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By PHILLIP BANTZ
Sentinel Staff
The Keene Sentinel: March 12, 2010

MANCHESTER — Surrounded by three lawyers, the man who ran the now-shuttered Hinsdale Greyhound Park walked out of U.S. Bankruptcy Court in Manchester Thursday afternoon, closing the door on a Chapter 7 case that began in December 2008.

Joseph E. Sullivan 3rd declined an interview request through one of his attorneys, Arpiar G. Saunders Jr., after the hearing. Sullivan believes the “court order stands for itself,” Saunders said.

In the order, Chief Judge Mark W. Vaughn called the bankruptcy settlement “fair and reasonable and in the best interests of the bankruptcy estate.”

The settlement Vaughn approved calls for drawing $1,086,120 from the estate to repay the track’s creditors.

Dozens of bettors who were unable to withdraw their wagering accounts when the track closed stand to be repaid about half of what they’re owed, said Deborah Notinger, an attorney for the bankruptcy trustee, Michael S. Askenaizer. The court appointed Askenaizer to liquidate the track’s assets.

One of the track’s biggest bettors, Herschel Bird of Nevada, disapproves of the settlement. He suspects that Sullivan, who had a salary of more than $200,000 during the three decades he ran the track and took out $650,000 in loans from the business, may have hidden assets from Askenaizer.

“When you’re asked to take 50 cents on the dollar, you feel like you’re being ripped off,” Bird said. “Something doesn’t ring true about Sullivan’s finances.”

Sullivan stated in a deposition with Notinger that he is destitute and financially dependent on his sister, who loaned him $70,000.

Sullivan and his wife own a house and two properties in Swanzey valued at an estimated $575,000.

But after a $375,000 mortgage, they have about $200,000 in equity in those assets, according to Sullivan’s deposition.

Sullivan also lists $123,206 in other personal property, which includes a 2003 Cadillac Seville, a 2004 Jeep Cherokee, jewelry and art.

Based on the advice of his attorney, Bird did not file an objection to the settlement with the court, which might have altered the outcome of Thursday’s hearing. None of the track’s other creditors objected to the deal.

Under the settlement, $400,000 will be taken from the proceeds of a land deal Sullivan and business partner Carl B. Thomas, who owns Spofford-based Thomas Construction Corp., made with Wal-Mart Stores Inc. Sullivan has to come up with another $400,000 by selling the remaining former track land.

That land, about 66 acres, belongs to Hinsdale Real Estate LLC, a holding company Sullivan and Thomas created before the bankruptcy filing.

Sullivan sold the track land, originally 91 acres, and buildings to the holding company for $3.3 million.

Later, the holding company sold 25 acres to Wal-Mart for $2.1 million. The remaining 66 acres have been assessed at $1.2 million. The buildings on the property are assessed at $3.5 million.

Sullivan disagrees with those assessments. He has made an unsuccessful attempt to have Hinsdale lower the assessed value of the land and buildings, which would result in a decrease in property taxes. He is appealing the town’s decision to the state.

Sullivan and Thomas have two years to hand over $400,000 to the bankruptcy estate by selling all or some of the 66 acres at and around the track before the court steps in and forces an auction of the property.

The $800,000 from that land sale and the Wal-Mart deal will be combined with $286,120 the bankruptcy estate has from the track’s other liquidated assets, such as computers, furniture and vehicles that were auctioned last spring.

A peripheral condition of the settlement calls for Thomas to buy Sullivan’s 75 percent interest in Hinsdale Real Estate for $500,000.

Sullivan owes Thomas about $2.3 million for two loans secured by mortgages tied to the former track property. Thomas is gambling that he can recover his debt on the mortgages and perhaps make a profit by selling the 66 acres, even after the court takes a $400,000 cut from the proceeds.

“That land is worth bupkus. Nothing’s selling in that area,” Notinger said after the settlement hearing. “He’s taking all the risk and we’re getting money up front.”

Askenaizer and Notinger have raised concerns that Sullivan’s deal with Hinsdale Real Estate prior to the bankruptcy filing was a fraudulent property transfer.

But they agreed in the settlement to not pursue the allegation by filing a lawsuit against Sullivan.

They say legal action would be expensive and, even if it were successful, Askenaizer would be responsible for selling the track’s remaining property to pay off Thomas’ debt and the creditors.

