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Friday, March 12, 2010

Exit AEG

Remember that Governor Paterson had, laughably, recused himself from the mess surrounding Aqueduct Entertainment Group that he helped to create. (And recusing sure seems to be a trend these days in the eternally conflicted capital.) So the announcement of the demise of the group's racino project was in the form of a statement issued in his name; and a terse and detached one at that.

“The Division of the Lottery has concluded that it cannot issue a gaming license to Aqueduct Entertainment Group.....Therefore, the state has officially withdrawn its support for AEG” to develop and operate the video lottery facility. [Bloomberg]
I can't imagine though that even Paterson couldn't help but roll his eyes shake his head when he saw was read the part about the next selection being "done pursuant to an expedited, transparent, apolitical, and publicly accountable procurement process." Of course, the process that led up to this latest failed selection was none of the above; had it been, perhaps the outcome would have been different. Nice of him to think of that now.

There seems to be some question as to whether the problem is that Lottery, as Paterson claims, cannot issue the license (not that the governor would ever lie); or whether they just don't want to.
An official at the lottery who spoke on the condition of anonymity said that the lottery division did not want to issue AEG a license because the structure of its partnership underwent continual changes since the group submitted its bid last May, including several changes just prior to a deadline to submit background materials on the partners on Tuesday. [Daily Racing Form]
Those last minute changes included the departures of Floyd Flake and Jay-Z; and Elizabeth Benjamin reported that those were the final straws.
"Such belated removals could not be expected during the ongoing (Lottery) investigation since they created the appearance that AEG was being allowed to conceal relevant information,” an official with the state Lottery Division said.

“AEG claims they’ve given us everything, but you can’t say someone is in one day and then when we want to see their (background) information, say, ‘No, they’re not in anymore. It doesn’t work that way.” [Daily Politics]
But, for one thing, by eliminating individuals with any possible issues - all investors with insignificant stakes as far as I've seen - wasn't AEG merely complying with the conditions set forth to it by Sheldon Silver? And what's really the big problem with two investors who owned barely over 1% combined withdrawing out of their own substantial self-interest in keeping their personal financial information to themselves (knowing the details would turn up in a Fred Dicker column before too long)?

OK, I know, now I'm sounding like a big AEG supporter again, and say what you will. I know, they obviously were not the most qualified. But at this point, I'm fed up enough to settle for qualified enough. The group was apparently prepared to hand over the $300 million and finally get this thing going. If Lottery can't license these guys over some minor stakeholders that are no longer even connected, how, in the case that SL Green/Hard Rock is up next, are they going to license an entity which is running blatantly illegal table games in Florida? And what will a likely AEG lawsuit do to the process?

And besides, do you want to see this thing go on for the rest of the year? While we've generally heard calls for a new winner to be selected from the losing bidders from this round, James Odato reports on Capitol Confidential that Paterson’s office said it wants to rebid the project and select a winner by Dec. 31, the governor’s last scheduled day in office. (!!)

That frightening statement is blind ignores the fact that NYRA is running out of money, and that the state is broke (though maybe Dick Ravitch has a plan to borrow money on NYRA's behalf).

It's funny - I recall when Paterson selected AEG, there was an initial report I read that it was all a clever scheme. The Assembly Speaker would reject the choice, thus putting the onus on the Senate Democratic leaders who persistently insisted on the group despite the obvious appearance of impropriety given the connection between Flake and Senator Malcolm Smith. And though it didn't quite work out that way, the end result was the same. However, the focus is all on the beleaguered governor instead of where it really belongs. Maybe if he wasn't foolish enough to have that ill-fated meeting with Flake, at a time when he was still delusional enough to believe he had a shot at re-election, that wouldn't be the case. Instead, it's Paterson who, again, ends up looking bad.

Of course, these days the governor looks bad compared to everyone around here. (Well....almost everyone.)


Anonymous said...

The reasons given by Lottery do seem bizarre to me. Seems to me like the Governor wanted out of the deal because he could not take the political heat anymore, recused himself and then used the Lottery to kill the deal. It will be interesting to see how the courts deal with this one because surely this is heading that way.

steve in nc said...

I realize slots are seen as a life raft for racing. But...

A 60-year-old widow in my state was just arrested this week for robbing a bank. She saw that as the only way to recoup her gambling debts - she was a regular video slots player.

Folks who care about racing need to really get outside the box and create a business model that won't rely on bleeding helpless slots addicts to death in order to stay afloat.

