Agreement - Corporate Crime Reporter

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LONG ISLAND OFFICE
lTED STATES DIS'J'RICTCOURT
. "gASTERN DISTRICT ()F NEW YORK
UNrrED STATESOF ',MERICA,
AGREEMENT
- against.
Cr. No. ~5.'J,"';f.A\'~)
THE NEW YORK RAC[NO ASSOCIATION. INC..
D.:fendant.
DJ~FERREDPROSECUTIONAGREEMENT
The Defe.tdantTHE NEW YORK RACING ASSOCIATION,INC. C'NYI~A"),
by its undersignedattorn:ys, pursuantto authority grontedby its 803rd of Trustees,and the
United StatesAttorney's Office for the EaslernDistrict of New York (lhe "USAO") cnter into
this DeferTedProsecutiollAgreementC'Agreement} for a [)Criodof eighteenmonthsfrom the
dateor this Agrcemcnt.
1. NYR/\ acknowledgesthat it hasbeenindicted on chargesofconspirocylo
defraudthe United StatC!;,in violation of Title 18,United StutesCode,Scction371, and aiding
and abettingthe filing of falsetax returns,in violation or Title 26, United StatesCode,Section
<'1.'1.-12.1';"
7206(2),as set forth in irdictment numbcrCr. [
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filed by a grandjury sitting in the
EasternDistrict of New '{ork (the "Indictment"), attachedto this Agreementas Exhibit A.
2. NYR/\ acceptsand acknowledgesl"esponsibilityfor ilS conduclassel forth in
lhc Slipulalion of FactsIIllachcdlo lhis Agrccmcnl U5ExhibillJ ultd incorpurulcdinlo il by
refcrcnccby cnlering inl<Ilhis Agreement.and by, umongothcr things,the rcmedialaction5thal
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.il hustukento dute,its conlinuingcommitment
of full cooperation
~'ith theUSAOandother
governmentulagencies,and its agreementto restructureits managen\entorganizationand the
other undertukingsit hasmtideasset forth in this Agreement.
3. NYRA expresslyagreesthat it shall not, through its presentor future
u[[omeys,Bouro of Trustees, llgen[S,officers or employees,make allY public statement,in
liligution or otherwise,contrddictingthe Stipulation of Facts. Any SJchcontradictorystntement
by NYRA, ilS pl'esenlor future uttomeys,Bourd of Trustees,agents,officers or employeesshall
constitutea breuchof this Agreementund NYRA thereaftershall be subjectto prosecutionas set
fol1hin pul'Ugruphs15 und 16. The d~cisionusto whetherany suchc:ontradictorystntementwill
I~ impulcd to NYRA for the purposeof determiningwhetherNYRA has brenchedthis
Agre~m~ntshull be at the sole discretionof the USAO. Upon the USAO's notifying NYRA of
unysuchcontradictorystalement,NYRA muy avoid a breachof this Agreementby publicly
repudiu[ingsuchstutementwilhin 48 hoursufter notification by the \JSAO. This paragraphis
"ot intendedto apply to any statementmndeby any NYRA employe<:or fonner emplo~eewho
husbeenchurgedwith a crime usset forth in the Indictment. NYRA agreesthat in the eventthat
fulure criminal proceedingsare broughtin accordancewith this Agreement,NYRA will not
contc:stthe udmissibility of the Stipulation of Factsin any suchproceedings.
4. Dllring lhe tc:rmof lhis Agreement,NYRA agrees[0 continueto cooperate
fully with lhe USAO, und with unyother governmentugencydesignatedby the USAO
('.D~.iignatedAgencies")regurdingtiny muttertibout which NYRA h.is knowledge,which
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.,-"oo~r.ltionshall include providing privileged information to the exteltt describedin paragraph
5(c) ~Iow.
