De Francis keeps clear of Assembly slots debate


As the General Assembly opened public debate this week on expanding legalized gambling, the man whose family has been the face of Maryland horse racing for decades was noticeably missing. And if slots supporters have their way, racing executive Joseph A. De Francis will remain all but invisible in Annapolis for all 90 days of the legislative session.

"No one told me he wasn't coming, but it sure was obvious that he wasn't at the hearing," said Sen. Robert H. Kittleman, a Howard County Republican and slots supporter. "He seems to get a lot of bad press, ... so it was probably a good thing for him not to be there."

Sen. Ulysses Currie was more blunt. "That was a plus," said the Prince George's County Democrat and chairman of the Senate Budget and Taxation Committee. "Joe De Francis conjures up all the negative things that people associate with racing."

But no matter how hard he tries to stay in the background, the chief executive of Laurel Park and Pimlico Race Course is sure to see his name thrust into the Assembly's debate by gambling opponents - if for no other reason than to remind lawmakers of the money De Francis could earn if slots are legalized at the tracks.

As part of the deal to sell majority ownership to Magna Entertainment Corp., De Francis and former minority owners of the Maryland Jockey Club would share in the profits if either of the two tracks gets slots.

A Magna executive says De Francis is focused on operating the tracks and another company official is working with lawmakers on the slots issue. De Francis did not respond to requests for an interview.

"Joe was attending to the serious business of running our racing enterprises," said Paul Micucci, executive vice president of Magna. Micucci said he has assumed the lead role in dealing with slots because that is his area of expertise.

Privately, sources in the racing industry and in the administration of Gov. Robert L. Ehrlich Jr. say De Francis has become such a target of criticism that they'd prefer to keep him as far from the spotlight as possible.

Magna's public image is important because of the hurdle it faces in securing slots licenses at both of its Maryland tracks.

"The fact that Magna and Joe De Francis have two tracks was fortuitous," Ehrlich told WBAL Radio yesterday. "If there is a slots bill, and I hope there is but there is no guarantee, it's more likely than not that there will be language in there to the effect that owners will be given one license. ... If you are Pimlico, that may be a death knell."

While De Francis stayed away, Maryland's other prominent track owner, William Rickman Jr., testified at Wednesday's committee hearing and is engaging in the legislature's slots debate. Rickman owns Delaware Park, which has slot machines, as well as Ocean Downs on the Eastern Shore. He plans to build a track in Allegany County that the governor's bill identifies as one of six sites for slots.

Alan Foreman, general counsel for the Maryland Thoroughbred Horsemen's Association, said the owners of Pimlico and Laurel Park clearly have concluded they're better off if De Francis stays in the background.

"If Joe's returning to the racetrack and allowing the industry to move forward on slots legislation, then that's great," he said. "Let's take the focus off of Joe and let's try to get a bill passed that works for the entire racing industry. We're at a critical juncture. We need to focus all of our energies on trying to get a very good bill passed. ... Otherwise, we're at a point where the industry could collapse."

Wayne Wright, executive director of the horsemen's association, said that while De Francis might not be as visible, he remains influential. "It seems obvious to me that Joe De Francis still has influence from the way the bill looked last year and the way in which the bill evolved this year," Wright said.

Wright's group and others have said that track owners receive too much from the proposal and that the share of slots proceeds devoted to purses and horse breeding falls short of what is needed to save Maryland's racing industry.

Disagreements and infighting have plagued the horse industry in recent years, particularly since De Francis and his sister took over running the state's two leading tracks upon the death of their father in 1989.

Though he didn't refer specifically to De Francis, Ehrlich's testimony before the Senate committee called for better cooperation. "The industry has got to get it together," the governor said. "The history is not positive."

At the start of the 2003 debate, the push for slots fell under an ethical cloud after reports surfaced that De Francis had donated $225,000 to a national political committee controlled by Senate President Thomas V. Mike Miller, one of the legislature's leading slots proponents.

A state probe ended in January without finding any violations of Maryland election laws. An FBI "preliminary inquiry" into Miller's fund-raising activities apparently is continuing.

Slots opponents have met with some success in portraying the track owners, and particularly De Francis, as unjust beneficiaries of a noncompetitive system. Last year's proposal from the governor limited slots to four racetracks; this year's plan includes the four tracks and adds two other sites to be selected by an independent panel.

"How can you justify a competitive bid on the two nontrack locations and you just give away the other four slots locations to the tracks?" asked House Speaker Michael E. Busch, a leading critic of the governor's slots proposal.

Busch says the state, if it decides to expand gambling, should cut out the middlemen by building its own slots dens and keeping the profits.

Though De Francis is no longer the majority owner of the tracks, the widely held perception among lawmakers is that he'll make millions from slots.

In the deal to sell a 51 percent stake in the Maryland Jockey Club to Magna, De Francis and his sister were paid $18.4 million, with a similar amount due if Magna exercises its option to buy the rest. De Francis and the jockey club's other minority partners would gain a piece of future proceeds should slots be legalized.

Micucci insisted that De Francis' share would be small under the Ehrlich proposal, about $100,000 a year in the first few years after slots are legalized. "This distribution is speculative and may, in fact, be less," Micucci said.

If so, that would mean Magna's annual share would be about $350,000, with most of the company's economic benefit coming from long-term growth in the value of the two tracks.

Others say those figures are laughable. Jeffrey C. Hooke, who has co-written studies on slots in Maryland for a nonprofit tax policy group, said Magna vastly underestimates the revenues and exaggerates the costs. He says De Francis could make $8 million or more per year.

But some lawmakers say that as long as De Francis stays in the background, it may not make a difference how much he stands to make.

"Last year, everybody focused on Joe, but we have to move beyond that," said Sen. Gloria G. Lawlah, a Prince George's Democrat. "He cut a deal. Not everybody may like his deal, but it's his deal."

Sun staff writer David Nitkin contributed to this article.

Who gets a share

When Magna Entertainment Corp. of Canada bought Pimlico Race Course and Laurel Park, it agreed to divert any future slots proceeds to a venture made up of current and former track owners. For each dollar in pretax, net earnings generated by the venture, equity investors would first be paid their share. From the remainder, Magna would keep 35 cents and the previous owners 65 cents during the first five years of slots operation. The previous owners' share would drop to 50 percent for the next five years, then fall to 40 percent for the next 10 years. After 20 years, Magna would keep everything.

Here is the breakdown for the first five years:

Magna: 35 percent

Leucadia National Corp., a New York-based conglomerate with holdings in insurance, wineries and copper mines, and a former part-owner of the tracks: 19.11 percent

Louis Guida of Vero Beach, Fla., heads a group of 16 silent partners, most living in New Jersey, which once owned a large share of stock in Laurel. Among its members is Joseph J. Grano Jr., chairman of Wall Street's USB Wealth Management USA. The entire group would receive: 16.25 percent

Karin De Francis, executive vice president of the tracks: 12.55 percent

Joseph A. De Francis, president of the tracks: 11.74 percent

Martin Jacobs, former treasurer of the tracks: 5.35 percent

The estate of the late Redskins owner Jack Kent Cooke, who had made a loan to the tracks' former owners, is due $6 million if slots are legalized by 2006.

Source: filings with the Securities and Exchange Commission and documents obtained through the Public Information Act from the Maryland Racing Commission

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