Bird, the Nevada bettor, criticizes Askenaizer and Notinger for being too passive in their handling of the track’s bankruptcy — he wanted them to thoroughly investigate Sullivan’s finances instead of relying on the deposition and his financial affidavit.

Bird wants to know what Sullivan did with the money he made while working at the track and the $650,000 in loans he took from the business. Sullivan’s two daughters were also on the track’s payroll for years, making about $25,000 annually, even though they did not hold regular jobs, according to two former track employees who asked to remain anonymous.

In his deposition with Notinger, Sullivan indicates that he used a portion of the $650,000 that he took from the track to correct accounting errors.

Sullivan said the track’s vice president of operations, whom Sullivan appointed to run the company for a stint in 2005, had a gambling problem and used company money to fuel his addiction.

“When I had to let him go I went back in and the accounting was a wreck and I set about rebuilding it,” he told Notinger.

One of the former track employees wrote in an e-mail that Sullivan “representing himself to be ‘the cavalry’ riding back in to put (Hinsdale Greyhound Park) back in operating order after less than a year of mismanagement is bull crap. Joe never stopped controlling operations at HGP, he just hid in the shadows.”

Meanwhile, Bird said the track’s creditors may have gotten a raw deal because the bankruptcy trustee system is flawed. He said trustees have a financial incentive in the outcome of Chapter 7 cases in which assets are available to liquidate, which rarely happens.

Trustees receive a percentage of the funds they gather for the bankruptcy estate based on a sliding scale that ranges from 25 percent for the first $5,000, 10 percent for the next $45,000, 5 percent for the next $950,000 and 3 percent of the balance. They can also be paid for legal services.

The amount of Askenaizer’s payout was unclear and he did not return a phone message before press time today. An attempt to reach Notinger was also unsuccessful.

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By PHILLIP BANTZ
Sentinel Staff

The Keene Sentinel: February 25, 2010

A proposed settlement has been reached in the Hinsdale Greyhound Park bankruptcy case that would help reimburse creditors and forgive the former track’s president for an alleged fraudulent property transfer prior to the Chapter 7 filing.

The track closed in December 2008, leaving dozens of racing bettors with an estimated $500,000 in their wagering accounts holding the bag. The track also owes more than $1 million to additional creditors, including other tracks it did business with.

The proposal calls for drawing $400,000 from an escrow account and another $400,000 from the sale of the property at and around the now-defunct track, which includes 106 acres. The $800,000 will be combined with another $286,120 the bankruptcy estate has from the track’s other liquidated assets.

This would give bankruptcy trustee Michael S. Askenaizer $1,086,120 to help repay the track’s debts. A trustee is a third party appointed by the court to administer a debtor’s bankruptcy estate.

“The trustee believes, in his best business judgment, that this settlement with the settling parties is fair and reasonable and in the best interests of the bankruptcy estate,” Askenaizer wrote in the proposal.

As part of the proposed settlement, Askenaizer would agree to not sue Sullivan and his estate for an alleged fraudulent transfer of property to a real estate holding company, subordination of mortgages and a $650,000 promissory note former track president Joseph E. Sullivan 3rd took from the track when it was operational.

Askenaizer wrote in the proposal that while sufficient evidence exists to file and possibly win a lawsuit against Sullivan, doing so would “involve the expenditure of lots of attorneys’ fees and expert fees in order to prevail.”

And even if the lawsuit were successful, Askenaizer said he would have to sell the track’s remaining property, pay off a $2.3 million debt to Sullivan’s business partner Carl B. Thomas and cover property taxes and other costs from carrying the property.

“Given the depressed values of the commercial real estate market in southwestern New Hampshire, where the remaining property is located, the trustee believes refusing this settlement offer and litigating instead is not in the best interests of the estate,” Askenaizer wrote.

Before the bankruptcy filing, Sullivan sold the track’s property and buildings for $3.3 million to Hinsdale Real Estate LLC, a holding company he created with Thomas of Spofford-based Thomas Construction Corp.

The holding company later sold 23 acres to Wal-Mart Stores Inc. for $2.1 million, with $500,000 going into the bankruptcy estate escrow account that, under the settlement proposal, could be used to repay creditors. The rest of the proceeds paid off a portion of Sullivan’s debt from property taxes and loans.

Sullivan still owes Thomas about $2.3 million. The debt is tied to two loans for a total of $2.1 million, plus interest, that Thomas gave to Sullivan. The loans are secured to mortgages against the track property.

