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Queens Chronicle

AEG sues state over rejected Aqueduct bid

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Posted: Thursday, July 15, 2010 12:00 am

Aqueduct Entertainment Group has filed an Article 78 lawsuit against New York state, alleging it was the victim of “arbitrary, capricious, unauthorized and discriminatory actions taken against them by Lottery, Gov. David Paterson, Senate President Malcolm Smith and Assembly Speaker Sheldon Silver.”

AEG was originally the winner among groups bidding to operate a gaming and entertainment franchise at Aqueduct Race Track, and was subsequently denied a gaming license amid accusations of being the beneficiary of political favortism.

The lawsuit, filed in state Supreme Court, claimed AEG was unfairly disqualified from the process. A judge Wednesday ordered a halt to the bidding process pending a hearing July 23 on AEG’s suit [see pages 2 and 8].

The lawsuit claims that the state, specifically Assembly Speaker Sheldon Silver, changed the licensing rules after Albany had awarded the bid to AEG. The Division of Lottery then said it could not aprove them.

“One change required all members of AEG — even if they were passive investors who maintained negligible interests in the company — to apply for a video lottery gaming license and submit highly detailed personal and financial information to Lottery, an agency known for leaking confidential information,” a portion of the lawsuit reads. “[Silver] unilaterally imposed this condition and others solely on AEG, conjuring them out of thin air and supplanting applicable video lottery gaming regulations. Indeed, the speaker’s nonnegotiable conditions were so far out of left field Lottery’s general counsel called them “arbitrary and capricious.”

The lawsuit claims that the lottery caved to pressure from Silver to “derail” the bid, and that AEG was further the victim of “media speculation and innuendo” leaked by the state.

“But absolutely no one associated with AEG has been accused of any wrongdoing since they did nothing improper,” the court documents state.

The bidding process for the Aqueduct franchise has been a long and tumultuous one.After the bidding was reopened and AEG’s bid rescinded, three other groups vied for the franchise.

Earlier this month the bids of two, one a consortium consisting of SL Green, Hard Rock International and Clairvest Group; and the other Penn National Gaming. were disqualified by the Lottery.

Lottery officials said the two did not agree to all of the state’s terms set for the operator of the franchise, including a $300 million, nonrefundable licensing fee due before the final contract was signed and paying off a portion of the New York Racing Association’s debt.

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