Hinsdale Greyhound Track’s Land Deal Before Bankruptcy ‘Fishy,’ Creditors’ Attorney Says

By PHILLIP BANTZ
Sentinel Staff

The Keene Sentinel: March 22, 2009

Betting is Herschel Bird’s business. The Nevada resident has etched out a comfortable living beating the odds. Not much slips past this guru among horse racing aficionados.

But if you told Bird four months ago that the five-decades-old Hinsdale Greyhound Racing Association was on the verge of sinking and taking his six-figure wagering account along for the ride, he wouldn’t have believed it.

“Ironically, I felt very loyal to that track. I dealt with them for five years,” Bird said in a recent phone interview. “Even after they lost their competitive edge and there were better rates available elsewhere, I kept my money there. I was doing less business, but I still stayed.”

While sitting in a jet on a runway in December in Los Angeles, Bird answered a call from a friend telling him the Hinsdale track, which offered simulcast greyhound, thoroughbred and harness racing from tracks across the country, had filed for Chapter 7 bankruptcy.

Bird was told that the $138,000 he had in his wagering account was as good as gone, and the state laws that were in place to protect him and the other bettors were inadequate. He immediately called the N.H. Racing and Charitable Gaming Commission, which referred him to the track owner’s lawyer.

“The lawyer said he looked for two months and couldn’t find anything that prevented them from taking this money,” Bird said. “Basically, he was saying that because there’s nothing there to prevent us from taking it, we’re going to take it. Do you know how infuriating that is?”

State law has changed since Hinsdale went under and highlighted the need for more comprehensive protections for gamblers. Tracks are now required to maintain a balance in a secure bank account that would cover creditors in the event of bankruptcy, closure or sale.

The Hinsdale track’s last president and chief executive Joseph E. Sullivan 3rd said in a mid-January meeting with creditors that approximately half a million dollars in wagering accounts, including Bird’s money, was commingled with funds used to pay for overhead costs.

Before the track collapsed, Sullivan said he pulled cash from the general fund to pay employees and there wasn’t enough left to cover the wagering accounts. Bettors were not warned about the impending bankruptcy and given a chance to withdraw their accounts, he said.

The state racing and gaming commission accused Sullivan of breaking a verbal promise he made during private meetings to repay bettors. Sullivan disputes the commission’s claim.

The state attorney general’s office is in the middle of an investigation into Sullivan’s handling of the bankruptcy, while a trustee attempts to secure and liquidate the track’s remaining assets to pay its creditors.

The trustee, Michael S. Askenaizer of Nashua, has identified approximately $200,000 in receivables from the track that could be used to repay approximately 200 unsecured creditors – this includes the bettors and various businesses that dealt with the track — who are owed $1.75 million.

The tables, chairs, television monitors and other items that belong to the track will be auctioned in mid-April in an attempt to collect more funds for the creditors, Askenaizer said.

“The auction will bring whatever the auction brings, and that’s it at this point,” he said. “The next big thing is the promissory note.”

Sullivan took out a $650,000 loan from the track while he was its president. He declined to say where that money went when asked by The Sentinel after the meeting with creditors.

“Right now all I have is the promissory note he gave to the company,” Askenaizer said. “We’re going to be trying to unwind how that came to be.”

A year and a few weeks before the Hinsdale track declared bankruptcy, Sullivan formed Hinsdale Real Estate LLC with Carl B. Thomas of Spofford-based Thomas Construction Corp. and sold the track’s 102 acres and buildings to the holding company for $3.3 million.

Sullivan remains in the middle of negotiations to sell 22 acres of land that now belongs to the holding company to Wal-Mart for $2.1 million.

The land transaction with the holding company and its pending deal with Wal-Mart will be investigated as part of the bankruptcy process, Askenaizer said. He declined to comment further on either issue.

Under state law, any fraudulent transfer involving a debtor can be undone if it occurred less than four years prior to the bankruptcy filing. Federal bankruptcy law was changed in 2006 to extend the look-back period from a year to two years.

Sullivan’s bankruptcy attorney, John M. Sullivan of Concord, previously said creditors would not be able to go after the track’s former land because it belonged to the holding company. He could not be reached for comment late Friday afternoon or throughout the day Saturday.

Jennifer Rood, a Manchester attorney representing Bird and 11 of the Hinsdale track’s other biggest bettors, said she’s simply awaiting the outcome of Askenaizer’s inquiry into the land transaction with the holding company before making any moves.

“The transaction looks fishy and the trustee is investigating it,” she said. “I know my clients feel strongly that it was an improper transfer and it had the effect of depriving them of their money.”

While confident that the trustee will find in favor of the creditors, Bird said he has a backup plan.

“Unless indications from the bankruptcy are positive, we’re considering bringing a civil lawsuit and putting a lien on the property they’re trying to sell to Wal-Mart,” he said. “Forget the money I lost. I feel betrayed. I have deep enough pockets to fight this the whole way.”

A former high-ranking employee at the Hinsdale track, who asked to remain anonymous, said he does not believe Sullivan intended to defraud his creditors when he created the holding company and sold the track’s land.

“Joe Sullivan was an eternal optimist,” he said. “Chapter 7 bankruptcy is usually the last option for any business, and I’m sure that, had the land deal with Wal-Mart gone through in a timely fashion, (the track) would still be attempting to operate and hold out for the New Hampshire legislature to pass a slots bill.”