Betting Hub Claims NYRA Should Pay Out Wagering Payoffs

A North Dakota betting hub has broken ranks from a massive lineup of creditors jockeying for position in the complex New York Racing Association bankruptcy case, filing a federal lawsuit that demands the racetrack operator immediately fork over $1.6 million in net payoffs it claims it is owed from wagering pools.

Lien Games Racing, which operates several gambling outlets in North Dakota, claims the net funds remaining after takeout are not NYRA’s property, and that New York laws regulating pari-mutuel wagering require mandatory payouts.

A New York attorney representing Lien Games Racing contends the net funds actually belong to winning bettors and that NYRA merely holds the money in trust for them.

“In 56 years of (New York) racing history that I have researched, there has never been an instance of a mutuel wager not being paid off,” said attorney Philip Pierce of the Margolin & Pierce law firm. “NYRA has somehow been using the money owed to winning bettors.”

Neither NYRA officials nor affiliated attorneys returned calls or e-mails seeking comment.

A Lexington attorney who is not affiliated with any party in the case said that while lawsuits disputing estate property are common in bankruptcy proceedings, such legal debate over pari-mutuel funds is rare.

“It seems to me that Lien Games has a strong position that the funds are not ‘property of the bankruptcy estate’ if NYRA is merely a disbursing agent and (Lien Games) did not acquiesce in NYRA's conduct,” said Robert J. Brown of the Wyatt, Tarrant & Combs law firm.
 
Lien Games Racing, which in 2004 was awarded North Dakota’s lone simulcasting license after the fallout of the Racing Services Inc. scandal, is believed to include as a partner the prolific horse player Ernie Dahlman, who reportedly has wagered as much as $18 million annually on races.

The $1.6 million represents payouts allegedly due Lien Games Racing from wagers primarily placed on NYRA tracks last October, according to documents filed in the lawsuit. NYRA filed for bankruptcy protection in November.

The 148-page bankruptcy filing features a listing of more than 700 creditors that hold “unsecured nonpriority claims,” including nearly two dozen other racetrack or betting hubs that are owed anywhere from $114 (Philadelphia Park) to more than $128,000 (Finger Lakes). Keeneland spokeswoman Julie Balog said the $75,000-plus listed on the claim sheet is for the Lexington track’s live signal NYRA received in October.

The National Thoroughbred Racing Association is owed $1.36 million, but NTRA spokesman Keith Chamblin said the organization preferred not to comment on the particulars since the bankruptcy was ongoing. Alan Marzelli, president of The Jockey Club, acknowledged that several of the registry’s entities are due more than $100,000 collectively for provided services.

The New York Thoroughbred Horsemen's Association, which boasts more than 6,000 members, also has a lawsuit filed in the bankruptcy action, which, in part, claims that certain withheld purse monies are also not part of NYRA's estate property.

NYRA filed for Chapter 11 bankruptcy protection after years of public relations nightmares, legal run-ins, and financial struggles. Among its claims, NYRA charged that the state’s “abject’’ failure to approve a long-stalled plan to bring video lottery terminals to Aqueduct fueled much of its financial problems.

NYRA is also seeking to use the case, being heard in federal bankruptcy court in Manhattan, to get a resolution to the land claims dispute it has with the state over who owns the three racetracks. NYRA insists it has title to the properties and has been paying property taxes over the years, while the state claims title of the three tracks automatically reverts back to the state when NYRA’s franchise expires Dec. 31.

The state has a separate motion before Judge James Peck to dismiss NYRA’s bankruptcy case; the state says NYRA is a quasi-public agency that has been kept in business by the state over the years and has no legal standing to seek bankruptcy protection.

The Blood-Horse correspondent Tom Precious contributed to this article.