As reported by: The Associated Press
An outspoken Senate foe of gambling has asked Gov. Ed Rendell to order an investigation into the finances of the owner of the Philadelphia Park racetrack, questioning the business practices that have allowed the track to avoid paying much in federal and state income taxes.

Sen. Gibson Armstrong, R-Lancaster, in a letter to Rendell and Revenue Secretary Gregory Fajt, asked for the investigation as part of a background check ahead of the possible legalization of slot-machine operations at the state's racetracks, which would almost certainly enrich racetrack owners.

Citing news articles in recent years in The Philadelphia Inquirer, Armstrong noted that the track's owner, Greenwood Racing Inc., reports little in annual track profits after debt transactions largely with overseas affiliates or related parties.

A 1998 review of financial and court documents by the Inquirer show that Lebanese businessman Watche A. Manoukian has used the Bensalem racetrack as the hub of an expanding American gambling empire that ships tens of millions of dollars overseas - virtually tax free - to a family company in Liechtenstein, a country renowned as a tax haven. A follow-up story by the Inquirer last year showed the pattern continuing through the end of 2001.

Manoukian's California-based attorney, Terrence Everett, declined comment when contacted by telephone - "I don't comment on allegations that I have not seen nor have I reviewed" - and did not respond after a copy of Armstrong's letter was faxed to him.

Bob Green, president of Greenwood Racing, was in London and not immediately available for comment, a secretary at the company said. Kate Philips, a spokeswoman for Rendell, who supports the legalization of slot machines, said both the governor's office and the Department of Revenue had received the letter, which was dated Monday.

"We will review it and decide whether further action is warranted," Philips said.

Bob Thompson, counsel to Armstrong, said the senator had also asked the office of U.S. Sen. Rick Santorum to contact the FBI about the matter.

Manoukian, the majority shareholder of Greenwood, benefits from Philadelphia Park's debt because companies that he and his family own act as mortgagee and mortgagor, controlling both ends of most of the track's debt transactions, the Inquirer reported.

"Each year the interest and penalties are paid on this loan ... and the result is a massive 'write-off' for Philadelphia Park in taxable income," Armstrong wrote. He added that laws in Liechtenstein make it impossible to find out details about the loan.

The source of most of the track's lucrative tax write-offs is a $55 million mortgage acquired for $27 million in 1993 by Vectura Establishment, a wholly owned subsidiary of Greenwood headquartered in Liechtenstein and controlled by one of Manoukian's brothers, Varoujan, the Inquirer said.

From 1996 to 2001, Greenwood paid $85 million in interest - or 15 percent of total revenues during those six years - to Vectura, the paper said.

Despite reporting $546 million in income during those years, Greenwood paid no federal income taxes and $300,000 to Pennsylvania, citing track profits of only $6 million.

In comparison, Penn National Gaming Inc., the publicly traded company that owns Pocono Downs racetrack near Scranton and Penn National Race Course near Harrisburg, reported revenues of $111 million in 1997, paying $2.3 million in state and federal taxes.

Among other gambling interests, Greenwood owns six Philadelphia-area off-track wagering clubs, the telephone-betting system Phonebet, and riverfront property in Philadelphia purchased in 1996 in anticipation that riverboat gambling would be legalized on the Delaware.

Manoukian, a London resident, made his fortune as a purchasing agent for the royal family of Brunei.