Poker and other games of skill are one thing. Slots and roulette are bad karma. Bubbles eventually burst.

Anonymous said...

Steve, under that theory all gambling should be banned. There are guys in my OTB that are no better and an old lady up the block that spends half her SS check on scratch offs the day it arrives.

The business model for racing is really quite simple, privatize the industry and reduce takeout to reasonable levels.

Only governments addiction to the takeout stands in the way.

Anonymous said...

Jeapers, is this a horseracing blog? There are some pretty big races tomorrow.

alan said...


steve in nc said...

Anon, I'm a libertarian on gambling, drugs, and lots of other things. So I'm not into banning bad karma, just avoiding it.

And I'm with you on privatizing NY racing and reducing the government takeout. And marketing it as the anti-slots - exciting, positive-expectation gambling for people who would rather try to outsmart the crowd than pull and pray.

Racing has and is destined to have a smaller audience and an accent on simulcasting. It would be a better game with far fewer races nationally with larger more talented fields. Far fewer big stakes creating more rivalries. That would be a more rational business model than relying on slots.

So I'm fine for privatizing racetracks. Just keep those profiteering hands off our water supplies, schools and prisons. Civil service has a place too.

Anonymous said...

This is deja vu on the whole NY franchise renewal thing. At the time, most of us, including Alan, as I recall, decided that government intrusion and over-regulation had ruined racing and there is not a damn thing we can do about it. The pols use it as just another pork barrel, favor granting hand out, witness the OTB fiasco, among others.

This just gets more and more depressing, and with the pols more and more desperate for revenue by the day, is there any hope now for reform? Charlie Hayward thinks NYRA is in line to receive a $30 million line of credit from Albany? How does he sleep at night knowing those lying thieves are in charge of NYRA's fate? The till is empty, what part of that don't you guys get?

Where have you gone Joe Bruno, NYRA turns it's lonely eyes to you...why do I think Joe could march into the treasurer's office and come out with a good check for $30mm?... Who knows, when Charlie reaches the window they'll probably hand him $30mm worth of NY State Treasurer's Scrip and tell him to run along. /S/greenmtnpunter

Anonymous said...

Steve in nc: When has racing ever been marketed as a gambling etity, yet alone marketed as an anti-slot option? All one reads, day-in and day-out is commentary on Rachel and Zenyatta, stake races leading to the Kentucky Derby, and how Pletcher, Asmussen, and Baffert are doing. The fact that 99.9% of all people who give racing a look do so because of the ability to gamble is totally ignored.

The inability of racetrack management to market itself as a gambling option to casino gambling has launched its slow slide into oblivion, as casinos draw the crowds.

Anonymous said...

Jeepers Jeapers, Just how much money are you going to make on these so-called big races today, if you happen to select the winner.

Anonymous said...

Racing is unique because it is BOTH a sport AND a gambling enterprise that relies on that sport.

It needs to be marketed nationally as a sport and locally as a gambling venture/fun day out. This is why the NTRA national campaign was destined to fail.

IF I were suddenly appointed all powerful comissioner of the SPORT of horse racing (a position I would take for 1/3 of Charlies salary), the first thing I would do is cut the number of Graded Stakes in half and declaring that they ALL must be run on Saturday or Holiday weekends. The obvious results would be more match ups between top horses.

I would attempt to brand Saturday's Graded Stakes as Major League Horse Racing, with everything else being minor league.

Then I would sign a national tv contract that actually paid for the Major League Rights, and demand that they be blacked out on TVG, HRTV and locally. I would create a national schedule that made sense, with about six graded stakes every Saturday, properly scheduled twenty minutes apart for television during the 5-7pm ET slot.

That is how a "sport" operates, but as long as it remains fragmented it has no shot to succeed as a sport other than four or five days per year.

Locally, as a minor league sport, they need to create incentive to come to the track just like they do in minor league ballparks.

There are many ways to do this but you need a marketing budget and creativity. Most important, once you get them to the track you must provide a freaking enjoyable experience so they return (duh!).

You have to modernize the facilities, provide alternate entertainment that does not compete for the gambling dollar (do you know how many musicions of all genres, talented individuals, would play for free for the exposure if anyone had a clue how to find them? Many have small buy loyal followings that would happily go see they favorite band play outdoors), buy a fleet of buses like the old days and run trips from senior homes, civic associations and major transportation hubs, sub contract out the vendors to provide interesting food and beverage choices, and finally, and most importantly, ruthlessly fire ALL the long entrenched miserable complaining employees that exist at EVERY track in this country.