5. NYRA agreesthat its cooperation,asagreedto in }'aragraph4 above,shall
include,but is not limited to, the following:
(a) Completelyand truthfully disclosingall information with respectto the
activitiesof NYRA and presentand former membersof the Board of1'rustees,agents,officers,
andemployees,concerningt111
mattersaboutwhich the USAO or any t)f the Designnted
Agenciesmay inquire;
(b) Assembling,organizingand providing all documems,records,or other
tungibl~evidc:ncein NYRA's possession,custody,or control as may b~ requestedby the USAO
or any DesignatedAgency, including, but not limited to, documentsrelating to the New York
StateThoroughbredRacingCnpital ImprovementFund ("CIF'), the 1~99SpecialAudit and
Ut."t."Olll1l
shortagc:s in lhc: Pari-Muluel
Dc:partment;
(c) Waiving cluims of (he at(orney-clientprivilege or w.)rk-productdoctrine asto
any documen(s.records,information, or testimonyrequestedby the USAO relatedto factual
intern..!inves(igutionsor con(empordneous
advicegiven to NYRA con.;emingthe conductat
issuein the Indictment and the Stipulation of Facts (the "Confidential Materials"). Productionof
the Confidenti;ll Muten;lls shull be governedby the Confidentially Agn:ementdatedOctoberII,
2()()] pr~vi()uslyexecutedby the purtiesand att;lchedusExhibit C;
(d) Using its bestefforts to makeav;lilable its presentand former employeesto
providc:informution and/or testimonyas rc:quested
by the USAO or any of the Designated
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,Agencies,including sworn testimonyor in court proceedings,as well asinterviewswith law
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enfon;ementauthorities. Cooperutionunderthis paragraphwill inclu(le identificationof
witnesseswho, to NYRA's knowledge,may have materialinfonnatio.l regardingthe allegations
containedin the Indictment or the Stipulation of Facts;
(e) Providing testimonyand other information deemednecessaryby the USAO or
a coul1to id~ntify or establishthe original location, authenticity,or otller evidentiaryfoundation
n~c~ssaryto admit into evid~ncedocumentsin any criminal or other proceedingasrequestedby
the USAO or any of the D~signatedAgencies;and
(f) With respectto any information, testimony,document,recordor other tangible
evidenceprovided by NYRA to the USAO, the Internal RevenueService("IRS") or a grand
jury, other thnn the Confidential Muteriuls,NYRA consentsto any and all disclosuresof such
mntc:rialsto suchDesignatedAgenciesus the USAO, in its sole discretion,deemsappropriate.
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Wilh rc:spc:ct
to any such materii1l~that constitute"mattersoccurring bc:forethegrandjury"
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within the meaningof Rule 6(e) of the FederalRulesof Criminal Proct:dure,l\'YRA further
consent~to u) uny order soughtby the USAO permitting suchdisclosuI\:s;andb) the USAO's M
[!11aJ: or
in CilmernapplicationForsuchorders
(g) NYRA representsthut its Board of Trusteesand cunent SeniorManagement
huvc:tukennumerousremediulstepsto addressthe concernsraisedby the USAO andother law
enfon;emc:nland regulatorybodies. Thosestepshuveincluded:
.
the formation of u SpeciulOversightCommitteeof t:1eNYRA Boardto
ensurethu! NYRA properly nddressesall issuesruis(d by anylaw
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enforcementoffices or regulatorsand to enhance
NYRA's overall regulatory
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compliance;
the retentionof SafirRosetti,which reportsto the SpecialOversight
Committeeand which hasbeengiven a broadman(late(1) to conducta
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thoroughreview of NYRA 's operations,(2) to recommendrevisionsand
improvementsto NYRA's operations,and (3) to m;untaina fulltime presence
ut NYRA to ensureproperimplementationand foll,)w-throughon such
rec.ommended
revisionsand improvements;
.
the creationof an Office of the Chairman,which in,:ludestwo new Co-Chief
OperatingOfficers whoseresponsibilitiesinclude sllpervisionof all business
areasand departmentsof NYRA;
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the implementationof new policies and proceduresfor employeesin the PariMlllliel Dl.:purtmc:nt,
including u daily count-outpro.:edure;
.
the implementationof a new work rule requiring tht.t any Mutuel Employee
who had 11history of excessiveshortagesprior to th(: new shortagepolicy that
\vasput in effect in 2000 not be allowed to perfonn !lnyjob in the money
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room, at any fifty-dollar minimum window, at any IJ~Swindow,or at any
checkcushingor cashadvuncewindow; and
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the creulion of u NYRA employeehotline available:!4 hours11day,7 daysa
wec:k,for NYRA employeesto unonymouslyreport ilny suspected
mis~onduct,comlption undcriminal behavior.
