Delaware North once again finds itself involved in a legal battle, as Suffolk OTB recently filed a lawsuit against the troubled hospitality company in the US Bankruptcy Court.
Jake’s 58 Casino is operated by Delaware North. The lawsuit alleges that Delaware North engaged in deliberate and dishonest behavior, intending to act in bad faith and commit malfeasance. These actions were claimed to have unfairly benefited Delaware North by charging excessively high costs for:
- Construction
- Rent
- Operational expenses
According to a Newsday report, Bryce Friedman, the lead attorney for Suffolk OTB from Simpson Thacher & Bartlett, issued a statement.
It is our anticipation that the court will compel Delaware North to honor its agreement with Suffolk OTB and provide transparency by revealing its financial records. This will allow us to expose the complete magnitude of Delaware North’s misuse of power as the manager of Jake’s 58.
Delaware North is widely recognized as the proprietor of Mardi Gras and Wheeling Island casinos located in West Virginia. Currently, the company is embroiled in a highly disputed legal battle with Miomni, a sports betting operator, over the closure of its mobile sports betting application.
Delaware North in court – again
During the initial year, Jake’s 58 generated $158 million in gross revenue. However, Suffolk OTB alleges that Delaware North failed to distribute the OTB’s rightful portion.
In addition to overcharging on construction and operational expenses, Delaware North reportedly utilized the marketing budget of the OTB to occupy vacant hotel rooms. Furthermore, they allegedly used the trademarks of the OTB without obtaining the necessary permissions.
The OTB suit alleges:
Delaware North has consistently redirected funds intended for the state and county, enriching its own hotel and other ventures, from the substantial VLT revenue amounting to hundreds of millions of dollars that has flowed through their hands.
The underlying strategy of Delaware North for Jake’s 58 is straightforward: All expenses are allocated to Suffolk OTB’s ‘Jake’s 58 Casino’ in order to generate profits for Delaware North’s ‘Jake’s 58 Hotel and Restaurant’.
According to the lawsuit, the OTB alleges that it possesses evidence of the funds being redirected, which were originally intended to be paid to the County. Furthermore, the OTB asserts that Delaware North engaged in nearly 100 deceitful construction orders, resulting in excessive charges amounting to millions of dollars, all in favor of Delaware North.
In addition to alleging wrongdoing, the lawsuit asserts that Delaware North has intentionally obstructed and prevented Suffolk OTB from obtaining records, with the intention of concealing fraudulent accounting practices.
Additionally, Delaware North attempted to deceive Suffolk OTB by deliberately withholding the 2019 operating budget until the last possible moment. This tactic aimed to prevent Suffolk OTB from thoroughly evaluating the budget before it was presented to the Gaming Commission.
In addition to everything mentioned, Delaware North reportedly declined to acknowledge its accountability for breaching state gaming regulations. Suffolk OTB was billed $66,000 by the company for these casino gaming violations.
Delaware North may potentially be liable for a sum of $5 million in unpaid dues, along with additional compensation for damages incurred by the OTB. Furthermore, the OTB is seeking to have the existing contract with Delaware North declared void by the court, enabling them to explore alternative partnerships for the management of Jake’s 58 and make renewed efforts to restore their progress.
Delaware North’s side of the story
Delaware North’s spokesperson, Glen White, asserts that the company has not violated the contract, which aligns with their anticipated stance.
According to White, the company asserts that it has conducted its business dealings with the OTB in a lawful manner and has adhered to the agreed-upon terms between both parties.
According to White, the allegations made against Delaware North are deemed as “fabricated.”
After experiencing years of ineffective operations, Suffolk’s OTB operations have ended up in bankruptcy. In order to revive their video gaming operations, Suffolk OTB sought the assistance of Delaware North, a renowned industry leader from their home state, with the approval of the US Bankruptcy Court.
Delaware North’s management of the property has consistently exceeded financial projections, leading to greater returns than expected for Suffolk OTB, the residents of Suffolk County, and the State of New York.
According to White, Delaware North has invested millions of dollars into Jake’s 58, aiming to transform it into a lucrative and well-managed establishment that generates substantial revenue for both the state and the local community.
Aside from Jake’s 58, Delaware North manages various racetracks and casinos situated in:
- New York
- West Virginia
- Florida
- Arkansas
- Arizona
- Australia
In addition, it possesses hotels, tourist destinations, and stadium catering services catering to some of the most prominent sports teams globally.
It takes a village – or so they say
Suffolk OTB sought to leverage the launch of the Delaware North-operated casino as a means to counteract the diminishing trends in horse racing.
Since its opening, the casino, featuring a gaming operation with over 1,000 video lottery terminals (slot machines), has experienced considerable triumph. In the previous month alone, it managed to amass a staggering $322.9 million from wagers, resulting in millions of dollars in profits.
- New York State
- Suffolk County
- Village of Islandia
Other entities are also facing lawsuits, not just Delaware North.
In a recent legal battle, the Village of Islandia found itself entangled in a federal district court case. Opponents of the casino alleged that the village had unlawfully granted zoning approval for its establishment. However, a district court judge ruled in favor of both Delaware North and the Village, and the case is currently awaiting an appeal.
Paul Sabatino, a lawyer from Huntington Station, expresses his astonishment at the latest lawsuit filed by Suffolk OTB.
“It’s a typical situation where thieves lack any sense of honor. Presently, they are betraying one another, resorting to cannibalizing their own ranks.”
“The situation exerts immense pressure on the village, compelling them to reevaluate their actions. … I never anticipated that OTB and Delaware North would experience such a severe rift.”
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