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Ultimately, Capital Play did not win. First, the team lost the racing franchise agreement to the existing, cash-strapped operator, New York Racing Association, a move that stunned the competitors involved. Then he lost in a second bid, with a different team, to develop slot machines, or Video Lottery Terminals, at the Aqueduct.

 

THAT SLOT-MACHINE DEAL, though, fell apart in March 2009. And Mr. O’Farrell had not given up his gamble.

In April 2009, the state once again opened bidding. From the ashes of Mr. O’Farrell’s Capital Play bid arose the Aqueduct Entertainment Group. Precluded from taking a leading role given concerns of regulators, he worked behind the scenes to help form AEG, according to people who worked with Capital Play, and did not take an equity stake, according to AEG.

But the state continued to raise concerns over Mr. O’Farrell’s involvement. In September, to clear vetting, AEG wrote to the state that it terminated an agreement that would have entitled a company controlled by Mr. O’Farrell a $15 million bonus if AEG won the bid.

In terms of image, the new AEG bid went local. It emphasized the community; it trumpeted a commitment to minority participation; and its public image seemed to be dominated by Mr. Flake, a reverend with strong connections to Queens politicians, including the Senate’s president, Malcolm Smith, and who had a tiny 0.6 percent equity stake. It also signed on fame: Jay-Z had a 1.25 percent stake, according to a shareholder roster from the fall.

But if it was this sprawling team approach that helped propel AEG to victory, it may also be what precipitates its downfall.

Three days after Governor Paterson announced his choice of AEG, he met with Mr. Flake, tinging the entire deal with the appearance of malfeasance. Mr. Flake had just days before told The New York Times he might endorse Mr. Paterson’s likely 2010 rival, Andrew Cuomo, which made the bid-granting process look like a possible quid pro quo: that Mr. Paterson’s choice of AEG, the low bidder in an early set of numbers analyzed by the state, was connected to the governor’s race. (Mr. Paterson, who agreed to select AEG with Assembly Speaker Sheldon Silver and the State Senate Democratic leader, John Sampson, has denied wrongdoing.)

Now AEG is in the tabloids on a daily basis, unable to shake the qualifier “politically connected” from most stories on the topic. In truth, each of the bidders played politics with the process, employing armies of lobbyists, fund-raisers and other consultants with links to the Paterson administration and key members of the Legislature for what was sure to be a less-than-solidly-rational selection process.

AEG is racing to complete a memorandum of understanding with the state, even as an inspector general investigation pushed by Assembly Speaker Silver moves forward. A spokesman for the firm said AEG is working with New York to finalize the agreement, “so that we can provide New York with $300 million in sorely needed revenue.”

But the investigation may delay any imminent action. Other bidders are circling, and the public perception of the deal has been severely tainted.

Mr. O’Farrell, meanwhile, has disappeared from the public scene. AEG insists he has no involvement at all anymore and no ability to take money out of the deal (though the state declined to provide additional correspondence documents to back up this claim, citing an investigation). And Mr. O’Farrell, once the out-front man happy to hop on the phone with elected officials and reporters, did not respond to emails or calls to multiple phone numbers.

ebrown@observer.com