State's racing feud nearing finish line Buyout may settle track ownership

October 01, 1993|By Ian Johnson and Ross Peddicord | Ian Johnson and Ross Peddicord,Staff Writers Staff writer Kent Baker contributed to this article.

Any day now, one of them will pull the trigger.

They don't want to, but they agree that a duel is the only way. Better than more messy lawsuits. Better than publicly fighting while one of Maryland's institutions slowly deteriorates.

Click, and the feud is over.

The bullet will arrive in the form of a letter, probably from Tom Manfuso to Joe De Francis. It will offer Mr. De Francis the chance to buy Mr. Manfuso out of his stake in the tradition-laden Pimlico and Laurel racetracks. Buy me out for the amount I propose, Mr. Manfuso will write, or else I will buy you out for the same amount and become king of Maryland horse racing.

The action, which legally can take place any time starting today, would be a fittingly dramatic end to the bitter feud between Mr. De Francis, who controls both racetracks, and his co-investors, Tom Manfuso, 64, and his brother Bob, 56. The Manfusos and Mr. De Francis, 38, have been trading barbs and insults for four years, leaving the industry divided as it confronts some of the greatest challenges in its 250-year history.

The animosity reached its apex in May 1992, when the Manfusos filed suit against Mr. De Francis, alleging he had used track funds in his efforts to lobby for a track in Texas. Mr. De Francis responded by banning them from the executive offices at Laurel and Pimlico, taking away their company cars and declaring them "bitter enemies" who "make me sick to my stomach."

After so many jabs, both sides agree, the showdown at least would put someone firmly in charge of Maryland's tracks.

"It's obvious that you've got a situation where this couple has to be divorced," said Bob Manfuso. "It would clear the air."

This kind of legal duel is called Russian Roulette -- fitting not only because it eliminates one participant with brutal efficiency, but also because it's a high-stakes gamble.

The immediate risks are obvious: The winner of the duel will be saddled with the tracks' $41 million debt and $2.5 million in losses over the past three years. In addition, the winner will have to buy out the other partner. Analysts are reluctant to put a price on the tracks because of their huge debt, but they could be worth $40 million.

Maybe more important is that the future owner will have to shoulder this crushing load while dealing with huge changes in the horse racing business. Fans soon may be able to call up races from around the country on their televisions and place bets in their living rooms, and the growth of casinos and riverboat gambling is drawing customers away from the tracks.

The industry's survival is more than an economic issue for Maryland. It has a sizable economic impact -- state estimates suggest that $1 billion changes hands because of it every year and that it generates more than 10,000 full-time and part-time jobs -- but horse racing is also one of the state's great traditions, as woven into Maryland's fabric as steamed crabs and sailing on the Chesapeake.

"There are multiple factions in the industry and some support De Francis or Manfuso and the division of support has hurt the industry," said Dr. Malcolm Commer, an equine specialist at the University of Maryland's Wye Research and Education Center. "There are so many hypotheticals that it's hard to know who would be better, but the main thing is that someone be in charge and have a vision for horse racing in this state."

Frank De Francis' legacy

The rancor between the Manfusos and Joe De Francis began with a death.

It was in July 1989 and Frank De Francis, 62, was dying from the effects of a massive heart attack. Mr. De Francis, a former Washington lawyer and lobbyist for the arms industry, was the czar of Maryland horse racing.

His successes had started in 1980, when he had bought the bankrupt harness race track in Laurel, which he renamed Freestate Raceway. Using his knack as a promoter and motivator, he helped revive the raceway, earning him the respect of Tom and Bob Manfuso, two businessmen who recently had sold their pharmaceutical company for $120 million.

In 1984, Bob Manfuso asked Frank De Francis if he would be interested in buying Laurel Race Course. Mr. De Francis agreed. The two then added Bob's brother, Tom, and Mr. De Francis' lawyer, Marty Jacobs.

With Frank De Francis controlling the voting stock, the four investors bought the track for $16 million. Frank De Francis ran the show, while Tom Manfuso headed maintenance and Bob became liaison to the horse owners and trainers.

Frank De Francis' climb to the top of Maryland's equine industry culminated in 1986, when the four partners bought Pimlico for $30.5 million.

But even as the partners were putting together their racing deals, problems were afoot. Changes in the 1986 tax law made owning a horse less profitable, and the number of racehorses available began to fall.

Faced with this growing challenge, the De Francis-Manfuso empire was poorly structured to cope. Built on $41 million of debt, the tracks had to make $4.5 million in interest payments each year.

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