|by James M. Odato|
|ALBANY — Federal investigators want to know more about background materials collected on bidders pursuing the rights to run a racino at Aqueduct Racetrack — including the controversial winner in the competition, Aqueduct Entertainment Group.
According to officials familiar with the situation, a subpoena served on the Division of Lottery is geared toward finding out more about an entity that does not appear to be linked to AEG or the other bidders. The division has been asked to turn over to the U.S. Attorney’s office all documents regarding proposals to operate a video lottery casino at Aqueduct, including comments or opinions by the Lottery Division.
The subpoena, dated Feb. 9, does not specifically ask for material that led to the decision to choose AEG, according to the sources. But one source said investigators are particularly interested in the New Direction Local Development Corp., which is described on its Web page as a charity designed to foster economic development in southeast Queens. Senate President Malcolm Smith, who has ties to New Direction, is a close friend and political protege of the Rev. Floyd Flake, an AEG principal.
"There is no connection between New Direction and AEG," said Jeffrey Levine, chief executive officer of Levine Builders, a partner in AEG.
AEG won the competition for the Aqueduct racino against four other bidders, a decision agreed upon by Gov. David Paterson and the leaders of the Senate and Assembly. Nevertheless, the choice has drawn criticism from some editorial boards, several losing bidders and lawmakers such as state Sen. Ruben Diaz, D-Bronx, who is feuding with Smith.
Peter Kiernan, Paterson’s counsel, emphasized that the Lottery Division has been advised that the U.S. Attorney’s inquiry concerns New Direction, and not the selection of AEG to operate the Aqueduct facility. "No investigatory agency has contacted the governor’s office about the selection of AEG … and to the best of our knowledge, no such investigation into this selection exists," Kiernan said in a statement.
Neither the Lottery Division nor the office of the U.S. Attorney for the Southern District of New York, which is behind the subpoena, would offer comment.
AEG’s partners have included the Darman Group and Flake’s Empowerment Development Corp., with each outfit owning about six-tenths of a percent of AEG’s equity. Darman Group is led by Darryl Greene, who exited AEG this week because Greene has a misdemeanor conviction on his record. Assembly Speaker Sheldon Silver set several conditions on the selection, including clean recent criminal records for principals of the winning bidder.
Flake, a former congressman, is a major economic development figure and religious leader in Queens, where he heads the Allen A.M.E. Cathedral in Jamaica. Smith was one of three leaders required by law to take part in the Aqueduct selection. The senator has said he recused himself from the process; a Senate spokesman said Smith handed it off to Democratic Conference Leader John Sampson, D-Brooklyn.
Austin Shafran, a spokesman for Smith, said the Queens Democratic leader "maintains he has had no involvement in the day-to-day operations, administration or management of (New Direction) and looks forward to a full investigation."
AEG officials said they were unaware of any probe. The group said it has hired Thacher Associates to develop a "comprehensive integrity monitoring" program for the development and operation of the Aqueduct racino. The group also includes former MGM CEO Larry Woolf of Navegante Group and Turner Construction.
AEG has begun work on an agreement that would require it to pay a $300 million upfront fee to the state for the rights to the 4,500-machine racino project. The group would be eligible for a $250 million state grant to build the facility. The deal carries a 30-year franchise for AEG and a 10-year extension option. The racino is expected to generate $300 million a year in revenues for the state, and potentially millions a year for AEG and the horse racing industry.