I'm sorry, I am at the track to escape my miserable existance, I am not here to listen to you complain.

"Don't you understand its not my problem...." Dylan.

Anonymous said...

While I dont have any specific information I strongly suspect the following outcome to the Aqueduct VLT saga.

AEG has strongly indicated that it will sue the state over its reasons for canceling the contract. Within a few months, the IG's report is issued which backs up Paterson and Flake.

Pressure mounts in Albany over the Budget deficit. Remember it is not just the $300 million upfront payment but also the $1 million per day they state will need once the VLTs are up and running. The state will be faced with delays of possible years due to the AEG lawsuit.

Just like with NYRA and its claim over its ownership of the land, expect a reversal of the State's position with AEG. I expect the state will embrace AEG (citing the IG's report as its reason for moving ahead) and the contract moves ahead shortly after the IG's report is issued, possibly within 3 months.

Anonymous said...

Time for Stevie Wynn to jump back in and save the day? they say in Texas, "He ain't braggin, he can do it." Stevie Wonder Boy does know to run gambling joints, it's in the genes.

Meanwhile, according to The Sartogian P1 story on Friday, they are pushing the panic button in Saratoga Springs. No wonder, it is a one horse, company (NYRA) town. The city, county, merchants, et al are in dire straits without racing.

Perhaps they are pulling a Pelosi and just scaring the hell out of those they need to put the heat on Albany.Perhaps they pay off pari-mutuels in 90 or 120 day scrip this season? Purse money? Scrip seems to be the coming coin of the realm in CA and other states with empty tills.

Hopefully, the city and county pols and executives, the business groups and state assemblymen, Senators, etc will put the heat on Albany to cough up the dough....and in cold, hard, cash, not scrip. Alan, any update on the situation? NY Breeders and Horsemen are rallying at Belmont on the 21st... /S/greenmtnpunter

Anonymous said...

Talk to Lottery: AEG weren't merely complying with Silver's requests by dropping partners. They were, in the view of Lottery, engaged in a potential concealment. There are names on the most recent AEG investor list who Lottery quickly discovered were nothing but fronts for "investors" that AEG had claimed had no direct ongoing interest in the consortium. The problem for AEG was that those "investors" still had indirect interests, and were waiting anonymously for their future payoffs. It took state investigators no time to figure this out, and Lottery soon wised up too.

Dirtyshirt said...

Told you so.

Dirtyshirt said...

Zenyatta now confirmed 15-20 length better than Rachel. Easily. Where's that one guy with his pom-poms. All I want is the satisfaction of you admitting you know nothing about class.

Anonymous said...

Zenyatta just proved that there was an error in choosing Rachael for Horse of the Year

ballyfager said...

The PP's for both horses are in today's DRF. Rachel CLEARLY had the better year, and by a wide margin. Nothing that happened today changes that.

Zenyatta beat up on the same tomato cans she usually sees. Rachel got beat by a horse who is undefeated on dirt (4 for 4). If you noticed (and you probably didn't) it was at least ten lenghts back to the third horse.

There are two separate issues here. Who was HOY of 2009. Clearly, it was Rachel. Read the PP's until you understand that.

The other issue is which one is the better horse. That is yet to be resolved. I hate to state the obvious, but some people need it. Zenyatta did not beat Rachel today.

If, as you state ad infinitum, ad nauseam, Zenyatta is fifteen or twenty lengths better than Rachel, just bide your time. When she does it on the track (if), then you can crow till the cows come home.

By crowing in advance you're just sticking your neck out needlessly. Setting yourself up for possible disappointment and ridicule.

You know who said...

Lol. The gig is up... I have seen Rachel's pp's and she hasn't beat any horses of quality on good going ever. That said, Rachel was much the best today, racing wide (confident?), and was rated for far too long. BUT - Zenyatta should be given a Breeze designation next to the race in her PP's. She won in an open gallop. She would blast Rachel. They probably won't be at the big race anyways...

BTW - I gave out Zardana in the comments here a few days back. Dirty

Anonymous said...

Alan, I gotta assume you have a DI of 2.00 and a CD of 1.00 for the stamina you've exhibited over the many years in covering the NY VLT/Political scene. But I also have to give you a 10 on the moronic scale for wasting your time on those baffoons in Albany. So, give your readers a break and break with your old routine by dropping those Donkeys and Elephants altogether and stick to the Ponies. Thank you.