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Friday, January 9, 2004
Racino sale raises licensing questions
Copyright © 2004 Blethen Maine Newspapers Inc. | ||||||||||
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AUGUSTA — Penn National Gaming confirmed on Thursday that it plans to buy Bangor Historic Track from rival Shawn Scott and develop Maine's first racetrack with slot machines. As expected, the announcement came as the Maine Harness Racing Commission prepared to resume a hearing on Scott's request for a commercial racing license. Neither Scott nor Penn National officials would reveal the purchase price. Both said the agreement is contingent on Penn National obtaining racing and slot licenses from the state and a development contract with the city of Bangor. The likely change in ownership means the commission must decide whether to move forward with Bangor Historic Track's application or start anew. It will meet again at 9 this morning at the Augusta Civic Center to hear a recommendation from Scott. "We're hoping the state will grant Penn National a conditional license for 2004, based on them completing a suitability investigation," said Stephen Langsdorf, a lawyer for Preti Flaherty Beliveau Pachios & Haley, and one of Scott's attorneys in Maine. Ruth McNiff, an assistant attorney general presiding over the hearing, told racing commissioners that it is up to them, not Scott or Penn National, to decide what step to take next. Options include moving forward with Bangor Historic Track's application for a 2004 commercial racing license. Hearings last month left off with Scott testifying before the commission. Another option is to continue the hearing until Bangor Historic Track "gets their house in order," said Assistant Attorney General John Richards, an adviser to the racing commission. A third option would be to adopt a recommendation made by Scott or other parties involved in the licensing process. During Thursday's hearing, Commissioner Michael Andrews said it seemed clear to him that a new owner would mean a new licensing process. "The law is pretty clear that we need a new application for the new entity before we can determine if a license would be granted to the new owner," he said. Complicating the issue is the fact that a new voter-approved law legalizing the use of slot machines at racetracks is scheduled to take effect on Feb. 21. The law gives the racing commission the responsibility of regulating slot machines and their operators. But even as the commission works on Bangor Historic Track's application, Gov. John Baldacci is pushing legislators to create a gambling commission to regulate slots. His bill is making its way through the Legislature, and Baldacci has asked the racing commission to delay any licensing decision until the racino law is revised. Eric Schippers, a spokesman for Penn National, said the company supports the governor's stricter regulations. He was also confident that the publicly traded company would satisfy whatever suitability standards are in place at the time of licensing. "We're confident, having been licensed in some of the strictest states, that we would pass," Schippers said. Penn National owns horse tracks in Charles Town, W.Va., and Grantville and Wilkes-Barre, Pa., and 11 off-track betting facilities in Pennsylvania. It also has a joint venture with Pennwood Racing, which operates Freehold Raceway in New Jersey, and an agreement with Scarborough Downs to work toward building a racino in southern Maine. Because the company is publicly traded, it will have to disclose its purchase price for Bangor Historic Track at some point. Scott and his companies, Capital Seven and Capital One, have invested at least $3 million in Maine. Capital Seven bought Bangor Historic Track from former shareholders for about $1 million, Langsdorf said. Scott organized and financed last fall's successful $1.5 million campaign to allow slot machines at racetracks. Under the new law, those licensed to operate commercial tracks are automatically permitted to operate slot machines at the tracks. They also get to keep 75 percent of the gross slot revenue. Scott's companies contributed $90,000 in a campaign to get local approval for slot machines in Bangor, and an unknown amount last month opposing an effort by Penn National and Scarborough Downs to build a racino in Saco or Westbrook. Negotiations between Capital Seven and Penn National began several weeks ago, during what became a bitter campaign between Scott and Scarborough Downs. Capital Seven had tried to team up with Scarborough Downs on a southern Maine racino project, and sued the Scarborough track owners when they joined with Penn National. Penn National sued a political action committee associated with Scott over statements made in an ad. Negative campaign ads on both sides of the issue aired on TV and radio, leading up to last week's votes by the two cities rejecting Scarborough Downs' proposal. Scott said the companies were able to put their differences aside. Schippers said Capital Seven, Scott and his associates "ran a campaign of massive mudslinging," but Penn National kept its focus on the opportunity that Bangor presented. "We are not working with him. We have an agreement to purchase his ownership in Bangor Historic Track," Schippers said. "Long after Capital Seven and Shawn Scott have left Maine, Penn National will be in Maine to help revitalize the harness racing industry and help to create what we hope will be a tremendous economic engine for the area." Capital Seven recently made $500,000 worth of improvements at Bangor Raceway as part of a development contract with the city of Bangor to build and operate a slot facility at the city-owned track. Bangor City Manager Edward Barrett said city officials spent much of Thursday studying the city's contract with Capital Seven after learning about Penn National's potential purchase of the company that leases the track. "We're also obviously concerned and interested in what direction the harness racing commission is going to be interested in taking," Barrett said. The racing commission, with help from the state Attorney General's Office, spent a year on its background investigation into Scott, his business associates and finances. The commission held four days of hearings last month while trying to determine if Scott was both financially responsible and of good moral character. Last month, the New York Racing and Wagering Board determined that Scott made a false application and that his experience, character and general fitness were inconsistent with the public interest and the best interest of racing generally. Scott is appealing the decision. Scott is a key investor in Mid-State Raceway in New York, the parent company of Vernon Downs. A background report prepared in Maine for the racing commission listed several concerns, including Scott's business associates, his companies' practices over the years, and lack of cooperation in turning over financial documents. Scott said Thursday that he believed he met Maine's suitability requirements, but thought it best for the Bangor project if he sold his interest. "I became such a lightning rod during the project, it was the better thing for the project to eliminate whatever controversy we can," he said. This would not be the first time a larger gambling company stepped in and bought a racetrack from Scott. He purchased Delta Downs in Louisiana for $10 million in 1999, helped with a campaign to legalize slot machines at the track, then sold it for $130 million to Boyd Gaming. Penn National also announced Thursday that it acquired an option to buy Scott's interest in Vernon Downs in New York. Staff Writer Grace Murphy can be contacted at 282-8228 or at:
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