Court: Suffolk OTB bankruptcy move illegal
ALBANY - Suffolk Regional Off-Track Betting Corp.'s attempt to seek bankruptcy has been ruled illegal, putting its ability to survive in legal limbo.A federal judge has ruled that Suffolk OTB improperly went about filing for Chapter 9 bankruptcy earlier this year and that, for now, the betting entity is not eligible for protection.
Carla E. Craig, chief judge of the U.S. Bankruptcy Court for the Eastern District of New York, said in a decision that Suffolk OTB inappropriately sought authority from the County Legislature. Instead, Suffolk OTB should have sought authorization from the State Legislature and Gov. Andrew M. Cuomo.
The county legislature's resolution sanctioning bankruptcy "exceeded Suffolk County's authority and is therefore unconstitutional and void," Craig wrote in a 37-page decision late Friday. "Accordingly, Suffolk OTB has not complied with [bankruptcy laws] and is therefore ineligible to be a debtor under Chapter 9."
Suffolk filed for bankruptcy in March. Churchill Downs, the Kentucky horse racing track and one of the OTBs largest creditors, filed suit to block them. According to Craig's decision, the OTB's bankruptcy plan calls for all creditors to be paid in full. But if the bankruptcy filing is dismissed, "Suffolk OTB may be required to cease operations."
Spokeswoman Debbie Pfeiffer said Suffolk OTB bankruptcy attorneys have filed a motion requesting a stay pending appeal of Craig's decision. The agency also could press state lawmakers for permission to file a new bankruptcy petition.
An attorney for Churchill Downs declined comment.
Suffolk OTB president Jeff Casale said he has called a special meeting of the three member board of directors for 3 p.m. Monday and is making reaching out to the governor's office and the state legislature to determine what action may be required to allow the reorganization to continue. "We are pursuing all possiblities ... ," Casale said.
"We disagree with it," Casale said of the court decision.
He said the decision will have no immediate impact on OTB operations and that customers' money is safe.
With Rick Brand
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