The settlement proposal gives Hinsdale Real Estate two years to sell the remaining track property, about 83 acres. The bankruptcy estate will take 65 percent of the sale proceeds until it receives $400,000. The other 35 percent will be used to pay Thomas for the mortgages.

The remaining $100,000 from the escrow account tied to the Wal-Mart land deal will be used to pay outstanding property taxes.

If the land doesn’t sell within two years, the property would go to auction.

A separate agreement under the settlement proposal would give Thomas full control over Hinsdale Real Estate. He plans to purchase Sullivan’s 75 percent interest in the company for $500,000, according to Askenaizer.

Askenaizer and Sullivan’s bankruptcy attorney could not be reached for comment. Sullivan has declined to answer questions about the case.

A hearing on the settlement proposal is slated for March 11 at U.S. Bankruptcy Court in Manchester.

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By PHILLIP BANTZ
Sentinel Staff
The Keene Sentinel: August 15, 2009

HINSDALE — Wal-Mart is one step closer to buying land that is tied up in legal red tape because its former owner is the bankrupt Hinsdale Greyhound Park.

A bankruptcy trustee has lifted a pending lawsuit attached to the 23 acres off Route 119 in Hinsdale that Wal-Mart wants to buy for $2.1 million to build a Supercenter.

The sale, which has been in the works for about three years, is expected to close Aug. 26.

The track’s president, Joseph E. Sullivan 3rd, and a business partner, Carl B. Thomas of Spofford-based Thomas Construction Corp., are part owners of the holding company that is trying to sell the land to Wal-Mart.

Sullivan and Thomas formed Hinsdale Real Estate LLC a little more than a year before the track filed for Chapter 7 bankruptcy in December 2008.

When the track closed, dozens of bettors were told that an estimated $500,000 in their wagering accounts was lost. Their money had been commingled with the track’s general funds, a practice that the N.H. Racing and Charitable Gaming Commission made illegal shortly after the track closed.

Sullivan’s bankruptcy attorney, John M. Sullivan of Concord, said bettors were kept in the dark so the track, which was in financial turmoil, would have enough money to pay its 49 employees for the last time.

The track also owes more than $1.2 million to other creditors who did business with it, including telephone companies, food vendors and greyhound tracks across the country for simulcast betting.

Joseph Sullivan also took out $650,000 in loans from the track that he hasn’t repaid. He has declined to say where the money went.

As the court-appointed trustee in the track’s bankruptcy case, Michael A. Askenaizer has been selling off the track’s assets to help repay its creditors. He’s also investigating whether the bankruptcy filing involves fraudulent transfers of property, perjury or is an abuse of the bankruptcy system.

The N.H. Attorney General’s Office has cleared Sullivan of any criminal wrongdoing. Some bettors accused him of stealing the money in their accounts.

In looking at Sullivan’s land deal with Hinsdale Real Estate, Askenaizer began to question the relatively low price tag Sullivan attached to the property: $3.3 million for the track’s 106 acres and every building on the property.

Sullivan and Thomas deny that the land deal was fraudulent.

They say the holding company paid a fair price for the land and selling the land was the only way to keep the track afloat during the year before it shut down, because there were no other financing options, according to court documents prepared by Askenaizer.

Because of his concerns about the deal, which remains under investigation, Askenaizer filed a pending lawsuit with the Cheshire County Registry of Deeds on the property. The pending lawsuit warns potential buyers, such as Wal-Mart, that if they purchase the land, they could be implicated in lawsuits stemming from the bankruptcy case.

Wal-Mart said it would back out of the deal if the pending lawsuit was not lifted from the land it wants to buy. This prompted Askenaizer to ask a judge at U.S. Bankruptcy Court in Manchester for permission to lift the pending lawsuit, but only on the property that interests Wal-Mart.

Wal-Mart would be able to buy the land and would be protected from any lawsuits associated with the track’s bankruptcy.

If the deal goes through, $500,000 from the sale must be placed in an escrow account that cannot be touched until the bankruptcy case is resolved. The money could be used to repay creditors.

In his request to remove the pending lawsuit, Askenaizer said he wants the Wal-Mart deal to work because the retail giant’s presence will increase the value of the land surrounding the store, which may help repay the track’s debt.

Askenaizer did not return messages seeking comment.

Jennifer Rood, an attorney for the track’s biggest bettors, also could not be reached.

