Oct 19


OTB shells out millions for lawyers and lobbyists

Spending on lawyers and lobbyists - 19 of them - has doubled over the past five years as the embattled agency responds to lawsuits, investigations and reform efforts. The $2.2 million spent would have otherwise gone to local governments. Critics say the spending is excessive.

The Western Regional Off-Track Betting Corp. has shelled out nearly $2.2 million for an army of 19 law firms and lobbyists over the past five years in an effort to fend off investigators, lawmakers and plaintiffs.

The spending has eaten into the profits sent to the 17 counties and cities that own the public gambling agency, including Erie, Niagara and Monroe counties and the cities of Buffalo and Rochester. From 2019, when expenses started to take off, through last year, spending on lawyers and lobbyists cut OTB’s revenue sharing to municipalities by 10 percent.

While some spending could be expected, critics contend OTB’s outlays have been excessive.

“There’s a point at which it becomes ridiculous,” said Erie County Comptroller Kevin Hardwick, an OTB watchdog. “It’s good for the lawyers and it’s good for the lobbyists. But it’s not good for the citizens.”

The hiring has come in the face of non-stop controversies since 2018, when Investigative Post began reporting on irregularities at the state public benefit corporation. Since then, the FBI launched an investigation, the state comptroller completed two critical audits and OTB was sued on multiple occasions.

The spending since 2019 far exceeds what it was before controversy hit, according to Michael Nolan, a former OTB executive who is suing over wrongful termination.

“As a former chief operating officer, the costs that you’re speaking to seem to be extraordinarily high from what they were in years past,” he said.

To determine OTB’s spending, Investigative Post obtained 860 pages of invoices and contracts through the state Freedom of Information Law. The records cover Jan. 1, 2018, to Aug. 17 of this year.

Our analysis found that OTB since 2019 OTB spent $1.25 million on 14 law firms and $930,000 on five lobbying firms.

Top paid law firms include Harris Beach, Hodgson Russ and Connors LLP. All three have been involved in defending OTB against investigations and lawsuits, as well as other matters. The three firms have collectively earned $1.05 million since 2019. Their rates topped out at $425 to $450 an hour.

Top paid lobbying firms include Mercury Public Affairs, whose Albany office is headed by Patrick McCarthy, a former spokesperson for Gov. George Pataki, and Upstate Strategic Advisors, led by former Assembly Member Sam Hoyt. Both have lobbied lawmakers with oversight of gambling in the state and those interested in reforming OTB. Those two firms have earned a combined $720,000 since 2019.

OTB officials, including a spokesperson and CEO Henry Wojtaszek, refused to comment for this story. OTB took the maximum 25 business days permitted under the FOI Law to provide Investigative Post records, but failed to include contracts and invoices with two lobbying firms paid $275,000. They included Hoyt’s firm and Patrick B. Jenkins & Associates, which has ties to Assembly Speaker Carl Heastie.

It’s not clear if other payments or contracts are missing.

Troubles, and bills, mount

Investigative Post used 2018 as a benchmark for spending on lawyers and lobbyists because OTB operated in relative obscurity until Investigative Post began reporting on its problems that December. That year, OTB spent $220,000 on lawyers and lobbyists. Its average annual spending since then is about double.

Just weeks before the close of the year, Investigative Post reported OTB was spending as much as $500,000 per year on gold-plated health insurance for its part-time board members, a practice the state attorney general had previously ruled was not permissible. At the time, Wojtaszek said the agency would seek “our own opinion from the attorney general that would be binding.”

Instead, OTB hired Barclay Damon, which concluded providing the health insurance was not permitted. The firm, paid $12,700 for the opinion, hasn’t gotten a dime’s worth of work since. OTB then hired Schroder, Joseph & Associates for a second opinion that concluded providing the insurance was permissible. The firm has continued to receive work from OTB.

Starting in 2019, OTB’s spending on lawyers and lobbyists began to climb.

In April that year, Investigative Post revealed that the FBI was investigating OTB for at least three contracts it had granted to politically connected firms. OTB hired attorney Terrance Connors to handle that investigation, and later a lawsuit brought by former state Sen. George Maziarz.

