Columnist Ralph Siraco: NYRA tax fraud conspiracy charged

Ralph Siraco

Monday, Dec. 15, 2003 | 9:24 a.m.

Ralph Siraco's horse racing column appears Monday and his Southern California selections run Tuesday-Sunday.

The lengthy and damaging investigation of the New York Racing Association by the U.S. Attorney for the Eastern District of New York came to some resolution on Thursday, although the investigation stemming from the original indictments continues.

Indictments charging conspiracy to commit tax fraud by employees of the NYRA were unsealed at a news conference in New York on Wednesday. In addition to charging two former directors of its pari-mutuel department and four mutuel clerks, the NYRA was fined $3 million as part of an agreement reached with the U.S. Attorney's office for its role in a scheme that federal officials believe went on for almost 20 years.

According to Andrew Hruska, the chief assistant U.S. attorney, the mutuel clerks named in the indictment would take money from their daily draw or cash boxes and report the shortages from transaction payoffs to customers as legitimate discrepancies in their cash balances at the end of the day. To make up for the shortages, the association would deduct the amounts from the clerks' paychecks. At the end of the year, the teller would include the certification document of losses provided by NYRA to the IRS under the auspices of unreimbursed business expenses, thus conducting a criminal scheme with the assistance of their employer.

So, the clerks would pay taxes on their paychecks while the cash they took from their daily cash draw became exempt. Hruska suspects as much as $19 million of "shortages" income went unreported from 1980 to 1999.

The indictment alleges that the scheme was allowed to continue by NYRA as a negotiating tool with the union representing the mutuel clerks.

The NYRA got a deferred prosecution that allows the association, in essence, to avoid prosecution and keep its franchise to operate the Aqueduct, Belmont and Saratoga racetracks.

Although the NYRA has been under intense scrutiny from the New York AG's office for some time, Hruska defended the U.S. Attorney's penalty to the association. "NYRA will be punished in every way you can punish a corporate entity short of dissolution," he said.

With the agreement in place, NYRA will move ahead with its plan to install video lottery terminals or slot machines at its three racetracks.

Earlier this year the NYRA entered into an agreement with Las Vegas gaming giant MGM MIRAGE to supply and manage their slot machine business. That arrangement -- which would have seen a racino in operation by March 2004 -- was put abruptly on hold in August when the news of possible indictments for NYRA surfaced. Now that the U.S. Attorney's investigation of NYRA has been resolved, MGM MIRAGE announced last week the resumption of construction for the slot room at Aqueduct race track. It is estimated that slot machines at Aqueduct could generate moer than $400 million per year in revenue.

NYRA Chairman Barry Schwartz, who has been the one calming conduit through the investigative process, shared relief and optimism for the association's future. "We're going to get that casino open," he said.

While the path to the casino is now clear, Schwartz may need a snowplow to get to the track.