One of the bettors Rood represents, Herschel Bird of Nevada, stands to lose nearly $140,000 he had in a wagering account at the track.

Bird said he will not fight the Wal-Mart land deal if it helps creditors get paid.

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By PHILLIP BANTZ

Sentinel Staff

The Keene Sentinel: August 13, 2009

The N.H. Attorney General’s Office has cleared the president of the bankrupt Hinsdale Greyhound Park of any criminal wrongdoing after bettors accused him of stealing money from their wagering accounts.

However, a bankruptcy trustee continues to investigate the multimillion-dollar land deal track president Joseph E. Sullivan 3rd made before the bankruptcy. The trustee is also looking at loans Sullivan took from the track.

When the track closed in December 2008, dozens of bettors with an estimated $500,000 in their wagering accounts were told their money was gone, because the cash had been commingled with the track’s general funds.

Sullivan’s bankruptcy attorney, John M. Sullivan of Concord, said bettors were kept in the dark so the track, which was in financial turmoil, would have enough money to pay its 49 employees for the last time.

In the wake of the Chapter 7 bankruptcy, some bettors filed complaints with the Attorney General’s Office alleging fraud and theft, spurring the criminal investigation, said Assistant Attorney General Peter Hinckley, who handled the inquiry.

“Our focus was whether there was any criminal wrongdoing. We were not looking into bad business practices. And in looking at state law, we found there was no violation,” Hinckley said. “The regulations at the time were ambiguous and there was no duty to separate or segregate the betting funds from general operating funds.”

The loophole was closed shortly after Hinsdale went bankrupt. Tracks are now required to maintain reserve accounts to ensure bettors are not left holding the bag in the aftermath of bankruptcy or closure.

N.H. Racing and Charitable Gaming Commission Chairman Timothy J. Connors said Joseph Sullivan assured commissioners during closed-door meetings before the bankruptcy that bettors would be paid if the track closed.

The meetings were private because the track’s finances were being discussed, Connors said.

At a public meeting with creditors in January, Joseph Sullivan said he never made any promises to protect the bettors.

The commission also took its concerns about Joseph Sullivan’s handling of the bankruptcy to the Attorney General’s Office, which can reopen its criminal investigation if new information comes to light as the case moves forward in U.S. Bankruptcy Court in Manchester.

The bankruptcy trustee, Michael S. Askenaizer, and his attorney, Steven M. Notinger, both of Nashua, are investigating the land deal Joseph Sullivan made and a $650,000 loan he took from the track in the years before the closure.

A trustee is a court-appointed official who liquidates the debtor’s property and determines whether a bankruptcy filing involves fraudulent transfers of property, perjury or is an abuse of the bankruptcy system.

A little more than a year before Joseph Sullivan filed for bankruptcy, he 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.

Joseph 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.

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.

As for the loan, Joseph Sullivan has declined to say where that money went.

“Right now all I have is the promissory note he gave to the company. We’re going to be trying to unwind how that came to be,” Askenaizer said in a March interview. He could not be reached for comment this week.

In April, Askenaizer held an auction at the defunct track’s headquarters, selling ATM machines, computers, televisions, trucks, humidors, art, kitchen equipment, office equipment, furniture, tools, books and cash counters to the highest bidders.

Sixteen, 25-inch televisions sold for $30. An executive desk and leather chair went for $10. A 1979 Ford truck with a water tank was won with an $800 bid. Ten security cameras sold for $212. An ATM machine fetched $500. Someone paid $25 for a 20-inch tall bust of Elvis Presley.

At the end of the day, the auction netted $41,710 after auction-related expenses.

The earnings will be used to repay the track’s $1.75 million debt to the bettors and an array of other creditors who did business with the track, such as telephone companies, food vendors and various greyhound tracks across the country.

John Sullivan, the bankruptcy attorney, has said bettors should expect to receive a fraction of what they’re owed — he estimated 10 to 25 cents on the dollar — if they’re ever repaid.

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By PHILLIP BANTZ
Sentinel Staff

The Keene Sentinel: April 12, 2009

HINSDALE — While the Hinsdale Greyhound Park was struggling financially, its president and chief executive officer kept his two daughters on the payroll in “phantom jobs,” sources say.

Joseph E. Sullivan 3rd filed for Chapter 7 bankruptcy in mid-December, citing the sour economy as a factor, and the track closed its doors.

