The New Dealer

With Spitzer at the table, Pataki's casino cronies pull an inside straight

You couldn't give an opponent much more of a beating than the one Eliot Spitzer handed John Faso last fall. Any worse and you're talking possible fraud or felony assault charges. When the official tally for the New York gubernatorial race was posted in January by the state Board of Elections, it showed Democrat Spitzer with just shy of 70 percent of the valid votes cast, thrashing the hapless Long Island Republican by more than 1.8 million ballots.

Pow! Bam! That's a mandate, no questions asked. New Yorkers gave the former attorney general a bright green light for the mission he promised during his campaign, the one where he pledged, on "Day One everything changes." By "everything," Spitzer made clear on the stump, he meant Albany's stalled government, its fractured ethics, and the anything-goes approach of the previous 12 years that showered perks and deals on the well-connected.

Which is why many political watchers did a sharp double take when Spitzer's first big economic-development announcement delivered a potential windfall to a passel of business-as-usual Republican operatives, a crew consisting of some of former governor George Pataki's closest cronies, who have aligned themselves with a company desperately trying to shed the taint of past corruption by former officers.

Illustration by Julia Green


Tune in: Tom Robbins on Spitzer and the casino deal

On February 19, just seven weeks after taking office, Spitzer did something even Pataki never worked up the nerve to do, signing a formal letter of support to the U.S. Department of the Interior calling for a controversial new Las Vegas–style casino to be created in the Catskills.

The notion of Catskills casinos has been bandied about for so long it has started to rival Rip van Winkle as a favorite local myth up in the mountains. But after years of government dancing and dallying on the subject, Spitzer's sudden move was the most concrete step taken so far. And if it comes to be, there's no question that there's a pot of gold waiting for the successful entrepreneurs who will be able to offer gambling-happy New Yorkers a destination that's at least a half-hour closer than either Atlantic City or Connecticut's two gambling spas.

The planned $600 million gaming emporium, to be built on 29 acres at the Monticello Raceway in Sullivan County, would boast 3,500 slot machines, 150 gaming tables, and a 600-seat nightclub. The proud owner of all this would be the St. Regis Mohawk Indian tribe, whose reservation happens to be about 400 miles north of the site, on the New York–Canada border. This is where the Interior Department comes in: It must approve any off-reservation casinos and take the 29 acres "in trust" for the tribe. That's a prospect many believe dubious at best—but more on that later.

Dennis Vacco
Frances Roberts

Relations between the St. Regis Mohawks and state government have been tense for years over law enforcement complaints of drug, alcohol, and cigarette smuggling across the border. But unlike the rest of the state, gambling is legal on tribal land, and since the tribe has promised to cut the state in on casino profits, there's a standing agreement to let bygones be bygones (provided that state taxes are henceforth paid on reservation smokes).

If the arrangement holds up, the Mohawks are poised to get a small piece of revenge for that 400-year-old swindle when the Lenape Indian tribe of Manhattan got taken to the cleaners by some cunning Dutch real estate brokers.

Much closer to Albany's political heart, however, is the company that is going partners with the Mohawks. Empire Resorts, a publicly traded corporation, is now closer than anyone has ever gotten to winning the most sought- after prize in a generation of state favor-seekers: a Taj Mahal in the old Borscht Belt.

In its pact with the Mohawks, Empire gets the right to handle everything from blackjack tables to hotels, ATMs, and lounge acts—in exchange for 30 percent of net revenues plus a host of other development fees. In a press release after Spitzer's announcement, the company eagerly promised to deliver a "world-class" casino at the site.

Empire has gotten to this point despite a history of financial scandals involving past officers, allegations of mistreating other Indian tribes, and the crassest of ties to the Albany old boys' club that surrounded ex- governor Pataki.

Or is it because of that?

One of those who first heard the casino dinner bell ringing and joined up with Empire's original incarnation was Pataki's economic-development czar and top fundraiser, Charles Gargano, who served as a board member and director. Gargano, a former construction executive, was so blasé about his potential conflict of interest as a key player in what was then known as Alpha Hospitality Corporation that it took a 1995 state legislative hearing to embarrass him into stepping down as a director. Even then, Gargano delayed shedding his interest in the company for months, offering contradictory statements about how much stock he owned and what he'd done with it. He instructed aides initially to say that he'd put his shares in a blind trust, and later that he'd sold them. Although he minimized his interest in the company at the time, Gargano recently griped to The New York Times that he lost $625,000 on his $800,000 investment—a figure that doesn't quite fit the chump-change definition.

Next Page »