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Judge Rejects Rosecroft Sale; Money Owed

Monday, April 05, 2010  By: Tom LaMarra


A United States Bankuputcy Court judge in Maryland has tossed out a plan by Cloverleaf Enterprises Inc. to sell Rosecroft Raceway without having to make good on several claims, including those for millions of dollars owed Thoroughbred horsemen under a 2006 simulcast agreement.

Judge Paul Mannes, in a lengthy April 2 memorandum of decision, said the proposed sale of Rosecroft, a harness track, to developer Mark Vogel would primarily benefit the sole shareholder, the Cloverleaf Standardbred Owners Association. Mannes said Cloverleaf “fell short in its duty to act as a fiduciary for all creditors and interest-holders.”

In 2009, Rosecroft management refused to adhere to a 15-year revenue plan hammered out between Thoroughbred and Standardbred interests in 2006. Under the deal, Rosecroft was able to import Thoroughbred signals by paying about $5.9 million a year to the Thoroughbred industry, and generated $2-$4 million a year for harness racing purses depending on estimates.

Despite that revenue, the track continued to reduce live racing dates and hasn’t offered a regular live meet since mid-2008.

Vogel has said Rosecroft needs other forms of gambling to survive, and was successful in getting a card club bill through the Maryland Senate. The bill’s fate in the House of Delegates, however, remains unclear.

In a release, Cloverleaf said Rosecroft could close April 19 without assistance from the legislature. Cloverleaf claims about 200 jobs would be lost.

As noted in Mannes’ decision, Standardbred horsemen currently stabled at Rosecroft for training must vacate the premises May 1. That has led to speculation Rosecroft’s owners have little interest in rebuilding the harness racing program at the track, which is located just south of Washington, D.C., near northern Virginia.

“The court finds that (Vogel’s) interest is not one of promoting Standardbred racing, but rather of promoting a gambling enterprise, and the purchase of the Rosecroft facility provides him with a ticket to the game,” Mannes said.

Mannes also took the Maryland Jockey Club and Maryland Thoroughbred Horsemen’s Association to task in his memorandum.

“The opponents to the (sale of the track) are competitors of the debtor for the gambling dollar, so the court takes the high-minded tone of their objections relating to the public interest and racing industry with a grain of salt,” Mannes said, “but the requirement of good faith does not require that they act in selfless interest.”

As horsemen’s groups around the country began cutting off their signals to Rosecroft last year, the track was left with only harness and Quarter Horse simulcasts, which it continues to offer. Not having Thoroughbred signals in that market has hurt the MJC and horsemen, but the alternative is worse, Maryland THA attorney Alan Foreman said.

“We honored the (2006) agreement,” Foreman said April 5. “We took a decent hit of about $1.8 million a year, but figured with slots coming and a 15-year agreement it was worth that type of peace.

“I believe we’re capturing some of the (lost Rosecroft business) back, but it’s hard to quantify. Ideally, we’d like to have that market back but won’t make a deal with these people under these circumstances.”

When the statewide slots referendum passed in 2008, Rosecroft wasn't among the sites earmarked for gaming. It will, however share in up to $100 million a year the horse racing industry is to receive from slots parlors when all five are operating.

Multiple lawsuits, including anti-trust, have been filed in connection with the case and are pending.

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