A federal grand jury indicted three officers of Maryland's beleaguered Laurel Raceway yesterday on charges of "misappropriating" raceway funds to pay debts and funneling Laurel money into companies secretly owned by one of them.
The indictment charges that between March 1975 and December 1978 Joseph Shamy, his wife, Greta, and her father, Daniel Rizk, illegally profited from a $3.6 million raceway renovation contract awarded to a company in which Joseph Shamy had a concealed interest.
In August 1977, the three, all of New Jersey, allegedly arranged the transfer of $170,000 from a Laurel Harness Racing Association bank account in Maryland to Joseph Shamy's personal bank account in his hometown of North Brunswick, N.J.
Rizk, chairman of the board, and Joseph Shamy, Laurel's corporate secretary, own a majority interest in the harness racing track, according to the indictment. Greta Shamy is president of the track.
The indictment is the most recent in a series of legal problems for the raceway, a five-eights of a mile harness racing track in Howard County, including the 1977 conviction of the raceway's former president for giving directions to have the track's old club house burned down.
The majority owners of the track also have beset with lawsuits by banks, creditors and minority stockholders, takeover attempts, a state police investigation of charges of hidden ownership and an FBI investigation into allegations that the track's assets have been diverted into such uses as real estate deals in Atlantic City, N.J.
The Shamys, who moved from modest backgrounds to multimillion-dollar real estate deals in Atlantic City, first invested in the raceway in 1975 and took control of its operations in 1976. In Atlantic City, Shamy has put together real estate deals for two hotels planned by their owners for conversion to casinos and kept a piece of each property for his family.
Yesterday's indictment, returned in Baltimore, charges the Shamys and Rizk with "defrauding" other Laurel stockholders of their right to honest service by creating Howard Construction Company and then awarding it the $3.6 million contract to replace the demolished clubhouse and improve the track grounds.
The defendants concealed the true ownership in Howard Constuction and in two other companies, which were handed special, smaller contracts by Howard for work at Laurel, the indictment charges.
These two companies, BBI Contractors and Advance Equipment Company, received contracts totaling more than $475,000 according to the indictment. It charges that BBI was set up by the Shamys and Rizk and that Advance was owned by Joseph Shamy.
As part of their alleged scheme, the indictment claimed, the Shamys and Rizk had the raceway pay hundreds of thousnads of dollars for work done by these companies "when in fact . . . the work was done done as represented."
The three are charged in the indictment with mail fraud, specifically that they mailed various business letters and reports in executing the alleged scheme. They also are accused of wire fraud for allegedly arranging the wire transmission of $220,000 in Laurel funds to variuos bank accounts, including the $170,000 that was allegedly transferred to Joseph Sha Attorney's Office, which conducted the investigation, also is seeking forfeiture of Joseph Shamy's and Rizk's majority interest in the raceway. The forfeiture is sought under a count charging the Shamys and Rizk with engaging in a "pattern of racketeering activity" in the Laurel scheme.
James Anderson, an attorney representing the Shamys, said "We're convinced that the Shamys contained in the indictment."
The shamys, who could not be reached for comment, have denied similar allegations against them in the past and blamed their troubles on competitors in the racing industry and creditors who, they said, wanted to gain control of the lucrative raceway. "They're vicious people man," Shamy said in an interview last year.
"Everything that's been alleged about us has fallen through the cracks because it's bull. . .," Shamy said.
Shamy, a New Jersey realtor, suspended lawyer and a former Boston Celtics basketball team vice president, was part of a group that began negotiating in 1974 to buy Laurel Raceway from former owner Richard Hutchison.
Within three years the raceway became the target of a federal investigation into charges that funds were being skimmed from the racetrack's operations and diverted to the Shamy's personal use and allegations of fraud in contracts between the raceway and Shamy's construction companies.
With the FBI investigating and the grand jury subpoenaing track records, in March 1978 the harness racing commission chairman, Ben Schwartz, asked for a state police investgation of charges of hidden ownership.
The two Atlantic City hotels in which Shamy's family has an interest are the Claridge Hotel, in which Rizk owns a 9.5 percent interest and the Mayflower Hotel. The Mayflower was part of a real estate package Shamy assembled for a Penthouse Magazine subsidiary that plans to develop a casino. Greta Shamy retains a 50 percent interest in the property until it is sold or developed into a casino, at which point her interest is reduced to 10 percent.
The Shamys' attorney Katz said that the indictment would not interfere with the raceway's scheduled opening of the 1979 season June 18.