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Judge Dismisses NYCOTB Bankruptcy Case

A federal judge Jan. 25 dismissed NYCOTB's Chapter 9 bankruptcy case.

A federal bankruptcy judge Jan. 25 dismissed the shuttered New York City Off-Track Betting Corp.’s Chapter 9 bankruptcy case, rejecting a motion by a union representing more than 1,000 fired workers who have lost their pension and health-care benefits.

“Through no fault of OTB’s creditors, OTB has been forced to close. No possibility of reorganizing OTB remains,”’ Judge Martin Glenn wrote in dismissing the 13-month-old case.

NYCOTB shut down Dec. 7 after the state Senate failed to approve legislation agreed to by creditors to reduce certain statutory payments and permit the takeover of its advance deposit wagering operations by racetracks in New York.

“It has been clear from the start of this case that OTB’s ability to reorganize and confirm a plan of adjustment depended on the state legislature adopting changes to the New York racing, pari-mutuel wagering, and breeding law,” the judge wrote.

The judge dismissed a move by District Council 37, a public employees union, which sought the appointment of a trustee to recover hundreds of millions of dollars paid out by NYCOTB to New York tracks that the union believes should have been kept to pay for millions in obligations for worker pension and health-care expenses.

“The court is sympathetic to the plight of the union members,” the judge wrote, noting more than 1,000 people have been left without health or pension benefits. But he said appointment of a trustee would be an “inappropriate mechanism to resuscitate an essentially ‘dead’ debtor.”

The dismissal was supported by the New York Racing Association, but opposed by Churchill Downs Inc., which are both NYCOTB creditors.

Glenn noted the creditors, and fired workers, have other legal recourse. “Because the debtor is no longer operational and creditors do not stand to lose the ability to pursue their claims in state court, dismissal is appropriate,” he wrote.

NYCOTB, a state-owned entity, first sought Chapter 9 protection Dec. 3, 2009. A year later, after a political logjam blocked a final rescue deal in the Senate, the corporation closed its doors—and lost the about $800 million in bets it handles a year—Dec. 7, 2010.

The court noted NYCOTB counsel recently told the judge at a hearing that the remaining pieces of the nation’s onetime biggest OTB operation was now “merely a corporate shell with a board of directors.”

Since the closure, the union has made attempts in Albany, the state capital, to get NYCOTB back in operation. Others, including NYRA and out-of-state ADW operators, have moved in to try to pick up some of the bettors, and there is increasing talk NYRA might try to open betting teletheaters in New York City, which it is permitted to do under state law with approval from the mayor and city council in New York.

The closure has also spawned talk, noted New York State Racing and Wagering Board chairman John Sabini, of everything from re-opening NYCOTB as a public entity to consolidation of other OTB corporations in the state.

“There are other OTBs in precarious financial conditions, so we may be seeing this movie play out again,” Sabini said.