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Mar 2, 2011 10:31 AMPublication: The Southampton Press

Suffolk OTB May File for Bankruptcy

Mar 2, 2011 10:31 AM

Budget cuts and potential branch closures at the financially embattled Suffolk County Off-Track Betting Corporation will become a reality, a group spokesperson said this week, as the agency undertakes a new business reorganization plan while simultaneously seeking authorization from the Suffolk County Legislature to file for bankruptcy in the event that becomes necessary.

Southampton Town Management Services Administrator Russell Kratoville, who served as Suffolk OTB’s treasurer and director of finance and was employed by the organization from 1999 to December 2010, said he believes New York State is to blame for Suffolk OTB’s financial decline by requiring OTB corporations statewide to pay unfair statutory fees.

A recent Newsday article claims that the organization is being audited by the state’s Racing and Wagering Board, and that findings include mismanaged accounts, a $750,000 operating deficit and missing records.

Mr. Kratoville, however, said he does not believe that there were mismanaged accounts or missing records, or that there was even an audit conducted by the state agency. Further, he stated that under his watch, quarterly reports and monthly reports to the state were submitted, everything was in compliance with the law, and yearly audits came back clean.

Joe Mahoney, a spokesman for the Racing and Wagering Board, confirmed that there is an ongoing investigation into the agency’s finances but declined to offer specifics on the review. He also declined to comment on the Newsday article or any possible operating deficit, missing records or mismanaged accounts. He called the investigation a review of the corporation’s financial condition and cash flow, and said that the board had asked for additional financial records from the Suffolk OTB.

An audit of the five OTB corporations outside of New York City by State Comptroller Thomas DiNapoli’s office last year outlined reasons why OTB corporations statewide, like Suffolk OTB, are on the financial decline. The audit stated that the corporations’ business model, on the whole, needs to be changed. New York City’s OTB closed late last year.

The audit cites several reasons for the financial deterioration, which include external conditions such as a decline in the amount bet on horse racing nationwide, coupled with competition from casinos and unfair amounts OTB corporations are required to pay to harness tracks to take wagers on nighttime races. At the same time, the OTB corporations must make payments to local governments, leaving them with little money to pay their operating costs.

The audit provided recommendations to state policy makers to help alleviate the financial condition of OTBs, one of which includes revisiting the formula that dictates payments to harness tracks. None of the recommendations has been enacted, according to a statement released by Mr. DiNapoli last Friday.

“First, New York City OTB failed, and now Suffolk County Regional Off-Track Betting Corp. is on the verge of filing for bankruptcy protection,” he stated. “Others will follow. New York State has still not taken any substantive actions to bring back the bettors and fix OTB, a source of revenue for our hard-strapped municipalities and a support for the state’s horse industry.”

Mr. Kratoville echoed the same concerns outlined by Mr. DiNapoli in the audit. He said the organization is likely to benefit from a reorganization, something that is in the cards, according to a statement issued by Debbie Pfeiffer, the group’s director of public and government affairs. That reorganization could include an increased emphasis on generating revenue through internet and phone wagering.

“It’s important for people to understand that OTB has provided millions of dollars to the state, Suffolk County and horse farms,” Mr. Kratoville said.

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So the chickens come home to roost. Even if Russell Kratoville had been a paragon of management competence, the brazen steamroller tactics by which the Town Board majority of Chris Nuzzi, Nancy Graboski and Jim Malone forced his appointment last November would still be a dismal betrayal of the public trust. With no warning, no consultation with other Town Board members, no advertising of the open position, no interviews, no public input, no screening, and no background checks, the Nuzzi/Graboski/Malone ...more
By Turkey Bridge (1889), Quiogue on Mar 3, 11 3:45 PM
1 member liked this comment
No item unworthy of partisan commentary, eh, TB? And KNOW that we are in complete accord on the Kratoville appointment.
By Frank Wheeler (1806), Northampton on Mar 3, 11 5:00 PM
My comment is fact-based and fair.
By Turkey Bridge (1889), Quiogue on Mar 4, 11 10:58 AM
I hope that the bankruptcy filing doesn't result in the unemployment of more Republican Party loyalists. Under the circumstances, it's heartening to know that there are other governmental organizations like the ST Council that will step in to give them a helping hand.

(The position of ST Chief of Police will soon be up for grabs.)
By highhatsize (3795), East Quogue on Mar 8, 11 7:02 AM
1 member liked this comment
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