A secret group interested in bidding for the racetrack franchise now held by the New York Racing Association is urging the U.S. Attorney's office to prosecute the racing entity.The group, whose identity is not being disclosed, said in a letter sent by its lawyer July 21 that NYRA has continued to operate in questionable and suspect ways--despite being under the terms of a strict deferred prosecution arrangement for more than a year. A federal judge has agreed that if NYRA kept its operations clean during the period the prosecution against it would come to an end.But Donald Kinsella, an Albany lawyer and former federal prosecutor, said NYRA has violated the terms of the deal and should now be prosecuted to the fullest extent of the law. In his letter to the U.S. Attorney's office in Brooklyn, Kinsella said he represented a client in the racing industry that is "interested in obtaining the franchise" held by NYRA.The 18-month oversight period by a federal monitor, Getnick & Getnick, is due to expire July 24; the firm is believed to be preparing its final report on its oversight activities and NYRA's compliance. In return for avoiding prosecution for its role in a long tax fraud scheme involving former NYRA workers, NYRA agreed to pay $3 million in fines and let a monitor oversee its operations.Kinsella, in the letter to the U.S. Attorney's office in Brooklyn that is handling the case, said that the "terms and spirit" of the deferred prosecution deal has been violated by NYRA in several ways.He cited NYRA's no bid deal with MGM Mirage to have the Las Vegas company manage its future video lottery terminal casino at Aqueduct. In an unusual piece of legislation designed to get the VTL parlor opened, the state recently agreed to permit the project to go forward, even if NYRA didn't put it out to a formal bidding procedure.Kinsella confirmed that the letter was sent, but declined further comment. He said he could not name the group interested in the NYRA franchise for Aqueduct, Belmont, and Saratoga racetracks.The group is also believed to be represented, sources said, in some manner by William Powers, the former powerful state Republican Party chairman and now a lobbyist at the state capitol. Powers is close to Sen. Majority Leader Joseph Bruno, himself a Thoroughbred owner and onetime major defender of NYRA. Powers did not return calls for comment.In his letter, Kinsella said a recent critical audit of NYRA by state Comptroller Alan Hevesi "did not review a number of the most significant contracts and instances of possible malfeasance." He cited the MGM contract, as well as NYRA's no bid deal with ABC and ESPN for broadcast rights to the Belmont Stakes (gr. I) and the sale of out-of-state simulcasting rights to Television Games Network (TVG) without a request for proposal.Kinsella noted that the deferred prosecution agreement required NYRA to have its 4,500 VLTs operating at Aqueduct by the end of 2004. NYRA now says the casino won't open until sometime next year.NYRA's failure to follow proper bidding procedures on the VLT project and the other deals "show that little has changed at NYRA and that the prosecution should proceed," Kinsella wrote. He said the actions may also be "part of a pattern of conduct designed to drive down the value of NYRA's franchise," making it less valuable to future bidders. He cited the VLT deal, in which MGM will remain as the VLT operator no matter who ends up with the new franchise beginning in 2008."NYRA has violated the deferred prosecution agreement, failed to meet numerous obligations under the Racing and Wagering Law, has failed to change the culture described in the indictment and has short-changed the taxpayers of New York state," Kinsella wrote.Bennett Liebman, head of a racing think tank at Albany Law School, said of the Kinsella letter: "This could be the first salvo in the upcoming NYRA wars."The U.S. Attorney's office declined to comment. Neil Getnick, who is the NYRA monitor, couldn't be immediately reached for comment, nor could NYRA president Charles Hayward.