Stan Bergstein's Daily Racing Form columns

With permission of Daily Racing Form,  Stan Bergstein’s bi-weekly columns for that publication will appear here every other week. 

March 8, 2005

Little track turns into big deal 

For more than two years now, a bitter battle has torn apart Vernon Downs, a charming harness track located in a beautiful lush valley between Utica and Syracuse in central New York. It operated for more than 50 years as a popular rural center of the sport, having been founded by patrician fathers of the game. Then, bought by outsiders with no connections with racing who wound up in federal prison on matters not related to racing or Vernon Downs, it fell on hard times.  

The prize is not harness racing alone. The track is dead broke, owing perhaps $30 million. No one would ardently seek that financial burden to conduct racing of any kind with the zeal that is being shown by those who are fighting to buy Vernon. To make matters worse, there is a huge and hugely prosperous Oneida Indian Nation casino and entertainment complex - Turning Stone - less than five miles down the road. So what is the shining pot of gold at the end of the Vernon Downs rainbow?  

It is a racino license, currently sitting dormant while two rich and powerful men battle to buy the track.  

They are Shawn Scott of Las Vegas and the Virgin Islands, and Jeff Gural of New York City. There has been no love lost between the two entrepreneurs.  

Scott is a promoter, clever and successful. He bought Delta Downs in Louisiana for $10 million or so, fought hard to get slot machines at tracks legalized in the state, and two years later sold the track to Boyd Gaming for $120 million or so.  

Emboldened and encouraged by that coup, he repeated it in Maine, buying a little harness track called Bangor Raceway for $1 million, spending another $1.5 million getting slots legalized for the track, and then selling it for $30 million or so to Penn National Gaming, which is renovating the track, building a racino, and hoping to open it next year.

Jeff Gural's background is real estate, and he is a big-time operator in the toughest market in the world: Manhattan. He is chairman of Newmark and Company Real Estate, well known in the industry.

Mid-State Raceway, the parent company of Vernon Downs, has said it does not trust Shawn Scott, who ran the track for two years, sold it to a group from Florida who could not get licensed in New York, and then regained majority control, with Vestin Mortgage of Vegas as his de facto partner.

Both Scott and Gural offered money to keep Vernon solvent - Scott $9 million and Gural $8.5 million. Mid-State's board of directors took Gural's offer, for which he is to get 91 percent of the company's stock and the right to name a new chief executive officer of Vernon and two board members.

He promptly named, and a bankruptcy court last week approved, Edward Tracy, who has more than 20 years experience in the gambling and hotel industry, having served as president and CEO of Trump Hotel Casino Resorts in the early 1990's. He also consulted with the Oneidas when they built Turning Stone, so he knows the territory.

As soon as the court approved Tracy, peace broke out. Sort of.

The same day, Deborah Daitsch-Perez, Scott's lawyer, wrote a "Dear Mike" letter to Michael Rhodes-Devey, a Mid-State lawyer, suggesting that "Shawn would be happy to meet with Jeff in New York to work out how they could best proceed to restart racing and obtain a [video lottery terminal] license as quickly as possible in a new debt-free company."

The debt-free company would be created by Scott and Gural jointly putting up $36 million in cash to acquire the assets of Mid-State, each contributing $18 million as equal partners. Vestin Mortgage would be paid $27 million in cash, all professionals (read lawyers) would be paid in full, and all unsecured creditors would have the principal balance of their claims paid in full at confirmation, with a reserve for disputed claims that might be allowed. This would leave, according to Scott, "at least $3 million to be divided among the existing shareholders."

Gural says it is is "highly unlikely" that Scott's offer will interest him. Peace, of course, can produce strange bedfellows, but it is doubtful these two will share the same bunk.