Judge: No slots profit for De Francis

Posted: 7:22 pm Tue, January 5, 2010
By Liz Farmer
Daily Record Business Writer

Joseph De Francis is one of the bidders for Magna’s Maryland properties. WILMINGTON, Del. — The former owner of Laurel Park lost his bid Tuesday to keep alive an agreement that would grant him a cut of the proceeds if the race track gets slots.

Now the only way Joseph De Francis, who sold Maryland’s thoroughbred race tracks to Magna Entertainment Corp. in 2002, stands to gain from gaming at Laurel is if he is the winning bidder on the track at its bankruptcy auction this month.

That auction was pushed back to Jan. 21 at the request of Magna. An attorney for the Ontario-based company said at Tuesday’s hearing in U.S. Bankruptcy Court that Magna wants more time to reach a preliminary agreement with one of the six qualified bidders for its Maryland properties.

Magna would then share that preliminary agreement with Maryland, to give the state the option of exercising its right of first refusal, and the other five bidders.

The auction was originally scheduled for Friday.

De Francis is one of the six bidders for the Maryland properties, which include Laurel, Pimlico Race Course and Bowie Training Center. Other known bidders are Baltimore developer David Cordish and Penn National Gaming, which is planning a slots facility in Cecil County. Cordish holds the only gaming license allotted for Anne Arundel County and plans to build a facility north of Laurel near Arundel Mills mall.

Because Cordish holds the Anne Arundel license, Laurel cannot be granted a license for slots unless a change is made to the constitutional amendment that allowed slots in 2008.

The agreement Magna reached with De Francis in 2002 would have given him and his family a percentage of Laurel’s slots profits on a sliding scale for the first 20 years the track hosted slots.

Russell C. Silberglied, an attorney for Magna, argued that De Francis’ group, Maryland Jockey Club Ventures LLC, should not benefit from alternative gaming at Laurel because Magna had not secured any rights to alternative gaming during the time of its ownership.

De Francis made the agreement with Magna, Silberglied said, which failed to get a license for slots when its application was rejected for not filing the $28.5 million application fee last year with the state.

“If they granted the [license] to Laurel … Laurel would then have an obligation to turn it over to MV LLC,” said Silberglied. “But they rejected the application, so that shows we’re talking about promise rather than a vested right.”

He also said the agreement Magna made in 2002 did not transfer to a new track owner under bankruptcy code.

“There’s no reason why this should encumber a third party,” he said.

De Francis’ attorney, Ira T. Kasden, argued that alternative gaming rights were not just limited to holding a license. He said that alternative gaming rights includes anything that is necessary to “be able to secure and later maintain that license.”

He pointed to property improvements and permits obtained over the years to ready Laurel should the race track ever be allowed to have slots, as evidence that Laurel had the potential to be an alternative gaming property.

But U.S. Bankruptcy Judge Mary F. Walrath interrupted several times during Kasden’s argument and took issue with the notion that the agreement should transfer to a new owner when it was not written down and specified.

“It seems to me that [bankruptcy code] suggests that can be voided against a bonafide purchaser,” she said.

In her ruling, Walrath called the agreement “vague,” saying De Francis’ definition of alternative gaming rights was too broad.

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