Tuesday, October 22

Suffolk County OTB Sues Jake’s 58

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The shrill, still exciting sound of someone hitting a jackpot goes off periodically on the gaming floor of Jake’s 58 casino and hotel in Islandia. But Suffolk County Off Track Betting is hoping to win big – in the courts rather than at the video gaming terminals.

Suffolk County Off Track Betting is suing Buffalo-based Delaware North, the owner and operator of Jake’s 58 hotel and casino, arguing that the company has been overcharging it – and should be paying out far more to OTB.

The lawsuit was filed on Oct. 7 in the Eastern District of United States Bankruptcy Court by Suffolk Regional Off-Track Betting Corporation against Delaware North Companies. Judge Carla E. Craig is presiding over the case.

Suffolk County OTB, which includes 50 locations, argues that Delaware North inflated construction and other costs, misused an OTB marketing budget and incurred fines from the New York State Gaming Commission.

Delaware North operates the casino, with 1,000 video game machines, through a contract from Suffolk County Regional Off-Track Betting Corporation.

Jake’s 58 is owned by Delaware North, a Buffalo-based hospitality and gaming company, led by Co- CEOs Jeremy Jacobs Jr.  and Lou Jacobs. It is named for the Jacobs family, which owns the casino, and the Long Island Expressway exit where it is located.

“The issue is that Delaware North, who is managing Jake’s 58, is abusing the relationship and costing Suffolk county taxpayers millions of dollars,” John Schneider, a spokesperson for Suffolk County OTB said when he announced the suit.

Schneider said Suffolk County OTB documented and brought the issues to Delaware North’s attention, seeking to resolve its concerns without going to the court.

“Unfortunately, we haven’t been able to resolve these matters,” Schneider said. “And that really that leaves us with no choice to protect taxpayer dollars, but to go to court.”

Delaware North spokesman Glen White in a statement provided to Newsday called these “contrived allegations.”

He said Delaware North “invested tens of millions of its own dollars” in Jake’s 58 and “makes millions of dollars for the state and the community.”

Delaware North describes itself as “one of the most innovative gaming operators in the United States,” specializing in regional gaming venues with  slots and video gaming machines, table games, poker rooms, restaurants and hotels.

It operates casinos in New York, Arizona, Arkansas, Florida, West Virginia, Ohio and Illinois, and in 2016 acquired Ruby Seven Studios, a developer of casino gaming  applications.

Jake’s 58 is raking in about $1 billion played every three months, far outpacing previous years. The casino in filings with the New York State Gaming Commission said it attracts more than $300 million a month in bets.

Jake’s 58 first topped $300 million in one month this January and has been staying well above that threshold since.

The casino in filings said it wins a little more than $600 a day per video gaming machine, but with 1,000 of these machines, that’s more than $600,000 a day.

The Suffolk County OTB complaint against Jake’s 58 is being heart in bankruptcy court, since the betting operation, which accumulated millions of dollars in debt, filed for bankruptcy in 2012.

In addition to terminals set up at numerous venues, Suffolk County OTB seeks to attract those interested in horse racing to a venue in Hauppauge.

“For a special night out or an afternoon of fun, visit The Racing Forum, our state of the art tele-theater on Motor Parkway in Hauppauge,” Suffolk Regional Off-Track Betting Corp. CEO Phil Nolan wrote on its website.

Although Suffolk County OTB relies heavily on terminals set up at various locations, Nolan has touted this venue as a key part of its operations.

“As you enjoy food and drinks in the bar and restaurant, you can view live racing from thoroughbred and harness tracks from around the world on any of the Forum’s hundreds of television screens,” Nolan says online.

Jake’s 58 said that about $323 million was played in September, including $1.7 million in free games or credits. Gamblers won back about $302 million, leaving the casino with a net win of a little more than $19 million.

The casino has processed about $2 billion in bets over six months since April, including about $9.7 million in free credits or less than half a percent of the total.

The casino’s net win for the past six months ranged from $18.3 million in June to $20 million in April or about $114 million from April to September.

Jake’s 58 said since April it paid about 45 percent of its net winnings or $51.4 million to the New York State Education fund.

Another $11.4 million or 10 percent of winnings since April, the start of its fiscal year, went to costs for the gaming floor and administration, the casino said.

Meanwhile, $51.4 million or 45 percent of winnings went to agent commission to the casino, compensation for operating the facility, which also covers some expenses.


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