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6. NYRA agreesto completethe restructuringof its sellior management,and its
Pari-Mutuel,Legul, Security,Internal Audit, Accountingand HumanJ"{esources
Departments,
suchthat by the end of the first quanerof 2004, (i) NYRA will haven:pJacedthe Chief
OperdtingOfficer, Chief FinancialOfficer and Controller who had bet:nin placeduring the
conductallegedin the Indictment; and (ii) NYRA will havereplacedtile Managers,Directors
and Vice-Presidentswho hnd beenin chargeof the restructureddepanmentsduring the conduct
ullegedin the Indictment. NYRA funher agreesthnt, with the excepti,)nof the former headof
Security,\vho hasbeenreassignedto the Facilities Department,and th.: fonner Controller, who
\vill be hired as an independentconsultantto NYRA's AccountingDel,artment,it will not
continueto employ and it \vill not r~hireany of the individuals who arl~replacedpursuantto the
restructuringreferencedabove. NYRA further agreesto eliminate the TrusteeEmeritus
positionsfrom its Boilrd of Trustees.
7. NYRA ugreesto seek,within 60 daysof the dateof Ihis Agreement,an
advisoryopinion from the IRS ("IRS Advisory Opinion") regardingtht: properaccountingand
tax treutmentof fundsthat NYRA receivesfrom and paysto the CIF, i:lcluding accruedinterest.
NYRA funher ugreesto consider,in good faith, the IRS Advisory Opillion, but reservesthe right
!o conteslthe IRS Advisory Opinion throughappropriatechannels.
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8. NYRA agreesto provide its auditedfinancial stateml:ntsto theNew York
'.
: State Rucing und Wugering Board and the New York State Comptrolle,'s Office and not to
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the releuseof ilS uuditedfinunciul statementspursunntto the termsof the New York
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9. NYRA agreesand understandsthat an independentmonitor (the "Monitor")
will be appointedby the Court within 60 daysof the dateof this Agre.~ment,uponthe
recommendationof the USAO. The Monitor will carry out its duties ,lnd responsibilities
pursuuntto the termsof an Orderof Appointment to be issuedby the Court at the requestof the
USAO following consultationwith NYRA. The Monitor will, amongother things,monitor
NYRA's compliancewith the termsof this Agreement,report directly to and bedirectedby, an
agencyor agenciesto be designatedby the USAO. NYRA agreesthat the monitor may have
accessto any and nil materialsrel"ting to NYRA's operationssubject 10the limitation of
paragr.aph
5(c) above.
10. NYRA is in the processof establishingvideo 10ttelYterminalsat Aqueduct
Ral:~truck(th~ "VLT Projel:t"). If, for uny reason,the VLT Project is Ilot completedor
substuntiallycompletedunderthe current proposedplan in 2004, NYRA agreesto makeall
commcrci.llly reusonablc:
and leg.allypermissibleefforts to enter into cc>ntractual
arrangements
with otherentities to enablethe operdtionof VLTs at AqueductRacetr.lck. If, by the
seventeenthmonlh after lhe dule of this Agreement,VLTs are not operJtionalat Aqueduct
Racc:track,lhc:USAO shall evaluat~whelherNYRA hasmndeall commerciallyreasonableand
I~gallypermissibleefforts in accordancewith this provision.
11. NYRA agreesto pay a total of $3,000,000to the United States,accordingto
tilt: follc.)wingsl:hedult:,with paymc:nlsto be madepursuuntto the direction of the USAO:
$500,000- 6 monthsfrom tile dateof the executionof tile Agreement;
$500.000- 12monlils from the dutc:of the executionof Ihe Agreement;
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$500,000- 17monthsfrom the dateof the executionof the Agreement;
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$500,000 24 monthsfrom the dateof the executionof the Agreement;
$500,000- 30 monthsfrom the dateof the executionof the Agreement;
$500,000- 36 monthsfrom the dateof the executionof the Agreement.
