ALBANY - After state auditors found $750,000 in red ink, Suffolk Off-Track Betting Corp. Thursday took the first step toward filing for bankruptcy so the agency can reorganize and continue with a scaled-down operation.
Suffolk would become the second of the state's OTBs to declare bankruptcy after New York City's betting agency went out of business last year.
The move comes after an audit by the Racing and Wagering Board -- the state agency with oversight of OTBs -- found mismanaged accounts, a $750,000 operating deficit and missing records, said two people with knowledge of the audit. The state board recommended that Suffolk OTB file for bankruptcy, the people said.
Suffolk OTB still has $2.4 million in reserve accounts to pay off winning bettors, the audit found. Suffolk officials say they have no intention of closing or stopping payments to vendors and bettors. "I'm not choosing to shut down," said Suffolk OTB president Jeff Casale.
Casale said he had not seen a written audit report and could not comment on its findings.
The OTB's board of directors Thursday authorized the agency to file for Chapter 9 bankruptcy, which local government entities can use to reorganize. The Suffolk Legislature must approve the move at its meeting on Thursday before the case can go to court.
Casale said the agency's handle -- the industry term for bets placed - has declined by $50 million at its 12 locations over the past five years, to $139 million last year. Casale also said Suffolk OTB has faced increasing payments to tracks for broadcast rights. He said cash-flow problems have caused late payments of several million dollars in bills to state tracks.
"At some point, you have to make the judgment, do you have enough cash to continue," he said. "Our determination is that we have enough cash on hand to continue right now, but survival is getting tighter and tighter."
The Racing and Wagering Board had been monitoring Suffolk's operations for nearly a year and sent a team of auditors there this week.
In a statement, board chairman John Sabini said Suffolk and other regional OTBs for years were urged to consolidate services such as Internet gambling and television channels. The OTBs have resisted such moves, he said. "They've refused to economize and with the resulting down economy and down handle, we're seeing the results now in Suffolk," Sabini said.
The OTB's payments to the county have decreased over the years, falling to less than $1.8 million last year from $3.1 million in 2006.