Changes to the composition of its AEG’s investor and management group, the withdrawals of the Rev. Floyd Flake and rap mogul Jay-Z, and failure to comply with a deadline for submitting all license applications were the final straws that ultimately cost the group its lucrative racino contract. In a formal bid process (up for debate in this instance) parties are advised that failure to meet a defined deadline will exclude the bidder. Were the AEG partners surprised that as licensees they would have to disclose their personal finances? Hard to believe they were not apprised of this requirement from the beginning. Again, a formal bid process specifies the requirements of the bidder from the outset. Full Story from the New York Daily News, below.
March 11, 2010 – Albany Times Union: AEG legal staff: Decision is Arbitrary and Capricious
In turning a thumbs down on AEG, Lottery officials wrote that AEG was considered ineligible for a license because it failed to comply with the March 9, 2010 deadline for submitting all video lottery license applications in time for the Lottery to complete background reviews by March 31.
“The Lottery rejects AEG’s claim that certain individuals and entitites (including, but not limited to Floyd Flake and Empowerment Development Corp.) should have been excused from the application requirement because they were withdrawing from, or were being dropped by, AEG,” Lottery wrote. “Such belated removals could not be accepted during the ongoing federal and state investigations into AEG’s selection, since they would have created the appearance that AEG was being allowed to conceal relevant material information.”
New York State legislators differ on the next steps in process of selecting a new operator, see below following the Review Journal story.
March 11, 2010 – Las Vegas Review Journal: Plan to Build Aqueduct Racetrack Casino Rejected
A partnership that includes Las Vegas-based Navegante Group was rejected Thursday by New York licensing authorities to build and operate a lucrative slot machine casino at the Aqueduct Racetrack.
The move comes six weeks after the group won a contentious bidding process and was selected by Gov. David Paterson. The governor’s office announced Aqueduct Entertainment Group had supplied insufficient financial details about some of its investors to the state’s Lottery Division. The group had been given until last Tuesday to supply the information.
A spokesman for Paterson told the New York Times the group had been rejected. In an emailed statement, Aqueduct Entertainment Group attorney Barry Berke called the decision “both arbitrary and capricious.”
“In the event that AEG is not given an opportunity to address the issues raised by the Lottery, and the decision to reverse the prior selection of AEG as the successful bidder is not reconsidered, AEG intends to pursue all available remedies,” Berke said. Aqueduct Entertainment had been due to pay New York a $300 million licensing fee by the end of March.
“As AEG has repeatedly stated, they remain ready, willing and able to finalize the Memorandum of Understanding and pay the $300 million licensing fee in accordance with the conditions placed upon AEG’s selection,” Berke said.
Aqueduct Entertainment was chosen over four other bidders, all of which contained a casino operator and various New York-based developers and business entities.
Other casino companies that bid on the Aqueduct contract were MGM Mirage, Harrah’s Entertainment, Penn National Gaming and the Florida-based Hard Rock casinos. Wynn Resorts dropped out of the bidding process in November.
Aqueduct is in the New York borough of Queens and the casino will house 4,500 video lottery terminals, making it the largest gambling site in New York City.
Navegante Group, which is headed by longtime Nevada gaming figure Larry Woolf, manages casinos, including the Sahara, three casinos in Elko and Reno’s Grand Sierra. Woolf said the lottery commission didn’t cast any aspersions toward Navegante.
“We want that to be fairly clear that we (Navegante) weren’t denied a license,” Woolf said. “We want the lottery commission to come out and make that statement. It’s clear (the lottery) withdrew our bid.”
On Tuesday, one of Aqueduct Entertainment’s New York-based partners, former congressman-turned minister Floyd Flake, announced he was stepping away from the project to concentrate on his community efforts.
New York expects the casino to generate $450 million a year in revenue for the state to help offset and $7.4 billion budget gap. About 15 percent of the casino revenue will go to The New York Racing Association Inc., which operates the Aqueduct race track, Saratoga Race Course and Belmont Park.
The governor’s office said it now wants to reopen the bidding through a traditional procurement process.
However, Paterson is expected to remove himself on the advice of attorneys.
The process to add a casino element to Aqueduct has been under way since 2001. The recently concluded bidding process began last May. A deal with a Buffalo, N.Y.-based company fell apart in 2008 and the process was reopened.
March 11, 2010 – New York Daily News: Controversial Aqueduct Racino Deal is Officially Dead: Paterson Administration
Paterson’s team says a new group to run the long-delayed racino should be selected through an “expedited, transparent, apolitical and publicly accountable process.”
Assembly Speaker Sheldon Silver is said to also favor an expedited re-bidding process under procurement laws.
Senate Democratic Conference Leader John Sampson, however, told The News he prefers moving ahead with one of the bidders that lost out to AEG.
“No new procurement process,” Sampson said. “At this point in time we need to just get it done.”
At stake, he said, is “$300 million. We’re losing $1 million a day. People. Jobs. I think irrespective of what the decision is, we need to get back on track whoever the next group is.”
New York Daily News: Source: Flake, Jay-Z Cost AEG Racino Contract
The withdrawals of the Rev. Floyd Flake and rap mogul Jay-Z from AEG were the final straws that ultimately cost the group its lucrative racino contract, DN Capitol Bureau Chief Ken Lovett reports.
“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.”
On Tuesday, the Lottery Division deemed AEG “unlicensable” after it failed to comply with a deadline for submitting all license applications.
“The Lottery rejects AEG’s claim that certain individuals and entities should have been excused from the application requirement because they were withdrawing from or being dropped by AEG,” the official said.
The official said that AEG throughout the process “continued to make significant changes to the composition of its investor and its management group.”The Lottery said AEG also “demonstrated a pattern of involving unqualified individuals and entities” at various points through the process that were removed only after Lottery’s discovery.
Among them was Karl O’Farrell, whose Australian-based Capital Play once bid to run New York’s thoroughbred race tracks. He was involved in bankruptcy proceedings in Australia in 2008.
O’Farrell was listed as an AEG founder in a 2009 equity investment term sheet obtained by The News – though his name later disappeared from the organization’s documents.
AEG has said that O’Farrell was never a formal investor, but had once served as a consultant.
Another founder of AEG, according to documents, was J&J Partners, whose managing director, Joe Logan, has ties to convicted felon Eric Wynn. J&J and Logan also severed ties with the group last summer.
Related Stories
Numerous updates – Successful Aqueduct Racino Bidder Consortium with Las Vegas Ties and New York Influence
Steve Wynn was one of the original bidders, but dropped out: New York Media Critial of Albany’s Aqueduct Process – Wynn Knew a Bad Bet When He Saw One
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