(Corrects identity of minority stakesholder in paragraphs 4, 5
By Joan Gralla
NEW YORK Feb 10 The choice of a slot machine
vendor for New York's Aqueduct Racetrack came under more
scrutiny on Wednesday as federal prosecutors subpoenaed a
charity with ties to the vendor.
Peter Kiernan, counsel for Governor David Paterson, said in
a statement that the Lottery Division had been issued subpoenas
by the U.S. Attorney's Office on Feb. 9 related to an entity
called the New Direction Local Development Corporation.
New Direction, according to its website, was founded by
Congressman Gregory Meeks and state Senate President Malcolm
Smith to aid residents of Queens and the Rockaways.
Rev. Floyd Flake, the congressman whom Meeks replaced,
holds a stake of less than 1 percent in Aqueduct Entertainment
Group, the vendor selected to run the video lottery terminals
at Aqueduct Race Track.
Governor David Paterson in a radio show last Friday had
called Flake a "minute" investor in the video lottery venture.
One of New Development's missions was to raise money for
victims of Hurricane Katrina, but the New York Post on Feb. 8
ran an article saying almost none of the money reached the
The governor's counsel said: "The Lottery Division has been
advised that the inquiry by the U.S. Attorney's Office is in
regard to the New Direction Local Development Corporation, and
not the selection of Aqueduct Entertainment Group to run video
lottery terminals at Aqueduct Race Track."
The New York Times and other newspapers have raised
questions about whether the governor's selection of Aqueduct
Entertainment was due to Flake's political clout.
The list of companies that had sought the Aqueduct contract
included SL Green Realty Corp (SLG.N).
Kiernan said that "to the best of our knowledge" there is
no current investigation New Direction's selection as the
A spokesman for Smith said, "Senator Smith has played no
role in the day-to-day operations, management or administration
of the charity, and looks forward to a full investigation into
this matter." A spokesman for Meeks was not immediately
The New Direction Local Development Corp's website is:
Jeffrey Levine, an Aqueduct Entertainment Group partner,
said he was unaware of any probe and not been contacted by
investigators or regulators.
"We are continuing to work with the state to finalize a
memorandum of understanding and pay the $300 million licensing
fee by March 31 so that we can break ground on this vital job
creating project," he said.
Aqueduct Entertainment Group said it hired Thatcher
Associates, LLC, a law firm, to help devise "a comprehensive
integrity monitoring program for the development and ongoing
operation...of the casino and entertainment center."
The inquiry is another blow for an already embattled
governor who began the week by denying that he was resigning
because the New York Times was working on a story about an
unspecified scandal. On Thursday, Paterson told Albany
reporters he will only leave office through the ballot box or
"in a box."
Paterson's bid to win November's gubernatorial election
increasingly looks like a long-shot. For details on Paterson's
missteps, please see: [ID:nN08203009].
This also has been a difficult week for the state senate,
which on Tuesday evening expelled Democratic Senator Hiram
Monserrate, who was convicted of assaulting his girlfriend.
It was the first time a senator was booted since the 1920
"Red Scare" but two more senators' seats are also at risk:
Senator Kevin Parker was charged with assaulting a photographer
and Attorney General Andrew Cuomo is probing whether Senator
Pedro Espada profited from a charity. Cuomo and both senators
(Reporting by Joan Gralla; Editing by Kenneth Barry, Dan
Grebler and Leslie Adler)