemen to insist that NYRA agree to actually pay interest on these "borrowed" funds.

PaceAdvantage · 11-18-2003, 11:55 PM

A quote from Dennis Brida, executive director of the New York Thoroughbred Breeders Association:

Quote:

"The fear is the change because with all the aspersions cast on NYRA, true or false, the one good, honest quality about the whole thing has been the racing. The racing has integrity. Non one has ever challenged the fairness of racing. And the quality of racing has improved. Those are the things you don't want to lose in the mix,'' Brida said.

You really want Magna to run NY racing??? Or OTB?????? Now THAT would be a disaster.

Let's get this show on the road already. If you're going to idict, indict already. Shit or get off the pot, as Richard Nixon once said....(I know, how ironic that I quote Nixon in this instance)

Indict the idiots who broke the law, but leave the association (who has proven that it RUNS A FABULOUS SHOW) intact.

VetScratch · 11-19-2003, 04:24 AM

PA,

Who has been posting criticisms about the quality of the racing show? I think financial management is what is being questioned. Many of the published allegations and rebuttals may be politically motivated, so it is difficult to tell what crimes or misdeameanors, if any, has been committed.

Only one thing seems clear... New York politicians have been banking on the VLTs to generate tax revenues that far exceed the needs of the NY Thoroughbred industry. Justice will probably have to take a back seat to pragmatism in order to re-start the VLT implementation.

Right now, MGM Mirage holds the high card. When MGM capped NYRA's credit worthiness at a mere $4-million, the message was heard in the legislature just as loudly as if Standard & Poors dropped New York State debt obligations to a "CC" rating. One way or another, the politicians will have to reform, restructure, or replace NYRA because MGM has backed away from circumstances that are not completely transparent... it is hard to imagine that a mere $4-million is blocking the path to the VLT revenue bonanza!

Our greatest fear should be that pragmatism will tempt the politicians to throw the baby out with the bath water. We want them to keep the show going. If NYRA is best suited to run the racing show, maybe just the purse strings have to be placed in new hands. That may be the very message that MGM has tried to send to Albany. An operating budget subsisized by takeout and VLT taxes should enable NYRA to keep the show going in fine fashion.

Valuist · 11-19-2003, 10:07 AM

PA-

I don't know if anyone wants Magna to run it; but can anyone stop them if they come up w/enough money?

stgeorge · 11-19-2003, 11:31 AM

Quote:

Originally posted by VetScratch
...or replace NYRA because MGM has backed away from circumstances that are not completely transparent... it is hard to imagine that a mere $4-million is blocking the path to the VLT revenue bonanza!

Just to be clear -- MGM hasn't backed away from continuing to work on the VLT facility at Aqueduct because of $4 million. They stopped work on the facility because Nevada law (where they are based) prohibits them from doing business with any individual or organization under indictment.

So when the threat of indictment was raised a couple of months ago, construction stopped.

VetScratch · 11-19-2003, 02:27 PM

StGeorge,

Quote:

They stopped work on the facility because Nevada law (where they are based) prohibits them from doing business with any individual or organization under indictment.

Doesn't that simply mean that MGM needs credible financial guarantees and prompt payments every step of the way through the course of the project... since indictments are only a contigency at this point?

It could take months/years to get past all the allegations, investigations, and indictment contingencies. What if the IRS drags its feet pursuing Hevesi's written allegations?

Like bad weather, there are always negative contingencies in business deals. Indictments are a contingency in every business venture that MGM undertakes. Money is the usual hedge against negative contingencies. Should anyone at NYRA be shocked that someone has finally hung the "Pay In Advance" sign on the pump?

stgeorge · 11-19-2003, 05:39 PM

Quote:

Originally posted by VetScratch
Doesn't that simply mean that MGM needs credible financial guarantees and prompt payments every step of the way through the course of the project... since indictments are only a contigency at this point?

No.

This is from another article in last week's Albany Times Union, "MGM backed away from the project in August because of the threat of criminal prosecution against NYRA. MGM had planned to manage the VLT parlor and promised to arrange financing for the project... MGM reported in a U.S. Securities and Exchange Commission filing Wednesday that it has booked $4 million as a receivable owed by NYRA. The sum is how much MGM spent on development costs on what it pegs as a $135 million VLT project."

In other words, MGM, knowing a cash cow when they see one, and slots in the NYC area certainly add up to big bucks, agreed to arrange to finance the VLT project. They stopped on the project when the threat of indictments came up because as a Blood-Horse article says, "But NYRA's VLT partner, MGM Mirage, has put on hold plans for a racino until NYRA's legal picture is clearer... That's because regulators in Nevada, where MGM is based, and New Jersey, where other potential VLT partners reside, bar licensees from doing business with individuals or companies under indictment."

The potential for indictments has caused the delay, not the $4 million. That amount is a drop in the bucket for this project and the potential revenues.

VetScratch · 11-19-2003, 07:15 PM

StGeorge,

I read the same Albany Times copy but didn't think it was the whole story because there are no actual indictments against NYRA (the association)... but what was literally said could certainly be all there is to it.

Who would control the purse strings and repay MGM for financing the project? Since they will finance the project, why not franchise the VLT operation directly to MGM?

