By T. D. Thornton
Suffolk Off-Track Betting (OTB), which earlier this decade survived bankruptcy proceedings to be one of the five remaining New York OTB corporations, filed a $5-million lawsuit Monday against Delaware North for years of alleged mismanagement of the OTB's video lottery (VLT) gaming facility.
The lawsuit, filed in United States Bankruptcy Court (Eastern District of New York), is of note to Thoroughbred horsemen because some of the revenues allegedly being diverted by Delaware North are supposed to go toward purses that support the state's racing industry.
“This is an action to stop [Delaware North] from treating 'Jake's 58 Hotel & Casino' in Islandia, New York, as a pot of money to enrich its owners at the expense of Suffolk County and the State of New York,” the lawsuit states.
Delaware North was appointed to manage the VLT aspects of Suffolk OTB's gaming license in 2013 when the OTB reorganized in the wake of filing for bankruptcy protection.
“Jake's 58 is one of New York's most successful gaming facilities,” the lawsuit states. “Since opening [in 2017], Jake's 58 Casino has generated more than $210 million for New York State and millions more for Suffolk County and Suffolk OTB's creditors. Hundreds of millions of dollars of VLT revenue have passed through Delaware North's hands. But, at every opportunity, Delaware North has diverted money due to the State and County to its own hotel and other businesses.
“Delaware North's secret business plan for Jake's 58 is simple: Costs are charged to Suffolk OTB's 'Jake's 58 Casino' so that Delaware North's 'Jake's 58 Hotel & Restaurant' can make money,” the suit continues. “Delaware North implements this scheme by paying itself out of Suffolk OTB's bank accounts for bogus expenses.
“So, when Delaware North needed a kitchen for its hotel, it charged Suffolk OTB for the equipment and build-out,” the suit continues. “When the hotel needs elevator maintenance, security systems or a front desk, Delaware North charges Suffolk OTB. When Delaware North cannot fill its hotel's guest rooms, it charges Suffolk OTB for hotel stays it gives away for 'free.'”
The lawsuit details other alleged instances of “intentional bad faith conduct and malfeasance,” such as Delaware North “overcharging Suffolk OTB hundreds of thousands of dollars in rent by inflating the square footage of the VLT gaming facility…willfully miscalculating Suffolk OTB's share of utilities [and] incurring tens of thousands of dollars in fines issued by the New York State Gaming Commission while putting Suffolk OTB's gaming license at risk due to repeated regulatory violations.”
TDN could not reach Delaware North for comment prior to deadline for this story. But Newsday reported receiving a statement from Delaware North that said the company denies the lawsuit's “contrived allegations” and added that the firm “will vigorously defend” itself in court.
After allegedly trying for months to resolve the dispute out of court, Suffolk is seeking payment of three times the amount of damages the OTB has allegedly sustained. Suffolk is also petitioning the court to impose civil penalties of $12,000 for each alleged violation of the New York False Claims Act, and it wants the bankruptcy judge to allow the OTB to sever its court-appointed management ties with Delaware North.
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