The corporation behind the Kentucky Derby had plans to latch onto New Jersey’s Internet gambling industry but claims it was defrauded by a former Atlantic City casino executive who said he had plans to purchase the Showboat Casino Hotel.

In a lawsuit filed Monday in Kentucky’s Jefferson Circuit Court, Churchill Downs Inc. claims that Nicholas Ribis, the former CEO of the Atlantic City Hilton Casino Resort, misled the racing giant, repeatedly stating between August and January that he was close to closing a deal with Showboat owner Caesars Entertainment Corp.

Meanwhile in August, Churchill Downs Interactive Gaming LLC signed an agreement with Ribis’ NLR Entertainment LLC, based in Short Hills, Essex County, to develop and operate Internet gambling for Showboat under Ribis’ ownership. Churchill paid Ribis $2.5 million through the agreement, according to the lawsuit claiming breach of contract and fraud.

Now, Churchill Downs wants its money back and is looking to the court for relief.

The agreement stated that Ribis would execute an agreement to acquire Showboat by Oct. 15 with the transaction completed by Jan. 31. Despite several detailed communications through November in which Ribis said he was putting the “final touches” on the purchase and sale agreement, the deal never materialized, the lawsuit states.

Meanwhile, Churchill Downs took steps to prepare for launching online gambling, including making a $10 million investment in intellectual property and hiring more than 20 engineers to develop an online gaming platform, the lawsuit states.

Courtney Norris, a spokeswoman for Churchill Downs, declined to comment Thursday, saying comments would not be made on ongoing legal matters.

Ribis could not be reached. In 2011, the former Hilton executive faced criticism from Gov. Chris Christie’s office after Ribis missed seven consecutive meetings of the Casino Reinvestment Development Authority, of which he was an appointed board member.

Before his time at Hilton, Ribis was the vice chairman of Resorts Casino Hotel. He and partner Colony Capital LLC lost ownership when the casino defaulted on its mortgage in 2009.

According to the lawsuit, plans quickly began to unravel following an email Ribis sent on Dec. 12 requesting that Churchill Downs wire $7.5 million into an escrow account with NLR Entertainment’s bankers. At the time, Ribis said, he was ready to sign the purchase agreement with Caesars.

Katie Dougherty, a spokeswoman for Caesars in Atlantic City, declined to comment on the statements involving Caesars in the lawsuit.

According to the lawsuit, Churchill Downs said it denied Ribis’ request for additional money. On Jan. 3, a Caesars representative told Churchill Downs that it was no longer pursuing a transaction with Ribis.

Churchill Downs has requested Ribis to return the $2.5 million. He has acknowledged the money is owed but has refused to commit to payment, the lawsuit states.

In addition to the $2.5 million, Churchill Downs is seeking compensatory damages, interest and attorneys fees.

Contact Jennifer Bogdan:

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