NYRA ugreesto post a bond or executeone or more Confessionsof Judgmentin favor of the
United Stutesin un amountequul to the portion of the $3,000,000that lIas not yet beenpaid asof
17 monthsfrom the dateof the executionof the Agreement. The USAO will detennine,in its
solediscretion,whethera bond shall be postedor Confessionsof Judgementsh311
be executed,
or both. The bond sh.\11
be postedund the Confessionsof Judgmentshill I be executedno later
than 17 monthsfrom the date of the executionof the Agreement. The (~onfessions
of Judgement
shull be filed in countiesto be designatedby the USAO, at NYRA's ex)Jense.The USAO may
requestthat NYRA executeas manyConfessionsof Judgmentas the U~iAO, in its sole
Intel-estin the unpuidportion of the $3,000,000.
12.NYRA ugreesto comply with all federal,stateand local laws,including tax
laws. NYRA also agreesto materiallycomply with all generallyacceptl:daccountingprinciples
in muintuiningits booksand recordswhereapplicable.
13. In considel11tion
of NYRA's remedialactionsto date I~ndits willingnessto (i)
acceptilnd i~cknowledgeresponsibilityfor its conduct asset forth in the Stipulationof Facts;(ii)
continllC:its cooperationwith the USAO and the DesignatedAgencies;(Iii) consentto payment
asset fl')rthin pardgrdph11above;(iv) demonstrJteits futllre goodcondJct andfull compliance
will\ f~lIc:r.II,stalt:.md lol.".lllaws,inclllding tax laws, and gc:nerallyaccelltedaccounting
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.principleswhereapplicable;and (v) otherwisecomply with all of the (ennsof this Agreement.
the USAO shall recommendto the Court that prosecutionof NYRA on the Indictmentbe
deferredfor a ~I;od of 18 months. NYRA shall expresslywaive all tights to a speedytrial
pursuantto the Sixth Amendmentof the United StatesConstitution.1 itle 18. UnitedStates
Code.Section3161. FederalRule of Criminal Procedure48(b). and allY applicableLocal Rules
of the United StatesDistrict Court for the EasternDistrict of New York for the 18-mon~hperiod
during which this Agreementis in effect.
14.The USAO ugreesthut if NYRA is in full complianc:.e
with all of its
ohlig.ltionsunderthis Agreement,the USAO. within 30 daysof the e~pi ration of 18 months
from the duteof this Agreement.will seekdismissalwith prejudiceas to NYRA of Count~One
and FourteenthroughSixteenof the Indictment. and this Agreementshall expire. Except in the
eventof a breachof this Agreement.it is the intention of the partiesto this Agreementthat all
invcsligtltionsrelating to the muttersset forth in the Indictmentand tht: Stipulationof Factsthat
havebeen.or could havebeen.conductedby the USAO prior to the dtlte of this Agreementshall
not be pul'Suedful1heras to NYRA. NYRA and the USAO understantlthat the Agreementto
defer prosecutionof NYRA must be approvedby the Court. in accord.lncewith 18 U.S.C. §
3161(h)(2). Should lhe Court decline to approvethe Agreementto der~rprosecutionfor any
re.lsen.both the USAO and NYRA are releasedfrom any obligation ir.lposeduponthem by this
Agrt.'~melltund this Agreementshull be null und void.
15. It is further understoodthat shouldthe USAO. in it~ sole discretion.determine
thut NYRA. throughits SeniorMull.lgemellt
asdefinedin theStipulationof Facts.has
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.deliberatelygiven false,incomplete,or misleadinginformation under Ihis Agreement,has
committedany federalor statecrimescommencedsubsequentto the cate of this agreement,or
hasotherwiseknowingly violuted any provision of this Agreement,N'iRA thereaftershall be
subjectto prosecutionfor any federalcriminal violation of which the USAO hnsknowledge.
