Large racino back on track

By Liz Benston (contact)

Thursday, Dec. 11, 2003 | 11:08 a.m.

Las Vegas gambling giant MGM MIRAGE said today it would resume construction of a slot machine casino at the big Aqueduct Race Track in Queens, N.Y., following the resolution of a three-year federal investigation into criminal activity by race track clerks in New York.

Earlier this year, the New York Racing Association awarded MGM MIRAGE a contract to operate up to 4,500 slots at the horse track but halted construction on the project in August over uncertainties related to an investigation by the U.S. Attorney's Office into fraud committed by NYRA employees.

Today, federal prosecutors charged two former NYRA officials and four former track clerks with conspiring in a 20-year tax evasion scheme to evade taxes on $19 million in bets. Track tellers skimmed money from bettors, leaving them short. NYRA deducted the differences from employees' pay and treated it as a business expense, prosecutors said.

Under a deal reached today, NYRA will avoid prosecution by paying $3 million in fines and by agreeing to reforms. The government will defer prosecution of NYRA for 18 months while an independent monitor oversees NYRA's compliance with the reforms. The indictment will be dismissed provided that NYRA has not violated the terms of the agreement.

NYRA is a private nonprofit corporation that operates Aqueduct, Belmont Park and Saratoga horse tracks in New York.

MGM MIRAGE will resume renovations on the track, which involved installing slots on the second floor of the Aqueduct grandstand at a cost of at least $100 million. The racino could become one of the largest in the United States.

"We have great respect for and confidence in (NYRA Chairman and Chief Executive) Barry Schwartz and his team and we look forward to working closely with NYRA on this exciting project," MGM MIRAGE Chief Executive Terry Lanni said in a statement.

The slot machines could be open by late fall or early winter of next year and could generate more than $400 million per year.

"NYRA accepts and acknowledges responsibility for its involvement in the improper tax deductions taken by its clerks," Schwartz said in a statement. "We have taken numerous significant remedial steps to make sure that something like this never happens again and to enhance all of our compliance and cash-handling procedures."

Those measures include the creation of a special oversight committee, hiring a former New York racing regulator in a new regulatory compliance position and the replacement of several company officers including chief financial officer, and heads of legal, human resources and security departments. An 24-hour employee hotline will allow NYRA employees to anonymously report suspected misconduct.

Pari-mutuel employees must now apply a more thorough money-handling procedure and undergo additional training, among other things, the group said.

Most of the track's slot revenue would go to the state to support education, while NYRA and its horsemen would receive a "substantial" cut to be used to raise purses at the racetracks "to the highest level in the country" and to refurbish NYRA's aging buildings, the nonprofit said.