The planned allocation of funds for horseracing from net VLT proceeds could still be awarded to NYRA by New York State. This avoids any present or future contingencies regarding NYRA indictments. New York State will never be indicted, so the VLTs can flourish while NYRA runs the horseracing as a separate subsidized entity.

Other states have implemented or proposed plans where slots and gambling boats subsidize racing without entangling the Nevada and New Jersey companies in the legal affairs of third party partners. The current indictment contingency mess could drag on... and then erupt again whenever the winds of politics change... what will prevent political opponents from levying new allegations in the future? What would happen then?

stgeorge · 11-19-2003, 10:49 PM

Quote:

Originally posted by VetScratch
I read the same Albany Times copy but didn't think it was the whole story because there are no actual indictments against NYRA (the association)... but what was literally said could certainly be all there is to it.

The project was going along quite smoothly until the possibility of an indictment was raised a couple of months ago. And at the time all the press accounts pointed to the rules prohibiting MGM for dealing with organizations under indictment. This makes sense since, from a business standpoint, it would be questionable to continue a $135 million project when you (MGM that is) could just be out in the cold at any moment if those indictments are handed down.

Quote:

Who would control the purse strings and repay MGM for financing the project? Since they will finance the project, why not franchise the VLT operation directly to MGM?

I haven't read the VLT legislation but I think it's aimed directly at helping the racing industry and therefore only tracks are allowed to operate the VLTs. However, virtually all the tracks in the state have brought gaming companies onboard to run their VLT operations.

Quote:

...what will prevent political opponents from levying new allegations in the future? What would happen then?

Frankly that's already the stench that's in the air over the allegations against NYRA brought to light by reports by the attorney general and comptroller. Some of the allegations deal with things that happened years ago. Why now, just as VLTs are about to debut? And why does a guy like Donald Trump take out full-page ads this summer comparing NYRA to Al Capone? Hmmmm. I don't remember hearing any comments on NYRA or hrose racing in the past from Mr Trump. Of course, racinos in the NYC area might not help the bottom line at some Atlantic City casinos.

VetScratch · 11-20-2003, 12:46 AM

StGeorge,

Quote:

I haven't read the VLT legislation but I think it's aimed directly at helping the racing industry and therefore only tracks are allowed to operate the VLTs. However, virtually all the tracks in the state have brought gaming companies onboard to run their VLT operations.

I think publicity has generated the feeling that VLT legislation is primarily for the horse industry, but I don't think that's close to true. The state budget is on the table insofar as the politicians are concerned. The stakes are much higher than the amount that will end up in the various breeding programs.

According to what I've seen published, the last revision to VLT regulations in New York State divide the VLT handle as follows:
90.0% to Payouts (machines will return $.90 on the dollar to players)
06.1% to State Tax Revenues
01.0% to NY Lottery Division
02.9% to Track Operators (NYRA and others)

These splits supposedly went into law as amendments when budget measures were passed.
See http://www.osc.state.ny.us/press/rel...03/nyra903.pdf

Clearly, the state tax revenue fund will be the greatest benefactor from VLTs.

Track operators (like NYRA) would get 2.9% of the VLT handle to cover:
(1) Stipulations about sub-percentages to be given to the appropriate breeding funds.
(2) Operating expenses (including payments to organizations such as MGM).

VetScratch · 11-20-2003, 02:45 AM

BTW, several editions of the regulations for dividing VLT handle have been posted on the web. Most notably, the document archives at the Albany Law School trace the revisions as they have been enacted since the original VLT legislation.

Based on 90% payouts (i.e., 10% VLT takeout) the trend has been to raise the share of VLT handle going to racetrack operators (was 2.5%, now 2.9% of handle).

In 2002 legislation (Chapter 85, L. 2002, Part EE.), when the track operator's share (NYRA) was still pegged at 2.5% of VLT handle, the breeders and horsemen were to receive ZERO dollars during the first two years of VLT operation. Thereafter, the breeders would get 0.03125% of the handle while horsemen would receive 0.28125% of handle for three years, and then re-negotiate with NYRA. So VLTs would help breeders and purses beginning in the third year of operation.

By the February 2003, the share allocated to horsemen was reduced to 0.25000% of VLT handle (coming from 2.5% going to NYRA).

As amended in 2003 legislative budget measures, NYRA's share of VLT handle was increased from 2.5% to 2.9%. This, "presumably" changes the horsemens' share to 0.29000% (beginning in the third year of operation).

In the event that the VLT payout percentage is modified from 90%, all these figures would change. However, 10% takeout on VLTs is pretty steep, so whether takeout can be increased remains to be seen.

VetScratch · 11-20-2003, 03:10 AM

Let all the warring factions agree to light up one lousy VLT machine at AQU, BEL, and SAR. We'll raise enough money through contributions from PA members so that the night watchmen can make one minimum play each year. Then, when the legal mess has finally been resolved sometime in 2006, it will already be the third year of operation, and public money will immediately flow into horseracing. The racing will be fantastic and every horseman will praise the PA board!

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Racing historians will say, "Never have so few put up so little to help so many!"