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Suit Filed Over Aqueduct Casino Bid

Litigants were former partners in Empire Racing.

The long and twisting turns of efforts to develop a casino at Aqueduct racetrack has gone to a new venue: state court.

SL Green Realty Corp., a Manhattan real estate company, has sued Buffalo-based Delaware North for breach of contract and other causes with allegations that include taking confidential information it obtained from SL Green for use in its bid for the casino.

SL Green and Delaware North were original partners in Empire Racing Associates, a consortium that was eyeing the franchise to run Aqueduct, Belmont and Saratoga racetracks. Delaware North was “vital’’ to Empire, in part, because of its history of already running racetrack casinos. The New York Racing Association was eventually tapped to continue running the franchise.

The former Pataki administration originally sought a plan to award a contract for the three-track franchise and the Aqueduct casino. That changed with former Gov. Eliot Spitzer, who pushed to give NYRA the new franchise and split off the Aqueduct casino project.

By the summer of 2007, the suit alleges, rumors were spreading that Delaware North was holding secret talks with state officials about splitting away from Empire to submit its own Aqueduct bid. Delaware North denied that, the suit claims. It also charges the company “actively dissuaded’’ Empire from submitting a separate bid for the Aqueduct casino.

But in October 2007, Delaware North announced a new partnership with the owners of the Saratoga harness track to submit a bid for the Aqueduct casino, which was slated to have 4,500 slot machines.

SL Green alleges that Delaware North “turned on its partners’’ with Empire and, with the help of confidential financial information it obtained during the partnership, of helping with its own separate bid. It said Delaware North “sabotaged’’ the efforts of Empire and SL Green.

The lawsuit, filed in state Supreme Court in Manhattan, seeks unspecified financial damages.

SL Green said new partnership talks were underway between the Manhattan real estate firm and Delaware North in February 2008. It said it shared information with the Buffalo company, including proprietary financial details. It said Delaware North then used that information to submit its own separate bid.

Gov. David Paterson last fall awarded Delaware North the Aqueduct bid. The company offered the state a $370 million upfront payment for the contract. But the deal fell apart when Delaware North recently said it could not make that payment to the state, which has been undergoing severe financial problems, by a March 31 deadline. Last week, Paterson asked for new bids for the project, and Delaware North and SL Green are expected to both make separate offers.

“Had (Delaware North) lived up to its contractual and fiduciary responsibilities to Empire and SL Green, enormous costs to Empire, SL Green and, ultimately, the people of New York State could have been avoided,’’ the suit claims.

William J. Bissett, president of Delaware North Cos. Gaming & Entertainment, said the company has not yet been served the lawsuit's legal papers. "Based on what we have read in the press reports, it appears to be a desperate attempt by SL Green to try to enhance their standing in the re-bid process. We would hope the lawsuit does not complicate or delay the process further,'' he said in a written statement.

The company did not address any of the specific allegations contained in the lawsuit. Delaware North has said the economic climate made it difficult to secure the $370 million in financing for the Aqueduct project. Still, it said it continued to offer the $370 million amount to the state but on a delayed timetable.

"It has been widely reported that we withdrew from the project. Nothing could be further from the truth. Our issue was solely based on timing and changing conditions as we finalized the legal operating agreements. In fact, even with the changes, our proposal would have had the VLTs up and running faster than any of the other bidders. We remain further along because of the investments we have made during the initial project work and the finalization of the MOU. Again, we have already made a significant investment in the project and remain enthusiastic about its value to the community and the State of New York,'' Bissett said.