Jul 20
2022
Hardwick demands answers from OTB
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For the first time, one of the governments that owns the Western Regional Off-Track Betting Corp. is demanding answers about the agency’s management practices and business dealings.
Erie County Comptroller Kevin Hardwick sent two letters this week to Henry Wojtaszek, OTB’s president and CEO. One letter posed a series of questions about the agency’s practice of providing top-shelf health insurance to board members, despite repeated warnings that doing so is impermissible.
It’s a subject Investigative Post has covered extensively, in more than two dozen stories published over four years.
Hardwick’s other letter raised questions about OTB’s sale of land to a group of prominent Buffalo-area businessmen for the development of a hotel — which the agency then bought at a substantial profit to the developers.
Formed as a public benefit corporation in 1973, OTB operates 12 branches, 26 E-Z Bet locations, a telephone wagering service and a harness racing track and casino in Batavia. Revenues generated by OTB are distributed to 15 Western New York counties and the cities of Buffalo and Rochester.
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The hotel deal dates back to 2015, according to Hardwick’s investigation of the transaction. In March of that year, OTB’s board of directors approved the sale of a little under an acre of land at Batavia Downs to a company called ADK Hospitality, LLC.
ADK Hospitality was formed just the month before, according to state records. The company’s partners include prominent local businessmen: Anthony J. Baynes, a former chair of the Erie County Fiscal Stability Authority; Kent Frey of Frey Electric Construction; David McNamara, a partner at the Phillips Lytle law firm; Dr. Laszlo Mechtler of the Dent Neurological Institute and Roswell Park Cancer Institute; and James and John Basil, who own car dealerships.
Baynes and Frey are big political donors, particularly to Republicans, as is McNamara’s law firm, according to state campaign finance records. Wojtaszek is a former chair of the Niagara County Republican Committee and remains active in GOP circles.
None of the company’s partners had experience building or managing a hotel, Hardwick noted in his letter to Wojtaszek.
Nonetheless, the land was sold, ground was broken in October 2015 and the 84-room hotel opened a year later. Media reports indicate it cost $5.5 million to build. The cost was subsidized by $600,000 in tax incentives from the Genesee County Economic Development Center, according to a Buffalo News report.
The hotel turned a profit every year until the pandemic struck, according to an interview Baynes gave Buffalo Business First last year.
In 2019, a year before COVID shutdowns began, OTB began working on a deal to purchase the hotel from ADK Hospitality. Those negotiations were delayed by the pandemic, according to the Business First report.
The sale finally was consummated last July at a price of $7.5 million — “a considerable markup,” according to Hardwick.
OTB raised the money for the purchase through a bond sale, according to board meeting minutes, which means OTB will pay interest on that $7.5 million, too.
Hardwick’s letter poses a long list of questions about the deal, including:
- Why would OTB engage a group of investors who had never developed a hotel before? Who approached whom?
- How was the sale price for the land determined? Who initiated the deal to purchase the hotel? And who set the price?
- Did the New York State Gaming Commission, which oversees OTB, approve of the purchase of the hotel?
- What property tax and sales tax breaks has ADK Hospitality received from local governments and development agencies?
- How much has OTB spent on rooms in the hotel, before and after it took ownership, and how were those rooms used?
- How much does OTB pay the company that manages the hotel?
- How much has OTB paid attorneys and bond counsel to complete the purchase?
The questions go on for a page and a half.
“As the chief auditor for Erie County government, which is a co-owner of WROTB, I believe it is appropriate for me to make these inquiries, to pose these questions, and to expect thorough answers,” Hardwick wrote.
Hardwick’s other letter, regarding the practice of providing premium healthcare coverage to Western Regional OTB board directors at taxpayer expense, raises questions Investigative Post has been asking (and answering) in coverage of the agency over the past four years.
The state attorney general, the state comptroller and OTB’s own attorneys have advised Wojtaszek and the board that it is illegal to extend that perk to its board members. But Wojtaszek and the board ignored those admonitions entirely until last June, when the board agreed it would no longer offer the health insurance package to new board appointees.
Hardwick had questions about that decision, too.
“If you are terminating health insurance for new directors, are you terminating it for existing directors?” he wrote.
“For current directors, when they separate from the WROTB board, will they be eligible for health insurance in retirement? Are they continuing to receive it now? Under what legal basis are you giving them lifetime health insurance after ten years?”
Hardwick went on to ask how much money the board has spent on lawyers and consultants to defend its provision of healthcare for directors. He also asked questions about per diem travel expenses and stipends for board directors.
“The questions speak for themselves,” Hardwick told Investigative Post Tuesday in a phone interview, referring to both letters.
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In 2019, OTB divided $3.6 million in profits among the 17 governments that own the agency, using a formula based on population. Erie County, as the most populous of the government owners, received the biggest share: $860,687.
“As chief financial officer for the county, which is part owner of the Western Regional OTB, we’d love to maximize our revenues there. And we want to make sure that they are doing everything they can in their power to maximize profits, and thus the distributions to member municipalities such as Erie County.”
Ryan Hasenauer, a spokesman for OTB, said Wednesday afternoon the agency had not received Hardwick’s letters, so he could not comment on them.
An email to McNamara, the Phillips Lytle attorney who is a partner in ADK Hospitality, has gone unanswered. Frey, another partner, also did not answer an email seeking a response to the comptroller’s inquiry.
