Earlier this week, we suggested that rather than the rumored sex scandal NY Governor Paterson’s actual problems may surround the awarding of a state contract for video lottery machines at the Aqueduct Race track. New York TV Channel WPIX is reporting that the Eastern District of the US Attorney’s office in Brooklyn are investigating Governor David Paterson over the awarding that lucrative contract.

The Governor’s office has been ripped apart at the seams because of the tainted deal. Some Paterson aides have signaled they may quit over what some call his “corrupt decision” to give the lucrative Aqueduct gaming contract to a questionable consortium that includes the Rev. Floyd Flake of Queens, whose political support the poll-challenged governor has aggressively sought. 

Flake had originally announced that he would endorse State Attorney General Andrew Cuomo if he decided to run. Flake is considered by many as a key NYC African-American political player. The loss of Rev. Flake’s endorsement could be a death blow to the candidacy of the African-American incumbent. On the other hand, Cumo is the choice of President Obama, who has been pushing the incumbent to drop out because of his low ratings in the poll.

“Aqueduct was the last straw for many of them, they all want out,” said a source close to Paterson’s aides. “Even on the inside, the Aqueduct decision is seen as corrupt,” added a second administration source.

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…Paterson’s decision to award the huge contract to operate thousands of video lottery machines to the Aqueduct Entertainment Group at the same time he was blatantly seeking Flake’s endorsement was seen by many as the final unacceptable step.

“People on the inside have put up with a lot, but they’re embarrassed by what the governor has done, he did it behind their backs, and he did it for reasons that they’re very uncomfortable with,” said a source close to the situation.

“The truth is that Paterson made the Aqueduct decision with a blatant disregard for the smartest people around him,” an insider said.  

A longtime Paterson friend, who has tried to be of assistance to the governor, said it was “really sad to see what’s happened to David.

 Paterson has been aggressively defending himself in the press, he appeared on the Don Imus show this morning to claim his innocence:

“They had the second highest bid. They had the second highest long-term benefit to the state,” Paterson told Don Imus this morning, referring to the AEG consortium. “They were strongly competitive. They had good relationship with the community. They had a strong minority and woman’s business component to their plan.”

“We all had equal government jurisdiction here, and we imposed some conditions,” Paterson said, referring to demands by Assembly Speaker Sheldon Silver that resulted in the resignation of one of AEG’s partners. Senate Democratic Conference Leader John Sampson also signed off on the decision.

Imus asked Paterson about his relationship with the Rev. Floyd Flake, a former congressman and Queens pastor whose endorsement Paterson has sough. Paterson met with Flake shortly after awarding AEG the lucrative contract.

“In the case of Reverend Flake, his value is .6 – in other words, six tensths of one percent f the whole value – and he has no affiiation with this other organization that two other elected officials were raising money from,”

Flake’s non-support was read as just as damning for Paterson as his support for another potential primary challenger – like Attorney General Andrew Cuomo. Paterson defended his meeting with Flake.

“I met with him and I met with several others because the process took about eight months and they couldn’t talk to me about other issues that they wanted to discuss. So I told them all that I’ll meet with all of you the week after the bidding is completed. There’s nothing unethical about meeting with people after the bid. In other words, after the final decision has been made.” Paterson said. “He had already said he was neutral. At the time the contract was awarded he had already publicly stated that he was not picking a candidate in the Democratic primary.”

Whether the Paterson investigation results in charges or not, it is not totally out of the realm of possibility that this investigation is the result of “Chicago-style” politics.  The President has made it clear that he wants Paterson to drop out, he may be trying to give him an extra push to the sidelines.