Union argues against dismissal of New York City OTB bankruptcy case

NEW YORK – Though the New York City Off-Track Betting Corp. is essentially dead, the union representing its former employees and retirees is seeking to resuscitate it with a longshot plan designed to recapture hundreds of millions of dollars in payments made to the state’s racetracks.

The goal of the plan is not to re-open the shuttered parlors and teletheatres, but instead to recover monies previously paid to the state’s racetracks that would be used toward paying health and welfare benefits to the approximately 1,000 terminated OTB employees as well as approximately 600 retirees of the corporation.

New York City OTB, which filed for bankruptcy under Chapter 9 of the federal code in December 2009, closed its doors last Dec. 8 after the state Senate failed to pass legislation that had passed the Assembly and that would have drastically reduced the amount of money OTB would have paid the racing industry.

On Wednesday, in a Manhattan courtroom, NYCOTB sought to have its bankruptcy case dismissed on the basis that it no longer is in business nor is it actively formulating a reorganization plan to come out of bankruptcy. U.S. Bankruptcy Court Judge Martin Glenn, who listened to an hour of testimony Wednesday, was not expected to rule on that request until next week at the earliest.

Richard Levin, attorney for NYCOTB, said all of the company’s operations have ceased, all employees have been terminated, all officers have resigned, and all leased space has been returned. The only money OTB has left is to pay uncashed employee checks.

“There is nothing left of New York City OTB except a board of directors and a corporate shell,” said Levin, who told the judge that he is working for free.

At the same time that NYCOTB is seeking to dismiss its bankruptcy case, the union was asking the same judge to keep the case open so that the judge could appoint a trustee to NYCOTB “whose sole purpose would be to investigate and prosecute potential claims against New York tracks for hundreds of millions of dollars of unreimbursed payments,” according to Curtis Mechling, the attorney representing District Council 37, the DC 37 Benefits Fund, and Local 2021.

Mechling argued that NYCOTB was making statutory payments to New York’s racetracks but that “OTB did not get back fair value in return” for those payments and that “OTB was insolvent at the time it made these payments.”

“It’s clear OTB has been insolvent for years,” Mechling said.

Mechling said that the statute of limitations would allow OTB to seek monies paid to the tracks going back to 2005. Mechling, in papers filed with the court on Jan. 11, argued that neither the city nor the state – which took over NYCOTB in 2008 – has any intention of paying health and welfare benefits to retired OTB employees, which are estimated at more than $230 million.

Parties present in court Wednesday – including attorneys for NYCOTB, the New York Racing Association, Yonkers, and Monticello – opposed the appointment of a trustee and suggested that the union employees seek restitution in state court.

Mechling argued that most of the employees and retirees are struggling as it is and don’t have the resources to pursue litigation in state court.

Brian Rosen, an attorney representing NYRA, said it would be unfair for the union to “hoist the cost” of the health and welfare benefits for OTB employees on OTB’s other creditors – of which NYRA is the second largest.