Trust Who?

by Ed Meyer

posted on January 20, 2009 in News | No Comments >>

The Hinsdale Greyhound Park’s president and chief executive is denying that he ever told state gambling regulators that bettors would be paid if the track went bankrupt and closed its doors.

The track filed for Chapter 7 bankruptcy last month, leaving hundreds of bettors across the country at risk of losing a half-million dollars they had in wagering accounts.

The Hinsdale Greyhound Racing Association, which owns the track, does not have the assets to fully reimburse these bettors, Chief Executive Joseph E. Sullivan III said Friday during a creditors meeting in Manchester.

Sullivan also provided details about the transfer of the property the track sits on, to a holding company he manages and his pending land deal with Wal-Mart.

The N.H. Racing and Charitable Gaming Commission asked the state Attorney General’s Office last week to determine whether Sullivan did anything illegal when he filed for bankruptcy.

Commission Chairman Timothy J. Connors said Sullivan promised bettors would be paid, and then kept quiet about the bankruptcy so they wouldn’t try to withdraw their accounts.

Connors is adamant that he and his fellow commissioners heard Sullivan make assurances during several meetings that bettors would be protected.

“I’m kind of shocked that Joe would make that kind of statement. I personally will attest that he said that (he would repay the bettors) on more than one occasion. The other commissioners also feel strongly the same way,” Connors said in a telephone interview with The Sentinel after the creditors meeting.

Sullivan’s promises were verbal and made during nonpublic commission meetings that were not recorded, Connors said. The meetings were private because the track’s finances were being discussed, he said.

Sullivan said during the creditors meeting that he would have told bettors the track was going bankrupt, but they never asked. He acknowledged that bettors lacked sufficient knowledge about the track’s finances to inquire about its future.

Andrew Beyer, who writes a horse racing column for The Washington Post, could lose more than $20,000 in Hinsdale’s bankruptcy. Beyer and 11 of Hinsdale’s largest betting account holders have hired Manchester attorney Jennifer Rood in an attempt to collect what they’re owed.

“It certainly feels like a fraudulent criminal enterprise,” Beyer said. “At what point did Hinsdale say, ‘This money is ours, we’re entitled to take it’?”

The majority of Hinsdale’s bettors placed wagers on races over the telephone. Some never stepped foot on the track.

Bettors who spoke with The Sentinel said they thought they were depositing their gambling funds directly into accounts they held at the track.

They were wrong.

When any bettor sent the track a check or made a cash deposit, the funds would show up electronically in their wagering account.

But the money was actually deposited into the track’s general fund. This fund was used to pay for any track expenses, from dog food to the electric bill to payroll, according to Sullivan.

“All of the money was swirling around all of the time,” he said.

The track’s profits were plummeting in the years preceding the bankruptcy. It pulled in $5.9 million in revenue through Dec. 16, the day after its bankruptcy filing, a decline of $2.6 million compared with the same period last year.

The state gambling commission knew Hinsdale was having financial hardships, and began sending auditors to the track on a weekly basis in the months leading to the bankruptcy, according to Connors. He refused to explain why the commission did not pull the track’s pari-mutuel license before it went bankrupt.

In November 2007, Sullivan sold the track’s land and buildings to Hinsdale Real Estate Development LLC, a holding company, for $3.3 million, according to bankruptcy filings.

Sullivan and Carl Thomas, owner of Spofford-based Carl Thomas Construction Corporation, are the principals of the holding company.

The transfer allowed Sullivan to obtain a $1 million loan on the holding company from TD Banknorth and use it as a cash infusion for the struggling track, Sullivan said. The bank had refused to lend the money to the track, he said.

Thomas also bought the track’s mortgage for $2 million, Sullivan said. The track was paying $20,000 a month to the holding company for its debt on the mortgage, he said.

In the year before the track went bankrupt, Sullivan said his salary was $225,000.

Sullivan also borrowed a total of $650,000 from the track while he was its CEO. He refused to say where that money went.

Wal-Mart is looking to purchase 22 acres of land from Sullivan’s holding company for $2.1 million. Sullivan said the deal is expected to be finalized by mid-year.

The track still owns about 80 acres of land that may be liquidated to repay creditors. So far, one of the track’s accountants has collected $60,000 that will go to the bettors and non-betting creditors. The track owes a total of $1.7 million.

The track’s bankruptcy attorney has said that bettors might receive 10 to 25 cents on the dollar, if they are ever reimbursed.

A bankruptcy judge will decide who gets paid and how much. The case is expected to be hung up in court for at least a year.

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