Silver’s Trump Card:
Conditions Could Force Change In AEG

By DOMENICK RAFTER

After months of dithering, Gov. David Paterson finally showed his hand and selected a winning bid for the development of the “racino” at Aqueduct Racetrack. The winner, however, has yet to be finalized and questions about a partner in the winning bid, as well as compliance with a list of conditions from Assembly Speaker Sheldon Silver, could mean far less than even odds that ground ever breaks on the “winning” project.

Gov. Paterson selected Aqueduct Entertainment Group Jan. 29 to develop the facility that will house 4,500 video lottery terminals at Aqueduct and bring in $1 million a day to state coffers.

Assembly Speaker Sheldon Silver (D-Manhattan), who initially did not support AEG’s bid, said in a statement that AEG would have to be subject to four conditions before being given final approval, the first two of which are increasing the up-front licensing fee from $200 million to $300 million and requiring the use of the existing approved footprint for timely approval under the New York’s State Environmental Quality Review Act.

The second two seem to point in a particular direction that could cause trouble for AEG’s partners. The first of these is that any investors at any level, partners, directors, managers, contract holders and principal and other selected employees must obtain a license from the State Division of the Lottery. Anyone who has been denied a gaming license in any jurisdiction anywhere in the world, or convicted within the past 15 years of a felony or any other crime or offense involving fraud, larceny, theft, misappropriation or conversion of funds, or tax evasion is prohibited from obtaining a license.

The second of these final two stipulates that through the final approval process, all changes in the proposal including but not limited to partners, investors of any level, management, development or principal employees and contracts must be reviewed by the Division of the Lottery and approved by the three leaders prior to final approval.

Darryl Greene, a principal at The Darman Group, a partner of AEG, was convicted of fraud in 1999. Andrew Frank, a spokesman for AEG, said that Greene’s conviction may not be a problem because Greene pleaded guilty to a misdemeanor and was not convicted in a trial. Frank refused to comment on specifics, but said that any issues would be negotiated before the final memorandum of understanding is issued. AEG said in a statement released by Jeffrey Levine, founder and CEO of Levine Builders, another partner in AEG, that they expect the move forward with final approval and construction.

“We know we will be a great partner with the state and residents of Queens for years to come. We look forward to completing the memorandum of understanding and beginning construction,” read the statement.

Silver’s office also said that this issue, as well as whether or not AEG will be able to foot the $300 million price tag upfront, would be discussed and worked out before the final memorandum of understanding is issued, but restated that under the Speaker’s conditions, any conviction, whether through jury trial or plea bargain, would prohibit an individual from receiving a license from the State Division of Lottery and that the Speaker will not budge from his four conditions.

“I agreed to support the selection of AEG contingent upon four conditions to be expressed in a memorandum of understanding,” Silver wrote in a letter to Governor Paterson Wednesday. “Let me reiterate – in the event our conversation and my letter were not absolutely clear – the four conditions are not negotiable.”

Despite the issue of conditions, the decision was met with sighs of relief and praise from local officials.

“The Racino will bring welcomed economic growth to our community by providing jobs, both during the construction and also full-time permanent jobs for the operation of the facility,” said Assemblywoman Audrey Pheffer (D-Rockaway Park). “This project will be a strong economic engine for the local economy by providing added revenue for New York State, increased educational funding and much needed employment.”

“Now that a decision has been made on the future of Aqueduct, I look forward to working on ensuring the project is done in an efficient and expedient manner,” said Sen. Joe Addabbo Jr. (D-Howard Beach) whose district includes Aqueduct Racetrack. “The communities I represent need jobs, funding for our schools and the big financial shot in the arm the AEG project, with its entertainment, restaurants and retail shops, will bring.”

The Darman Group will work with Empowerment Development Corporation as co-developer of the project. Empowerment Development has strong ties to South Queens politics. The group was created by the Rev. Floyd Flake, who represented South Queens, including Aqueduct Racetrack, in the U.S. House of Representatives from 1987 until his resignation from Congress in 1997. Flake is a political mentor of Senate President Pro Tempore Malcolm Smith (D-St. Albans), the former Senate Majority Leader, as well as U.S. Rep. Gregory Meeks (D-Jamaica) who succeeded Flake in Congress and represents a district that includes Aqueduct Racetrack.

Smith was thought to be strongly in favor of AEG’s bid. The extent of his influence in the final decision is unclear, although it was current Senate Majority Leader John Sampson (D-Brooklyn) who spearheaded the Senate on the issue. Sampson was strongly in support of AEG’s bid.

Reach Reporter Domenick Rafter at drafter@queenstribune.com or (718) 357-7400, Ext. 125.