Any suchprosecutionsm.1Ybe premisedon any information provided by or on behalfof NYRA
to the USAO or the DesignatedAgenciesat any time. Moreover,NYltA agreesthat any
prosecutionsreluting to the alleg.ltionsin the Indictmentor the Stipulnlion of Factsthat are not
time-ban"edby the applic.lblestatuteof limitations asof the dateof this Agreementmay be
commencedag.linstNYRA in uccorduncewith this Agreement,notwililstandingthe expiration
of any applicablestatuteof limitations betweenthe signing of this Agr~ementandthe expiration
of this Agreement. By this Agreement,NYRA expresslyintendsto anJ doeswaive any rights in
this respect. Suchw.1iveris knowing, voluntary and in expressrelianc,~on the adviceof
NYI~A's coul\sel.
16.It is further ugreedthat in the event that the USAO, in its solediscretion,
determinesthut NYRA hasknowingly violated any provision of this A;~reement,
a) all
statementsmndeby or on behulf of NYRA to the USAO or any of the I)esignntedAgencies,or
uny testimonygiven by NYRA beforea grdndjury, or elsewhere,whetller beforeor after the
d.lle of this Agreement,.lnd .lny le.ldsderived from suchst.ltementsor ..estimony,shall be
.ldmissiblein evidencein .lny .lnd .111
criminul proceedingsbroughtby Ihe USAO againstNYRA;
and b) NYRA shall not assertany cl.1imunderthe United StatesConsti.ution,Rule 11(t) of the
P..:d..:rul
Rulc:sof Crin\inul Pruc.:edurt:,
Rule 410 of the FederalRulesof I~vidence,or any other
f~d~r.11
rulc, lll.ll stulemenlSmadeby or on t>ehalfof NYRA beforeor DI'terthe dateof this
Agr~~menl,or .lny leadsdel;ved therefrom,shouldbe suppressed.
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J7. The decision whetherconductand/orstatements01any individual will be
imputedto NYRA for the purposeof detem1iningwhetherNYRA ha::violated anyprovision of
this Agreementshull be in the solediscretionof the USAO. Should t:1eUSAO determinethat
NYRA huscommitteda knowing breuchof any provision of this Agr,:ement,the USAO shull
provid~written notice to NYRA of the ullegedbreachand provide N'(RA with a two-week
period in which to makea pl-esent.ation
to the USAO, or its designee,to demonstratethat no
breachhasocculTed,or, to the extent upplicuble,that the breachwas faotknowing or hasbeen
cured. The p.artiesto this Agreementexpresslyunderstandand agreeihat shouldNYRA fail to
m.ak~u prcsenlulionto th~ USAO, or ilS dcsignee,within a two-week IJeriod,it shall be
conclusivelypresumedthut NYRA is in knowing breachof this Agref"ment.The partiesfurther
llnd~rstundund agreethat the exerciseof discretionby the USAO or its designeeunderthis
p.lrdgruphis not subjectto review in any court or tribunal outsidethe Departmentof Justice.
18. Il is llndersloo<.1
th.althis Agreementis binding on }~YRA andthe Department
ofJlaslic~,blals~cificully doesnol bind any other federalagencies,ar.y stateor localluw
~nforcementugencies,I.lnylicensingulathorilies,or any regulatoryauttorities, althoughthe
USAO will bring the coopcrutionof NYRA and its compliancewith its obligationsunderthis
Agreementto the attentionof .my suchagenciesor authorities,if requ(:stedby NYRA or its
uttomeys.
19. NYRA and the USAO agreethut this Agreement,it1cludingits attachments,
sh.allhe pllblicly filed in the United StatesDistrict Court for the Easteln District of New York.
20. This Agre~m~ntsetsforth uillhe termsof the Defeired Prosecution
Agre~I'lc=nl
b~lwe~nNYRA .andtht: USAO. No modificutionsor addilionsto this Agr~emenl
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,shallbe valid unlessthey are in writing and signedby the USAO, NYRA's attorneys,and a duly
authorizedrepresentativeof NYRA.
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Du[ed:~r.~l,I~" . New York
December~. 2003
ANDREW c. HRUSK.~
Acting United StatesAI torney
Easten)il»)strictof New York
By:
'g Islund Criminal Division
Chief PreTrial Services()fficer
United StatesPretrial SelvicesAgency
E.1stemDistrict of New '( ork
ASSOCIATrON. INC.
