Officials from the New Jersey Sports & Exposition Authority will consider whether to reopen bidding for its plan to privatize Monmouth Park Racetrack after a hearing Monday that centered on one losing bidder’s protest of the state’s current agreement.
Agency officials heard arguments from an attorney for John Brunetti, a New Jersey developer and Florida racetrack owner, who is protesting the state’s deal with the Thoroughbred Horsemen’s Association. The attorney, Paul Josephson, of Hill Wallack, argued the sports authority’s bidding process gave the horsemen a “competitive advantage” because of their involvement in an earlier deal that fell through late last year.
Josephson told agency officials the group’s advantage began as early as March 2011, when it asserted its rights to the signal for simulcasting races at Monmouth Park. That allowed the horsemen to become “a necessary party to the authority’s negotiations” with Morris Bailey, the developer who was close to leasing the Oceanport track before pulling out of negotiations in December.
“Based on that, we believe they certainly had a window into the authority’s thinking, negotiations, ultimate positions and a pretty good handle on not nearly issues involving simulcasting consent, but the overall terms of the transactions with Mr. Bailey,” Josephson said during the hearing.
That left the horsemen in a stronger position than Brunetti by late January, when the sports authority issued notices that it would hear new offers for Monmouth Park, he said.
Josephson also laid out a case that the horsemen should be disqualified because of political contributions made over the past two years. On Thursday, his firm sent a letter to the sports authority listing political contributions that he said disqualified the horsemen group’s winning bid.
Attorneys for the horsemen and Dennis Drazin, who are part of the group that was awarded the lease last month, argued Brunetti was kept in the loop after the Bailey deal fell through. Kenneth F. Oettle, of Sills, Cummis, Epstein & Gross, cited a detailed conversation about the deal in early January between Brunetti and Robert Kulina, the former Monmouth Park general manager who had joined Bailey’s negotiating team.
The conversation meant Brunetti “had access to the information he needed” by the time the sports authority formally sought a second round of bids that were similar to the would-be deal with Bailey, Oettle said. But Brunetti balked at the terms, he said.
“He had a lot of information — and certainly enough to form a strong view that he didn’t want any part of the Bailey lease, which he expressed,” Oettle said.
Nonprofit status key
Attorneys for the horsemen also argued that the group’s nonprofit status allowed it to make the political donations without disqualification, even though it would be making money as the Monmouth Park operator.
“The mere fact that there’s a return on an investment by a nonprofit entity, or its involvement in what would otherwise qualify as a commercial enterprise, has never converted … a nonprofit entity into a for-profit entity,” said Angelo J. Genova, of the firm Genova, Burns & Vernoia, citing IRS standards.
The attorneys also laid out a legal defense against Josephson’s claim that so-called pay-to-play laws or executive orders would disqualify the horsemen from bidding on a public contract.
But Josephson dismissed the idea that the horsemen group could claim to be a nonprofit organization as a track operator.
“They, in this instance, are acting in a commercial manner,” he said. “If gambling isn’t commerce, if gambling isn’t a business, I don’t know what is.”
Questions over political contributions surfaced earlier this month when the sports authority said Brunetti’s own donations disqualified his bid. On Monday, Mark Stefanacci, the agency’s chief operating officer and legal counsel, at one point asked Josephson if his client would even be eligible if the authority sought new bids in the immediate future.
Josephson said it was difficult to answer. He also conceded that the “authority … does find itself in a quandary in terms of having before it two bidders, both of whom are disqualified by the pay-to-play laws as we see it.”
Stefanacci, who served as the hearing officer, said the authority would consider the arguments and make a recommendation to its board of commissioners. The board will hold its monthly meeting on Thursday, but Stefanacci said he wouldn’t guarantee that the recommendations would be ready by then.
But Jerry Zaro, a Sills, Cummis & Gross attorney representing the horsemen, said Monday time was of the essence in the case of the state’s struggling racing industry. Under the agreement reached last week, the group was to take over operations starting early next month.
“The surroundings pertaining to award of this lease has created turmoil in the thoroughbred racing industry,” Zaro said. He added. “The season opens imminently, and yet trainers, horsemen, veterinarians, feed haulers, grooms, vendors … are wondering, ‘Is this season going to open?’ “
