Just a month before he proposed a dramatic expansion of gambling with video lottery terminals across the state, New York Gov. George Pataki told a state appeals court the devices would be limited to racetracks under a 2001 law.The contradiction was provided to the judges hearing the case by an Albany, N.Y., lawyer who accused Pataki of telling the court one thing and then proposing another in his 2004 state budget proposal.The issue arises in a lawsuit brought by legislators, religious leaders, and civic and business groups against a 2001 law that allows eight racetracks across New York to install thousands of VLTs. Critics claim the law illegally diverts money from education, which is supposed to be the sole beneficiary of such state-sanction gambling ventures, to the racing industry.But the Pataki administration, in Dec. 16 filings with an appellate division court in Albany, defended the payments to the racing industry. The papers claim the racetrack VLT program "is unique in that VLTs will be operated only at racetracks in the state. The VLTs and the tracks thus have a symbiotic relationship: to maximize lottery proceeds for education, the health and vitality of these tracks is essential."The court filing said that if the tracks fail or become run down, the overall use of VLTs "will generate less money for education."But the week of Jan. 19, Pataki proposed expanding VLTs beyond the eight racetracks to an additional eight facilities that could be located almost anywhere in the state and operated by any private entity, from hotels to Las Vegas casinos. Track operators have complained Pataki's plan comes at a time when they are investing hundreds of millions of dollars on VLT expansion with the understanding the state was giving them exclusive rights to VLTs.Now, they say, their investments will face stiff competition from deeper-pocket companies that could locate the VLT casinos in highly populated urban areas like downtown Manhattan.Cornelius Murray, a lawyer who represents the group challenging the 2001 law, told the court in a letter after Pataki's budget presentation that it is now "painfully apparent" Pataki's new gambling plan "belies the very rationale" of his justification for why the racing industry should get 29% of revenue from VLTs under that law. Murray told the judges it is now incumbent upon Pataki to notify the court that his rationale from only a month ago no longer applies.Under Pataki's VLT expansion plan, vendors would be able to keep no more than 20% of revenue. The 2001 law sets that at 29% for the racing industry. Murray said the governor's latest plan serves to highlight what he called an illegal diversion of money to the racing industry."This is clearly an inappropriate attempt by Mr. Murray to re-argue his case, mislead the court, and bolster a weak argument," said Todd Alhart, a Pataki spokesman.