Attorney General: Susan G. Townsley, Division of Special Revenue, 2003-015 Formal Opinion, Attorney General of Connecticut

Attorney General's Opinion

Attorney General, Richard Blumenthal

September 23, 2003

Susan G. Townsley
Executive Director
Division of Special Revenue
555 Russell Road
Newington, CT 06111

Dear Ms. Townsley:

This is in response to your request for advice on whether Connecticut law would prohibit Autotote Enterprises, Inc. ("AEI") from continuing to purchase the New York Racing Association's ("NYRA's") signal if NYRA were indicted on criminal conspiracy to commit tax fraud charges. We do not have sufficient facts to respond with certainty under all possible circumstances. However, in general, an indictment would not automatically require a signal termination order from your agency. Nevertheless, your agency should immediately take action, on an emergency basis, whether or not there is an indictment, to determine whether the alleged conduct of NYRA occurred and whether it justifies the immediate commencement of proceedings for revocation of the pertinent pari-mutuel wagering approval.

The factual circumstance as reported to us by you on August 7, 2003 is as follows:

"The Division received a call today from IRS Special Agent Mike Scaringi [(516) 683-5262]. He stated that NYRA, which operates thoroughbred racing in New York and has a contract with Autotote to carry the NYRA product in Connecticut, may be indicted after a three (3) year investigation into money laundering at the tracks they own and operate (Saratoga, Aqueduct and Belmont Park). In an attempt at a possible civil settlement, NYRA is claiming in its defense that if it were indicted, entities with which it contracts would be obligated to turn off the signal and therefore, cutoff a significant revenue stream. (Please note newspaper articles quote NYRA as stating the issue is that if they are indicted they will eventually file for bankruptcy (see attached)).

In Connecticut, AEI has the exclusive rights to the NYRA product. AEI in turn contracts with Mohegan Sun, Shoreline Star and Plainfield Greyhound Park to provide the NYRA signal (see attached agreement between NYRA and AEI).

The question that has been posed by the federal authorities in New York is if Connecticut law would prohibit an entity (AEI) from purchasing a signal from a corporation (NYRA) under indictment."

Your memo (August 7, 2003).

In general, the Division of Special Revenue cannot take administrative action based on the mere fact of an indictment. This rule is set forth in Conn. Gen. Stat. § 46a-80(d) which provides:

In no case may records of arrest, which are not followed by a conviction, or records of convictions, which have been erased, be used, distributed or disseminated by the state or any of its agencies in connection with an application for employment or for a permit, license, certificate or registration.

Conn. Gen. Stat. § 46a-80(d).

However, as we have noted in the past, the underlying conduct can serve as a basis for administrative action. See Informal Opinion of December 20, 2002 (Prior Activities), Attachment A.

NYRA is not a licensed entity in Connecticut. However, it does provide racing programs to AEI, which is a licensed entity. Conn. Gen. Stat. § 12-574(a).1 Those racing programs, and pari-mutuel pool combinations involved, must be approved by you and the Gaming Policy Board, where applicable, before they can be allowed. Conn. Gen. Stat. § 12-572(g);2 Reg. Sec. 12-574-F59(a)3. The test of allowance is whatever “may be determined to be in the best interests of the off-track betting system.” Conn. Gen. Stat. § 12-572(g). This type of eligibility requirement is a continuing duty, and failure to maintain eligibility can be grounds for revocation. See, e.g., Dadiskos v. Liquor Control Commission, 150 Conn. 422, 425, 190 A.2d 490 (1963). Accordingly, you should, with the approval of the Board where applicable, take immediate action to consider whether to revoke approval for NYRA racing. Any such decision should be made after notice and a hearing to fairly test the facts and law that might be in question.

Also, AEI's continued participation with NYRA under circumstances not "in the best interests of the off-track betting system" could constitute grounds for administrative action against AEI. As a licensee, AEI is prohibited from "committing or conspiring to commit or assist in the commission of a conspiracy to commit any improper, corrupt or fraudulent act or practice in relation to racing, jai alai or the operation of off-track betting." Reg. Sec. 12-575-F17(a)(8). Such conduct could subject it to administrative penalty after notice and hearing. Conn. Gen. Stat. § 12-574(m); Reg. Sec. 12-574-F16(a)(b). If your agency finds that public health, safety or welfare imperatively requires emergency action, and if your agency incorporates a finding to that effect in its order, summary suspension of a license may be ordered pending proceedings. Conn. Gen. Stat. § 4-182.

For all of the foregoing reasons, an indictment against NYRA would not automatically require a signal termination order from your agency, but administrative action should immediately be taken to determine if the charged conduct occurred and constitutes grounds for action under the applicable statutory and regulatory standards in an appropriate proceeding.

Very truly yours,


RICHARD BLUMENTHAL
ATTORNEY GENERAL

Robert F. Vacchelli
Assistant Attorney General

RB/RFV/ni
Attachment


1 Conn. Gen. Stat. § 12-574(a) provides: (a) Association licensees. No person or business organization may conduct a meeting at which racing or the exhibition of jai alai is permitted for any stake, purse or reward or operate the off-track betting system unless such person or business organization is licensed as an association licensee by the board. Any such licensee authorized to conduct a meeting or operate the off-track betting system shall indemnify and save harmless the state of Connecticut against any and all actions, claims, and demands of whatever kind or nature which the state may sustain or incur by reason or in consequence of issuing such license.

2 Conn. Gen. Stat. § 12-572(g) provides:

(g) The division or any person or business organization operating an off-track betting system, with the approval of the board, may combine wagers placed within such off-track betting system with similar wagering pools at the facility where a racing program is being conducted, regardless of whether such facility is located within or without the state. Such pari-mutuel wagers shall be combined in such form and manner as the executive director may determine to be in the best interests of the off-track betting system established pursuant to the provisions of section 12-571. Notwithstanding the provisions of subsection (c) or (d) of this section to the contrary, the division or any person or business organization operating an off-track betting system and conducting wagering on racing events held without this state, with the approval of the board, may distribute to the holders of winning tickets who have placed wagers in said combined pools such sums as may be deposited in said combined pari-mutuel pools, less the same percentage of the total deposits of such combined pools as is established at the facility where such racing program is conducted plus the breakage to the dime, as shall be determined by the executive director with the approval of the board.

3Reg. Sec. 12-574-F59(a) provides:

(a) Generally. The OTB association shall conduct pari-mutuel betting on any recognized meeting held within or without the state as the OTB association may determine, subject to the prior approval of the executive director.


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