Hundreds of bettors with an estimated half a million dollars in their unsecured wagering accounts were told their money was gone, because it had been commingled with the track’s general funds.

The state Attorney General’s Office has launched an investigation into Sullivan’s handling of the bankruptcy, and a trustee is trying to secure and liquidate the track’s remaining assets to repay bettors and other creditors.

Meanwhile, two former high-ranking track employees who asked to remain anonymous have independently told The Sentinel Sullivan’s daughters Meghan and Brianna were on the payroll for years, but they did not hold steady jobs at the track. The sources said they held “phantom” or “ghost jobs.”

“As long as I can remember, they were showing up on my department’s payroll,” said the first source, who began working for Sullivan in 2002. “Most of the employees there already knew these girls were getting paychecks.”

Sullivan has declined to comment through two of his attorneys, who also declined comment or did not return phone messages and e-mails seeking comment about his daughters’ salaries and other financial information pertaining to the track.

Meghan Sullivan was paid $393 a week throughout 2007, earning approximately $20,460 before taxes, according to payroll documents obtained by The Sentinel.

She received one paycheck for $393 at the end of the first week of 2008, and then she no longer appears on the payroll. She was living and going to college in Washington, D.C., while she was receiving the checks, according to the second source, who began working for Sullivan in 2001.

Brianna Sullivan occasionally worked at the track as a fill-in when she wasn’t away at college, and was paid $200 to $300 a week, the second source said.

Brianna Sullivan does not appear on the track’s payroll during the past two years because she took a job with Major League Baseball, which frowns on employees having ties to gambling institutions, the first source said.

Joseph Sullivan’s wife, Virginia, was being paid $823 a week, but had steady employment at the track as director of food and beverage and “was well worth every dime she got,” the first source said. Her salary in 2007 and 2008 was approximately $42,830 before taxes, according to payroll documents.

Joseph Sullivan drew weekly checks of between $3,340 and $9,100 in 2007 and 2008, bringing in more than $279,700 before taxes during 2007 and about $225,000 in 2008, when he began taking weekly pay cuts in the period leading up to the bankruptcy filing.

Sullivan also borrowed $650,000 from the track between 2002 and 2008. In 2005, the bulk of the loans he took out against the track went toward personal expenses, according to the second source.

The bankruptcy trustee is now attempting to trace and recover the money Sullivan borrowed from the track to repay the creditors.

The track lost $330,912 in 2006 and $470,816 in 2008, but reported a profit of $378,928 in 2007, according to bankruptcy filings.

Why the track profited the year before it went bankrupt remains a mystery. The N.H. Racing and Charitable Gaming Commission had no answers, and Sullivan’s attorneys declined to offer an explanation.

In 2007, the track obtained a $1 million loan from TD Banknorth in an attempt to stay afloat, but cash from the loan should not be counted as revenue, according to Sudhir K. Naik, deputy director of the gaming commission.

More than a year before Sullivan filed for bankruptcy, he 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 deal with the holding company and its pending sale of land to Wal-Mart will be investigated as part of the bankruptcy process.

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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.”

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By PHILLIP BANTZ
Sentinel Staff

The Keene Sentinel: February 22, 2009

State gambling regulators were so concerned with the financial situation of the Hinsdale Greyhound Racing Association that they planned to deny its operating license for this year and asked it to begin closing down.

The company went bankrupt before that could happen and hundreds of bettors with an estimated half a million dollars in their accounts were left wondering where their money went.

N.H. Racing and Charitable Gaming Commission Chairman Timothy J. Connors said the decision to withhold the pari-mutuel license was influenced by a N.H. Attorney General’s investigation into the track’s finances and business practices.

“We got a note or letter or something from the attorney general’s office saying they didn’t think at that point that the track would be suitable for licensing in the coming year,” Connors said. “So we had a meeting and asked for a wind-down plan.”

Gaming commission Director Paul M. Kelley sent an e-mail Nov. 7 to the track’s president and chief executive Joseph E. Sullivan 3rd asking that the track begin a “wind-down plan” that included making sure all of its bettors with wagering accounts be paid in full.

The track filed for Chapter 7 bankruptcy Dec. 15, leaving more than 500 betting accounts in jeopardy.

Sullivan was and still is in the middle of a $2.1 million land deal with Wal-Mart, and the gaming commission figured he would use earnings from the sale as a cash infusion for the track, then reapply for a pari-mutuel license in 2010, according to Connors.

