Playing the Ponies

A corporate watchdog's horse comes in

From corporate watchdog Neil Getnick's perspective, it makes perfect sense that the New York Racing Association has hired him—at $125,000 a month, pending a judge's OK—to serve as its "special integrity counsel" and ensure that NYRA doesn't get into the kind of trouble that once landed it a federal indictment on tax-fraud charges.

"NYRA must ensure that the reform process is continued and expanded upon," Getnick tells the Voice. "It was in that context that NYRA retained us nearly two years after our federal monitorship ended. . . . It makes no sense to make progress and then abandon it."

And who better than Getnick to do that work, since he was the court-appointed monitor who, in 2003, concluded in a report that NYRA—which runs the state's three premier horse-racing tracks—had substantially reformed its operations.

But for critics who were shocked when Governor Eliot Spitzer announced his plan two weeks ago to give NYRA—which is currently in bankruptcy—a new 30-year deal to run the tracks (as well as a bailout worth $175 million), Getnick's plum job is an outrageous example of quid pro quo politics that only adds to the questionable nature of Spitzer's choice.

In his announcement, Spitzer declared that NYRA has "completely changed." Meanwhile, in the 148-page report on all four racing-franchise bidders released earlier this year, the state inspector general's office relied heavily on Getnick's 2003 report in the relatively favorable section on NYRA.

It was Getnick's glowing account, in other words, that helped the troubled NYRA land an improbable—and incredibly lucrative—new lease on life. And now, without competitive bidding, NYRA has hired the 53-year-old attorney to be its ethics monitor.

"Since Getnick has been involved with NYRA, his relationship has evolved from independent monitor to business partner," says David Vermillion, a spokesman for Empire Racing, one of the three other groups competing with NYRA for the racing franchise. "Getnick has worked aggressively on behalf of NYRA to help retain the franchise, and he stands to profit greatly from its success."

Of course, Getnick is only one of many lawyers and lobbyists who have found a financial windfall in the two-year struggle for the right to run the Belmont, Aqueduct, and Saratoga race tracks. In 2006, for example, the combatants spent $2.2 million on campaign contributions and lobbyists, a recent report showed.

The law firm Weil, Gotshal & Manges has already earned more than $1 million in fees from NYRA's bankruptcy case, and has another million-dollar bill pending, court records show.

Those records also show that the firm has assigned no fewer than six partners—billing at up to $890 per hour—to the bankruptcy case, along with 14 associates (up to $560 per hour) and 15 clerks (up to $225 per hour).

But Getnick, a 1978 graduate of Cornell Law School who is president of an association of inspectors general and earned fame for his pursuit of Medicaid fraud, has emerged as a main target of critics of the deal.

In the state inspector general's report that looked so positively on NYRA, there was a less positive section on Empire that was written by another firm that employed a former Getnick attorney and whose president sits on a board with Getnick. Vermillion alleges that Getnick "masqueraded" as an independent third party in meetings with the state inspector general, thereby "corrupting" the investigation.

"First, that's nonsense, and second, everything I told the IG's office was the absolute truth," Getnick says.

A spokesman for the inspector general's office didn't return a phone call for comment last Friday.

Officials with Empire have threatened to file a lawsuit over the report. But last week Spitzer dismissed those charges as "specious" and denied that the inspector general's report had any bearing on the choice of NYRA.

Spitzer spokesman Paul Larrabee says that the governor's special counsel, Richard Rifkin, who headed the panel on the racing franchise, met once with Getnick last February. The two men discussed Getnick's integrity report, produced while he was the court-appointed special monitor.

"The meeting took place prior to the time that the racing panel had been convened," Larrabee says. "At the time, Getnick had completed his work as the monitor and was sharing the findings of the report to the court with Mr. Rifkin."

Getnick did not meet with the governor or other Spitzer aides in connection with the franchise, Larrabee says.

NYRA's creditors immediately questioned why the association needs "yet another outside consultant" and said the deal would effectively add another $7.5 million in expenses before they would get a dime.

A NYRA spokesman did not return phone calls Monday.

The state Racing and Wagering Board, meanwhile, has concluded that NYRA should have put the contract out to bid. Under state law, NYRA has to solicit bids on all contracts over $250,000, unless the case is an emergency or the vendor is the only available source for the work.

NYRA used the sole-source exemption for the Getnick contract, but the board concluded there were other vendors who could have performed the same work.

"It is not a sole-source contract," says Racing and Wagering Board spokesman Daniel Toomey. "We believe the contract must be competitively bid."

For his part, Getnick says his firm is uniquely qualified to work for NYRA because of its prior work as the racing association's court-appointed monitor. "Our firm served for 18 months in that capacity, overseeing the structural reorganization of NYRA as well as the implementation of its comprehensive reform program," he says, adding: "NYRA fully complied with the sole-source exemption under the racing law as it is written and as it has been properly applied previously by the Racing and Wagering Board."

A federal bankruptcy court judge was expected to rule on the deal on September 19.

 
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