The group awarded the contract to install and manage 450 video slots terminals at Aqueduct Racetrack was initially deemed “not qualified” by the state, The Post has learned.
The revelation came as Gov. Paterson yesterday staunchly defended the selection of the consortium led by Rev. Floyd Flake, the Aqueduct Entertainment Group.
“AEG was initially not found qualified by the Lottery Division,” said a source involved in the deliberations.
Another state official familiar with the review confirmed that AEG’s initial plan had been flagged as problematic during a background check of partners associated with the bid.
The insider particularly mentioned Karl O’Farrell, an Australian who operated a gaming firm and had been ensnared in bankruptcy proceedings, but was later dropped from the group.
Another partner, Darrell Greene, has a criminal record.
But a Lottery Division spokeswoman insisted that AEG was never disqualified at any point in the process.
Meanwhile, AEG hasn’t crossed the finish line yet.
State Attorney General Andrew Cuomo and Comptroller Tom DiNapoli are required to sign off on the plan, said Assembly Speaker Sheldon Silver (D-Manhattan).
Silver backed AEG’s plan — but only if it meets his conditions.
“It’s his [Cuomo’s] responsibility to look at the contract . . . to make sure it is in order and to make sure it will be capable of being complied with,” Silver said.
The speaker also said DiNapoli has to ensure that the plan is sound.
Sources raised questions about where AEG will find $300 million — the up-front licensing fee it must pay to move ahead with the project.
The lead financial partner for AEG is a Canadian merchant bank, Clairvest, whose total assets come only to about $300 million, a Post review found.
AEG yesterday said that Deutsche Bank — which is not a partner — will provide additional financing.
AEG is expected to roll out a full list of investors that sources say will include hip-hop mogul Jay-Z and other notables.
Paterson defended his choice of AEG — and pointedly noted that both Silver and Senate Democratic Conference leader John Sampson of Brooklyn agreed.
“Each leader had equal statutory authority, equal responsibility and is equally accountable in this selection,” the governor said.
Additional reporting by Brendan Scott in Albany