“That’s what they were going to fall back on. The big thing was Wal-Mart,” he said. “They felt all along that that was going to close sooner than it has.”

Permitting requirements delayed the project, but Sullivan has said the land deal should be finalized by mid-year.

In November 2007, Sullivan formed Hinsdale Real Estate LLC with Carl B. Thomas, of Spofford-based Thomas Construction Corp., and sold the track’s property and buildings to the holding company for $3.3 million.

Thomas also took over two of the track’s mortgages totaling $2.1 million.

The deal allowed Thomas to secure a $1 million loan through the holding company and pump the money into the track, which was denied a loan because of its shaky financial situation.

During its final year of business, Hinsdale brought in $5.9 million in revenue, a decline of $2.8 million from the previous year.

Gaming commission Deputy Director Sudhir K. Naik said the track was trying to survive by borrowing money, which raised a red flag.

“If you’re running a business, the rule is to generate cash from primary operations, not financing activities,” he said. “In my mind, it’s not very healthy for a business to continue raising cash from financing activities.”

A former high-ranking employee of the track, who asked to remain anonymous, said the company was struggling for years before it finally went under.

“We were literally bleeding money and I was doing everything I could to keep the company’s head above water,” he said.

“We closed some of the bars and shut down portions of the building and let some employees go. I can remember times where an employee would be caught with a soda or burger that belonged to the track and they’d be fired on the spot. I thought at the time that it was on principle, but clearly those principles didn’t go to the top.”

Sullivan borrowed a total of $650,000 from the track while he was its CEO and said his salary last year was $225,000. He declined to say where the money he borrowed went.

The attorney general’s investigation that spurred gaming commissioners to ask the track to begin closing its doors launched in August 2007. The investigation came in the wake of a gaming commission ordered independent audit that raised concerns about the track’s ability to stay afloat.

“We ended up with an incomplete investigation when they filed for bankruptcy and there was nothing finally determined,” Associate Attorney General Ann M. Rice said. “The only action we could have taken was to make a recommendation to the pari-mutuel commission as to whether the licensee is fit to conduct racing in New Hampshire.”

The gaming commission asked the attorney general to open a new investigation into the track when it became clear that the track had insufficient funds to fully reimburse more than 500 bettors.

Gaming commissioners have accused Sullivan of promising to repay bettors during several private meetings before the bankruptcy filing. Sullivan has denied ever making such a promise.

The former track employee said he disapproves of Sullivan’s handling of the bankruptcy, because bettors were left in the cold.

“We’re talking about people I know, people I talked to, people I helped out and people whose money I processed. It just went into somebody’s pocket,” he said. “Knowing what the land is worth over there and the kind of holdings the company had, I never would have guessed in my wildest dreams that people would not get paid.”

The track’s bankruptcy attorney said Sullivan decided against warning the bettors because he wanted to pay his employees, and that wouldn’t have happened if bettors withdrew their accounts. Sullivan said during a creditors meeting in January that betting accounts were commingled with the track’s general funds and used to pay operating expenses.

Rice said the attorney general’s investigation into the track’s handling of the bankruptcy remains active, but declined to comment on its findings so far or provide a timeline for when the inquiry will be finished.

The gaming commission was worried about the track’s finances more than a year before it collapsed, which is why commissioners decided to impose a number of conditions on the company before granting it a pari-mutuel license for 2008.

One of the conditions would have required the track to maintain a reserve account that contained at least 70 percent of its bettors’ wagering funds. The condition was later dropped.

“The only reason I can think of is that that rule didn’t become effective until January of 2009. We could recommend it, but we couldn’t enforce it,” Connors said. “We had to do some public hearings on it and work with the attorney general on the wording of it. We didn’t have the correct verbiage in it and we had to go through the Legislature and attorney general to get the wording right.”

State law required all greyhound and horse racing tracks to return bettors’ money within five days of closing their accounts, but did not specify that the tracks maintain a reserve account to ensure this happens.

The state’s two remaining greyhound tracks, The Lodge at Belmont and Seabrook Greyhound, and its only harness racing track, Rockingham Park, have until March 1 to comply with an amended law that went into effect soon after the Hinsdale track went bankrupt.

The law now requires tracks to maintain reserve accounts to ensure bettors are not left holding the bag in the event of bankruptcy or closure.

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