Since 2019, OTB has paid Connors LLP $273,000. Connors, in an interview with Investigative Post, said he was also hired to “do an internal investigation and try to suggest any changes if they were warranted, all of which I have done.”

That work resulted in a 380-page report that, allegedly, cleared Wojtaszek and other officials of wrongdoing, though OTB has refused to provide a copy to reporters.

The onset of the COVID-19 pandemic in early 2020 saw OTB’s gambling profits tank as state shutdowns closed the Batavia Downs casino, its most profitable enterprise. OTB obtained $3.1 million in federal Paycheck Protection Program funds and furloughed two-thirds of its staff. It kept paying for lawyers and lobbyists, however.

Mercury Public Affairs was paid $100,000. Hoyt earned his highest-ever pay from OTB in a single year, $56,000.

For the year, OTB shelled out a total of $405,000 on lawyers and lobbyists. Profits distributed to municipalities for the year were only $723,000.

Hoyt, a Democrat working among the Democratic-majority state Legislature, said in a statement that OTB uses his services to assess proposed legislation and meet with lawmakers.

“Each year there are dozens of bills that are introduced that may have a direct or indirect impact on WROTB,” he said.

OTB’s legal bills skyrocketed in 2021. That’s when it purchased the Batavia Downs hotel, generating a $144,000 payment to Harris Beach, the agency’s lawyers in the deal.

Then, in August, Nolan sued OTB alleging the agency’s leadership “swiftly, aggressively, and austerely retaliated against” him for speaking with FBI investigators.

In September, State Comptroller Thomas DiNappoli released two audits, one dinging the agency for handing out Bills and Sabres tickets to executives and board members and another rebuking Wojtaszek for his use of an OTB-owned car.

Other attorneys were hired to advise on “damage control” and allegations of misconduct.

Total legal bills for 2021: $636,000. Add to that $151,000 for lobbyists.

Attempted reforms in the state Legislature and another lawsuit brought more significant bills in 2022. There was the continuation of the Maziarz lawsuit, which the former state senator eventually withdrew, and lobbying efforts to successfully counter reform bills introduced by state Sen. Tim Kennedy.

Mercury Public Affairs pulled in $124,000 for its lobbying efforts. OTB also brought on lobbyists from Bolton-St. Johns for $62,000. Hoyt earned his typical fee of $42,000. Woods, Oviant and Gilman earned $6,000 to offer its opinion on Kennedy’s proposed reforms.

The spending has continued apace this year. Through August, OTB spent more than $260,000 on 10 law and lobbying firms.

Earlier this year OTB doled out bonuses to executives, and approved multi-year employment contracts to top executives for the first time. Wojtaszek cited a legal opinion from the law firm of Gallo & Iacovangelo in defending the employment contracts.

At the same meeting in April the OTB board approved the contracts, it retained an attorney from the firm — John Owens, a former Monroe County judge — as the agency’s assistant corporation counsel on a contract paying $64,800 annually.

In a June letter to Wojtaszek, Hardwick questioned the agency’s hiring of Owens to opine on its new employment contracts.

“Certainly, you could understand how this may look like a quid pro quo,” Hardwick wrote.

The county comptroller, in an interview, said taxpayers — who would otherwise see local budgets bolstered by OTB contributions — should be incensed.

“I'm upset and I assume they would be upset if they knew what was going on,” he said.

New board coming soon?

Kennedy’s reform legislation, passed in May of this year as part of the state budget. The deal fired OTB’s board of directors and reapportioned the voting power of the board, giving the more-populated Democratic counties and cities (Erie, Buffalo, Monroe and Rochester) more votes than the 13 rural counties controlled by Republicans.

The new board has not yet met, however.

When the board does meet, Assembly Member Monica Wallace, co-sponsor of the reform legislation, said, “I expect that they will come in and they will ask the questions that don't seem to have been asked over the years, and they will provide greater oversight.”

A spokesperson for Kennedy said the spending on lawyers and lobbyists is evidence of “the uphill battle he faced in his efforts to strengthen oversight and accountability within the [OTB].”

Hardwick, for his part, is still demanding answers from OTB. While he said some spending on lawyers and lobbyists is understandable, the agency has gone far beyond a reasonable limit.

“I think it's a poor use of this money,” he said. “And it calls into question the decision making of whoever's approving this.”

Investigative Post

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