May 30
2023
Lawsuit seeks millions from OTB officials
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Earlier this month a federal court issued summonses to a host of current and former board members at Western Regional Off-Track Betting Corp., as part of a lawsuit seeking to hold the directors liable for the agency’s alleged misuse of millions of public dollars.
The lawsuit aims to compel those 21 board members to pay back to OTB — and thus to the 15 counties and two cities that own the agency — money “improperly used” to purchase health insurance for board members, expensive tickets to sporting events and concerts, and contracts for politically connected firms.
Specifically, the lawsuit claims that OTB’s board members approved:
- Spending “approximately $500,000 per year” for at least the past decade on “deluxe quality health, dental and vision insurance” for board members, even though the state attorney general and the state comptroller deemed the practice impermissible, and the agency’s own legal counsel advised the board the benefit “was unauthorized … and could lead to civil or other liability for the Board of Directors.”
- Spending “in excess of $300,000” each year on suites for Bills and Sabres games, concerts, golf outings and other events. “[M]ost of … the … Special Events Tickets are being used by [OTB CEO Henry] Wojtaszek, his family and friends … and other members of the WROTB Board of Directors,” according to the lawsuit.
- Directing more than $1.3 million in consulting contracts to three firms with ties to the Republican and Conservative parties in Niagara and Monroe counties and to OTB board members.
OTB — which runs the Batavia Downs racetrack, casino and hotel, as well as betting parlors and kiosks throughout the region — has been beset in recent years by allegations that it is a patronage pit controlled largely by, and for the benefit of, Republican and Conservative party insiders.
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The latest inquiry is the result of a false claims lawsuit filed almost two years ago but just unsealed in February by a federal judge. The plaintiff is Michael Nolan, a former chief operating officer at OTB.
The lawsuit aims to hold OTB board members individually liable for approving expenditures that violate the state’s False Claims Act.
“We’re trying to recoup money that’s been stolen from the people,” Steve Cohen, Nolan’s attorney, told Investigative Post.
The lawsuit asks the court to make the board members pay “three times the amount of all damages incurred,” plus penalties between $6,000 and $12,000 for each misuse of public funds.
In his complaint, Nolan offers three examples of outside firms with connections that won OTB contracts due, he said, to their owners’ “close political connections” to the agency:
- Growth Marketing of Rochester, run by Arnie Rothschild, a close associate of OTB Chairman Richard Bianchi, was paid more than $1.1 million for advertising in 2018 and 2019, without a competitive bidding process.
- Richardson Management of Williamsville, run by Republican lobbyist Rick Winter — father of OTB board member Elliot Winter, a defendant in the lawsuit — was paid $126,000 for lobbying work between 2012 and 2016.
- Regency Communications of Lockport, run by Republican political operative Glenn Aronow, was paid $73,000 for “consulting services” between 2014 and 2017.
In 2019, Investigative Post reported the contracts with these three firms had caught the interest of the FBI, while Nolan was still working for OTB.
In all, Investigative Post has published more than two dozen stories about the agency’s management in the past six years, reporting in detail on the allegations raised in the lawsuit, as well as investigations by the state comptroller and the Federal Bureau of Investigation.
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Until recently, OTB provided free health, dental and vision insurance to its board directors, who travel to Batavia once a month for meetings. Board members who served for at least 10 years were eligible for lifetime coverage. In 2017, Investigative Post reported that 13 of 17 active board members received coverage.
In 2021, under pressure, OTB reported that it would no longer offer the health insurance package to new board appointees — but has refused to address whether existing board members would continue to get the benefit.
Nolan brings an insider’s knowledge to his complaint. He worked for OTB for nearly a decade, the last three years as chief operating officer. His duties ranged from handling the agency’s purchasing and contracts to fulfilling Freedom of Information law requests.
Nolan claimed in a separate lawsuit that he was fired in December 2020 in retaliation for cooperating with state and federal investigators probing OTB operations. That lawsuit was dismissed last fall by U.S. District Court Justice William Skretny as “untimely.” Nolan has appealed that dismissal. Nolan’s attorneys withdrew a corresponding lawsuit in state court, pending a ruling by the federal appeals court on Skretny’s decision.
Skretny is also hearing Nolan’s false claims lawsuit.
In a false claims action, the “plaintiff-relator” who calls attention to the misuse of public dollars (Nolan, in this case) acts on behalf of the state to identify fraud.
Nolan filed his complaint in July 2021. He sent the complaint and “supporting material evidence” to state Attorney General Letitia James the following month. The attorney general chose not to “intervene” — that is, to investigate Nolan’s claims itself and either negotiate a settlement or take the OTB board directors to court.
However, the attorney general encouraged Nolan to pursue the claim individually, according to Cohen. If the court upholds the claims, Nolan can be rewarded with 25 to 30 percent of whatever money the government recoups.
The summonses to directors were issued a week after the state Legislature dismissed OTB’s entire board and restructured its governance, in response to “a pervasive culture of corruption,” according to state Sen. Tim Kennedy, the Buffalo Democrat who attached the legislation to the state’s omnibus budget bill.
“This legislation that we passed is part of cleaning up one of the most corrupt and unethical agencies in our state,” Kennedy told Investigative Post. “We have to restore trust in that agency, which has been totally lost.”
The old board was dominated by Republican and Conservative party members appointed by county governments in rural counties. Kennedy’s budget amendment upended that hegemony by assigning weighted votes to board seats based on the populations represented by the governments that appoint them. The new rubric potentially puts a majority of votes in the hands of directors appointed by Rochester, Buffalo, and Erie and Monroe Counties — all controlled by Democrats.
In the wake of Kennedy’s budget amendment, Genesee County’s board representative, Richard Siebert — named in the lawsuit — resigned his seat. Last week, the Genesee County Legislature appointed Charles Zambito, a former acting state Supreme Court justice, to take his place.
Last year, while still a judge, Zambito heard a false claims lawsuit brought against OTB by former state Sen. George Maziarz. Maziarz withdrew that claim.
According to Siebert, Zambito’s “background as an attorney” would be helpful if the OTB board sought to challenge the restructuring of the board in court.
“I believe that eventually they’re going to try to pursue some sort of court action to try to rectify that … his legal experience could help Genesee County rectify some of these wrongs,” Siebert told the Batavian.
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Named in the suit are the following current and former OTB board members:
Siebert of Genesee County; Michelle Parmer-Garner and Maurice Garner, married, both of Buffalo; Frances Warthling of Erie County; Dennis Bassett of Rochester; Richard Haberer of Cattaraugus County; Paul Lattimore of Cayuga County; Thomas Wamp of Livingston County; Elliot Winter of Niagara County; Edward Morgan of Orleans County; Ronald Darrow of Oswego County; Richard Ricci of Seneca County; Ken Lauderdale of Wayne County; Scott Kiedrowski of Niagara County; John Clifford of Steuben County; James Foley of Wyoming County; Beverly Mazur of Erie County; Richard Bianchi, the board chair, of Monroe County; Henry Wojtaszek, the agency’s CEO and an ex-officio member of the board; and Edward Sohoski of Oswego County.
OTB did not respond to a request for comment for this story, nor did they respond when asked whether the agency intended to pay the legal bills of current and former board members named in the lawsuit.
Editor’s note: The original version of this story said the court issued subpoenas to OTB board directors. In fact, the court issued summonses. Both a summons and a subpoena are demands from the court. A summons requires its recipient to appear in court and answer a claim. A subpoena requires a person to provide evidence germane to the case, which can include appearing before the court.
