BANGOR – Representatives of Shawn Scott, the developer proposing a racetrack casino at Bangor Raceway, denied allegations of fraud and mismanagement alleged in a federal civil suit filed last week in New York.

A statement by management at Mid-State Raceway Inc., parent company of the Vernon Downs racetrack in Vernon, N.Y., of which Scott is a majority shareholder, was published on the track’s Web site this week denouncing the lawsuit against Scott and several affiliates as “spurious, devoid of substance, replete with factual inaccuracies and without basis.”

Vernon Downs is among several New York racetracks eligible to operate gaming facilities featuring slot machines, subject to approval from the New York State Lottery. Mid-State has applied for a gaming license and expects to open a gaming facility called the Miracle Isle at Vernon Downs at the end of this year.

The more than 30-page complaint was filed last week in U.S. District Court, Southern District of New York, by attorneys acting on behalf of the New York plaintiffs – longtime shareholder Gary Greenberg and former track executive John Signorelli, who reportedly resigned in 2001 after being fined by state regulators, and Vernon Downs Acquisition LLC.

The suit accuses Scott and affiliates of “breaches of fiduciary duties, gross mismanagement and intentional, reckless and-or grossly negligent conduct” that have “resulted and will continue to result in a gross waste and [destruction] of Mid-State’s assets and injury to its and its shareholders’ interests.”

Mid-State officials deny the allegations.

“In management’s opinion, the lawsuit is a continuation of an attack on the track and its management, which began [last] week with the unsolicited distribution to the media of material dealing with President Hoolae Paoa’s conduct 20 years ago,” company officials said in the Web statement.

Mid-State officials claim that the move was not motivated by concern for the company or its stockholders but rather “represents a continuation of a heavy-handed bludgeoning attempt to force a sale by the Shawn Scott family of its interests in the company.”

Mid-State contends that now that it is apparent that Scott’s racino plan might succeed, suitors who previously had no interest in Mid-State were trying to take it over.

The company further said that Scott inherited many of the company’s financial problems, including $1 million in unpaid property taxes and more than $500,000 in unpaid purses, Mid-State officials said, adding that the problems stem from Signorelli’s tenure.

Attempts by Signorelli and his associate, Dominic Giambona, to sell their shares and warrants they claimed to own fell through after Scott and his representatives learned that the warrants had expired, company officials said.

Mid-State management officials also said they have learned that Jeff Gural, a New York City businessman whose recent offer to buy the track was rebuffed by Scott, was attempting to acquire Scott’s interest in Mid-State through his newly formed entity, Vernon Downs Acquisition LLC.

Mid-State blames its level of debt on the company’s and the industry’s condition at the time Scott became involved in the company in July 2002, according to the statement.

Historic losses, unpaid taxes and purses, deteriorating facilities and ongoing operating losses dictated the timing and amounts of the loans. The lender’s “risk level” and the absence of viable alternatives determined the cost, management maintains.

Mid-State Raceway submitted the complaint to its legal counsel and its insurance carrier. The company was advised that not only does it have valid defenses to all of the alleged conduct, but that both counterclaims and third-party claims are possible recourses the company should consider.