Thursday, October 20, 2005

Downs: Slots promoter bilked us out of millions

Published in the Current

SCARBOROUGH (Oct 20, 2005): Scarborough Downs has sued gambling promoter Shawn Scott, saying he manipulated voters, state laws and horsemen to create a monopoly on slot machines in the state, which he then sold for more than $50 million, depriving the Downs of a cut of the windfall.

The suit is an attempt to ensure that Shawn Scott “doesn’t walk away from this a rich man after doing what he did,” according to Downs owner Sharon Terry.

A lawsuit filed in Cumberland County Superior Court claims Scott, a resident of St. Croix in the U.S. Virgin Islands who owns gambling operations in several states, always intended to block Scarborough Downs from installing slot machines at its track, or to control any slots at the Downs, despite making statements and formal agreements to support the Downs’ plans for slots.

The suit alleges their efforts cost the Downs the opportunity to receive $50 million from Penn National Gaming, the Downs’s partner in developing a Southern Maine racino. Scarborough Downs attorney Ed MacColl said Scott “made certain agreements” and then took action that “undermined” them, forming the basis of the suit.

Scott’s attorney, Bruce Merrill, said the suit had no basis in fact, and that “when everything is brought to light,” it will become clear that “neither Shawn Scott nor Capital Seven (his company) has done anything wrong.” Merrill has not yet filed a response, and has until early December to do so. He declined to talk about specific allegations in the suit until filing that response.

Scott created the citizen’s initiative that was on the November 2003 statewide ballot, asking to legalize slot machine gambling at racetracks, which required local approval by the voters of the town in which the track would be located.

The Downs sought to leave Scarborough because it wanted to move to a community that would vote in favor of having slot machines at the horse racetrack. Scarborough’s Town Council had voted to ban slots in April 2002, and voters town-wide rejected a proposal to overturn that ban in November 2003. The Downs optioned land in Saco and Westbrook, in hopes of relocating to one of those cities.

‘Tussle between the big boys’

Scott’s original draft of the citizen’s initiative allowed the Downs a year, until December 2004, to seek local approval from Scarborough or a nearby town.

When the Downs asked Scott for an additional year, until December 2005, the lawsuit alleges, Scott then changed the wording to shorten the deadline to December 2003. That wording – and the 2003 deadline – was passed into law when the referendum was approved by Maine voters.

The suit then alleges a litany of wrongdoing by Scott, including that he backed two political action committees opposing the Downs’s efforts to get local approval in Scarborough, Saco and Westbrook, where the Downs sought to relocate; that he was behind a lawsuit trying to block the Westbrook referendum; and that he tried “to intimidate the Westbrook City Council into refusing even to hold a referendum.”

The Downs claims Westbrook residents were in favor of slots until Scott’s public-relations campaign changed their minds.

George Rodrigues, an organizer of “Our City, No Slots,” an independent Westbrook residents’ group that actively campaigned against the racino, described his group’s efforts as a low-budget door-to-door campaign that tried to stay out of the battle between the racetrack and the larger anti-racino groups.

His group was not one the Downs alleged was run by Scott. “We just did the best to run our campaign and stay out of the back and forth between those guys,” Rodrigues said. “We knew this was a tussle between the big boys.”

He said Scott’s advertisements did help sway the vote, though he did not attribute the proposal’s failure solely to Scott’s efforts. He thought his group’s door-to-door efforts had a bigger effect.

“In my opinion, it was the passion of that campaign that made the difference,” he said. “We knocked on a lot of doors.”

The Downs also claimed Scott instigated and paid the legal bills for a lawsuit filed by a Westbrook couple, John and Carol Peters – allegedly the parents of one of Scott’s attorneys – seeking to block the city’s referendum altogether. John Peters said Monday night that he had no knowledge of the new suit filed by Scarborough Downs and declined to comment on the lawsuit filed in 2003.

The Downs suit claims Scott gave misleading and false information to Westbrook city councilors, but Westbrook City Administrator Jerre Bryant said he did not specifically getting any information from Scott in the weeks leading up to the racino vote.

Jim Violette, the president of the City Council, was also president at the time of the racino vote. He said he does not remember Shawn Scott coming before the council with any information about the racetrack or Downs owner Sharon Terry. “Scott never approached the council or talked to the council,” he said.

Penn on both sides

The Downs also claims that Scott negotiated in competition with the Downs for an option on land in Saco and Westbrook where the track wanted to move, if allowed.

The Downs also claims that having used fraud and deceit to gain a monopoly, Scott then sold it for more than $50 million. The buyer, Penn National Gaming, expects to open a slot machine operation in Bangor in the next couple of months.

A judge refused Oct. 3 to freeze an upcoming payment to Shawn Scott from Penn National Gaming, which is purchasing Bangor Historic Track from Scott and other owners. The suit claims the payment is the final one in the deal and is for more than $30 million, and claims that if Scott is paid, he will “conceal” the money outside the U.S., where it will not be available to pay the Downs if it prevails in the suit.

The judge could revisit the request to freeze the payment, once Scott has had a chance to respond to the allegations in the suit, MacColl said.

Merrill said he would not discuss the total amount of the sale, or the amount of the final payment, but said the final payment was agreed to coincide with the opening of slot machines in Bangor, which he said should be within the next two months.

Penn National also has an exclusive agreement with the Downs to build a racino in Southern Maine, should one be approved. Under that agreement, Penn National would pay for the construction of the new track and buildings, and would collect rent from the Downs, as well as the proceeds from gambling, some of which might be shared back to the Downs.

MacColl said the agreement has never been terminated, but “I don’t know that there’s any active effort” between the two companies at the moment.

The Downs is also slated to benefit from slot machine revenues – even only at Bangor – because a portion of the proceeds is designated to go to the state’s harness racing commission to increase the size of purses for horse races at all tracks and agricultural fairs.

The suit seeks unspecified payment for damages, but indicates the Downs spent more than $1 million attempting to pass the referenda, and could have gained as much as $50 million from Penn National Gaming, if the Westbrook or Saco referenda had given approval to slots at a relocated Downs.