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Fallout from Maine Casino Veto

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BANGOR, Maine - Bouncing back from a voter veto of a huge casino project last November, two Maine tribes are now fighting for a chance to run the racino that the voters did authorize.

A state court is scheduled to hear from lawyers for the Penobscot and Passamaquoddy tribes March 31 in the involuted maneuvering to bring slot machines to the historic harness racetrack at Bass Park. The two tribes have financial and managerial backing from the casino powerhouse Mashantucket Pequot Tribal Nation of Connecticut, which is aggressively exploring investments in racetracks with slot machine parlors.

The racino referendum looked like a double slap at Maine's Native peoples when it passed last November as the Two Tribes Casino measure went down by a large margin. But it has turned out to be a major embarrassment for Maine, bringing the tribal consortium back in the running.

The racino measure authorized slot machines at two of the state's existing racetracks. But local voters rejected plans for one at Scarborough Downs near the state's southern border. That left a monopoly in the hands of a racino entrepreneur from Hawaii, who had crafted the referendum and then financed the local campaigns that prevented his competitor from exploiting it. But a state investigation turned up so many questions about the applicant, Shawn Scott that it looked as if he might not even qualify for the harness racing license.

At the last minute, Scott sold his 98 percent interest in the Bangor track to a more established racing and off-track betting company, Penn National. The transfer gave an opening to the tribes to make their bid for the license. The move annoyed the state's harness racing interest, which sought a smooth transition to Penn National control at the Bangor track. When the tribes asked the Maine Harness Racing Commission to reopen the bidding, the response, said tribal attorney Kaighn Smith, was "very abrupt. Very abrupt."

"They see the Indians as spoilers," he said.

Smith and his law partner Richard Spencer will now try to persuade the Penobscot County Superior Court to halt the licensing for Penn National and open the door to the tribes.

Although national media constantly make insinuations about the financial backers behind tribal gaming, the shoe is on the other foot here. It's the non-Indian bid for the racino license that is clouded by shadowy figures in the background. Scott, who sponsored the Maine racino referendum through a Las Vegas partnership called Capital Seven LLC, has been the front man in several deals involving smaller racetracks in the South and Upstate New York. At one point he purchased and resold Delta Downs racetrack in Vinton, La.

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He also owns a controlling interest in the Vernon Downs harness racing track in Vernon, N.Y., through Mid-State Racing Corp. After first denying a racing license in late February, the New York State Racing and Wagering Board granted a conditional license for a new season there at its March 22 board meeting. It required third-party control of racing operations and the gradual divestiture of Scott's controlling interest.

While conducting licensing investigations of Scott, gaming regulators in several states have focused on his ties to a family of South Korean investors, a Hawaiian right-hand man with a criminal record and a close business associate originally identified only as "Mr. A." According to the Portland, Maine, Press Herald, Scott purchased Delta Downs in 1999 for $10 million with financing from Chun Kung Cho and his son. After backing a county referendum to allow slot machines, Scott sold the track in 2001 for $130 million and invested in Vernon Downs. Cho backed out of the track rather than go through the Louisiana licensing track and sold out to Scott.

After the split with Cho, Scott retained the services of an executive in the Korean's Hawaiian real estate company, a Native born in Honolulu in 1950 named Hoolea Paoa. Cho brought Paoa to Delta Downs, and after Scott sold the track, Paoa went to Vernon as the chief executive officer. He was also the CEO of the Capital Seven partnership. After the Maine referendum, it emerged that Paoa had a criminal record in Hawaii, including guilty pleas to 16 counts of felony theft in 1984 and family abuse at several points in the '90s. (In testimony to the Maine commission, Paoa said the theft charges involved money he believed was owed him by a real estate management company he worked for.)

In December, the New York Racing and Wagering Board denied racing licenses to both Paoa and Scott, a decision the two are appealing in the courts.

Before Cho left Louisiana, according to an investigative report issued by the Maine Harness Racing Commission, he told a Louisiana investigator that an unnamed "associate of Mr. Scott's" was the real decision maker in the business. The Maine summary continued, "Cho explained that an associate of Mr. Scott's did not have any documented ownership or formal position at the Delta Downs track because he knew he would not be found suitable to own or operate a casino in Louisiana."

The Maine report, written by Henry W. Jackson, executive director of the Harness Racing Commission, took this charge very seriously, devoting a section to the "incomplete investigation" of "other business associates" that "appears to exercise a degree of managerial and financial control over Mr. Scott's companies and business dealings." After filing a Freedom of Access Act request for the commission's records, the Portland Press Herald identified the unnamed associate as John K. Baldwin, an equity-financing broker in Las Vegas who shares an office with Scott. According to the Press Herald, Baldwin's undefined role raised questions with regulators in Nevada, Louisiana and New York, as well as Maine.

The Maine Harness Racing Commission concluded it had ducked these questions when Scott arranged to sell his Bangor Historic Track to Penn National, a publicly traded company with casinos and racetracks in seven states and Ontario. But to the annoyance of the harness racers, the Maine tribes are arguing that Scott is still in the deal, as a Penn National creditor.

"He's still wrapped around Penn National," said Smith, the tribes' attorney.