Update – March 30, 2010 – New York Times: Confidential Aqueduct Ranking Released
The confidential document is available at the New York Times site.
The Paterson administration has released a confidential document that assessed the various bidders vying for the rights to operate a casino at the Aqueduct racetrack in Queens.
The document, which was prepared by the state’s Division of Lottery last August, was turned over to The New York Times, which sought to obtain it through a Freedom of Information Act request.
The document is likely to raise new questions about why Gov. David A. Paterson and the Legislature selected the Aqueduct Entertainment Group, which does not fare nearly as well in the Lottery Division’s assessment as some of the other bidders. A.E.G., in fact, appears to be the fourth rated among six bidding groups in the running at the time.
The selection of the Aqueduct Entertainment Group was immediately mired in controversy after it was announced by the governor two months ago, and it is now a subject of investigations by both federal prosecutors and the state inspector general. The governor has since reversed course and scrapped the choice.
The Lottery Division assessment grades the six bidders at the time using 11 different criteria, from their ability to complete a deal swiftly to potential legal or licensing issues. Each bidder is graded in each category with either a “positive,” “neutral” or “negative” score.
While the Aqueduct Entertainment Group was assessed as having four potential negatives, including legal and licensing matters — concerns that would linger throughout the process — a group led by the developer SL Green had no negatives at all and appears to fare best in the assessment.
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.
Bennett Liebman, a professor who heads the racing and gaming law program at Albany Law School, said in the New York Times, “We’ve had a process that has almost been everything wrong with New York State in microcosm: secrecy, possible corruption and an inability to reach any decision.”
March 16, 2010 – New York Daily News: Gov. Paterson Sees New Aqueduct Racino Plan Within One Month
The Aqueduct racino project should be back on track within a month, Gov. Paterson declared Monday.
Paterson also said he expects to “have a role” in the selection of a new bidder – though he previously removed himself from the tainted project on the advice of his lawyers. “We are hopeful to find a procedure that would work within a month,” Paterson said.
The Daily News first reported yesterday that Paterson administration officials are drafting new rules to govern the selection.
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.
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.
March 12, 2010 – Wall Street Journal:Collapse Of Aqueduct Deal Threatens NY Racing Association – Operates Aqueduct, Belmont Park and Saratoga.
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