Dl:fc:nd.lnl
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Couns~llo D~f~ndunl
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RESOLUTION
Upon motion dllly madeby E.lrle Mack, secondedby PeterKarches,and
unanimouslycarried by the affirmative vote of the 22 Board TI"llsteespresent,tile
following resoilltionswere adopted:
RESOLVED, that NYRA, which hasbeenengagedin clisCllssions
with the Uniled StatesAtlorney's Office in connectionwith the
allegationssel forth in the lndiclment # (. RO:S-1')..1';;Jiled in the
EasternDislricl of New York, consentsto a resolutiol1.tlfsuch
discussionsand will, in tile EasternDistrict of New York, enter
into a deferredproseclltionagreement;and RESOLVEr>
FURT}-[ER,lhallile ChiefExeculive Officer ofNYRA, Barry K.
Schwartz,be, and Ilereby is, aulilorized to execlltethe r'eferred
ProsecutionAgreementon behalf ofNYRA substantiallyin such
rOml us rt:vit:wI.'d hy tllC Board of Trustees at this meeti;lg.
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CERTIFICATION
I, Patrick L. Kehoe,herebycertify that I am the duly electedSecretaryof
NYRA; that the foregoingis a fult, true and correctcopy of thc resolutionduly
adoptedby the Boardof Trusteesof NYRA at a meetingtherE:ofduly held on
December10, 2003,at the office of Fleet Bank, 345 Park Avenue,New York,
New York, in the UnitedStaresof America, andhasnot beenrescindedor
revoked;and that the foregoingresolutionis nor contraryto allY provisionsin the
Articles of Incorporationor By-Laws or NYRA.
IN WITNESS WHEREOF,I havehereuntosignedmy nameasSecretary
and affixed the Sealof NYRA this 10lkday of December200:..
I!M2Ca.-
Secr~lary
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CHIEF EXECUTIVE
OFFICER'S CERTIF(CATE
I have read this Agreement and carefully reviewed ev.~ry part of it with
coullSel for The New York Racing Association, Inc. (HNYRA "). I understandthe
terms of this Agreement and voluntarily agree, on behalf of l'IYRA, to eachof the
terms. Bcfore signing this Agreemcnt, I conslilted with the altorney ror NYRA.
The attomcy fully advised me of NYRA's rights, of possible .Iefenses,of the
Sentencing Guidelines' provisions, and of the consequences(If entering into this.
Agreement, No promises or inducements have been made otller than those
containcd in this Agreement. Fllrthermore, no one has threatl'ned or forced me, or
to my knowle<lge any pcr£on Cllithorizing this Agreement on lehalf of NYRA, in
any way to cnter into this Agreement, I am also satisfied witl. the attorney's
representation in this matter. I certify that I am the Chief Executive Officer of
NYI~A, and that III;IV~ I)(.',-,n
duly 3ltthorizcd by NYRA to eXl°.:utelItis Agreement
on behalfof NYRA.
Decembcr10.2003
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CERTIFICATE OF COUNSEL
I am counsclfor The New York RacingAssociation,I"c. r'NYRA "). In
conneclionwith such representation,I haveexaminedrelevanlNYRA documents,
and havediscussedthis Agreementwith the authorizedrepresentativeof NYRA.
Basedon my review of the Foregoingmaterialsand discussiolls,I am of the
opinion that:
1.
Barry K. ScllwarlZis duly authorizedto enteril1tothis Agreement
on behalfof NYRA.
2.
TI\is Agrecm~ntI\asbeendlJly and validly autl.orized,exccuted
and d~liveredon bel\alf of NYRA, and is a valid and binding obligationor NYRA.
Furtller, I havecar~rully reviewedeverypart or this A.~reement
with the
membersor NYRA's Board or Trustees. I havefully advisedthe memb~rsof
NYRA's Goardof Trusl,-,~sof NYRA's rigllts, or possibledelcnses,of the
SentcncingGuidelines' provisions,and or tile consequences
of enteringinto this
Agreement.To my knowltdge, NYRA's decisionto enterinto this Agr~ementis
an infom\ed and voluntary Ol\~.
n.
Deccmb~r
10,2003
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