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NYRA president, counsel suspended

Report: Officials knew of illegal takeouts on bets

Tuesday, May 1, 2012
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Union Ave. East gate at the Saratoga Race Course.
Photographer: Marc Schultz
Union Ave. East gate at the Saratoga Race Course.

— New York Racing Association President Charlie Hayward was placed on administrative leave without pay Monday following release of a scathing report alleging he knew that NYRA was withholding too much from winning bettors but kept quiet.

Patrick Kehoe, who serves as general counsel and senior vice president, was also put on unpaid leave.

The suspensions follow Monday’s release of a New York State Racing and Wagering Board report into NYRA’s problems with exotic bets.

“It was shocking to me and if the facts are correct, it is very troubling to say the least,” Gov. Andrew Cuomo said when questioned about the report at a Monday news conference. His office has asked the state Inspector General’s Office to review the possibility of criminal or civil charges.

As for Hayward’s future with NYRA, Cuomo said, “Let’s get the facts first, but if the facts are correct it is a problem.”

The report has prompted the Racing and Wagering Board to consider whether NYRA officials meet licensing standards allowing them to operate NYRA’s horse racing tracks, including the Saratoga Race Course.

In announcing the two suspensions late Monday afternoon, NYRA Chairman C. Steven Duncker said “NYRA will take all appropriate steps and actions to cooperate with the state’s inquiries and ensure the integrity of our operations.”

The critical state report follows December 2012 revelations that NYRA’s takeout on winning exotic bets had been higher than allowed by state law for more than a year. As a result, Monday’s report says, $1.1 million was illegally withheld by NYRA for on-track wagers, with almost $8.5 million withheld on bets across the state, including at regional off-track betting corporations.

NYRA was ordered to make restitution to the bettors it was able to identify, but as of the end of March it had reimbursed bettors only $594,508 and had kept the remaining $531,417.

Hayward and other NYRA officials initially said the higher-than-allowed takeout was the product of an “unintentional oversight” and said they didn’t realize they were taking out more than was allowed by law.

NYRA officials have contended that the fact the incorrect rate was consistently published indicated they weren’t aware the rate was illegal.

Emails and internal documents, included in more than 5,000 records obtained by the racing board, paint a much different picture about the behind-the-scenes workings of NYRA.

In an August 2011 email to Daily Racing Form Publisher Steve Crist, who had written to NYRA asking if a reader was correct in assuming NYRA was withholding too much money on winning exotic bets, Hayward wrote, “This gentlem[a]n is correct.”

“Off the record, we have been working on this for some time,” the email continued. “We originally had thought that we would announce [the error this summer] but political forces intervened. Since we are showing substantial losses in 2010 and 2011 and we have been smacked around by [Gov. Andrew] Cuomo ... we decided to wait.”

Hayward told Crist that he believed the regional off-track betting corporations, which lost money in 2010, would be opposed to lowering the takeout percentage and would “scream like stuck pigs.” He predicted that as a result, Senate Majority Leader Dean Skelos, R-Rockville Centre, would introduce “anti-NYRA legislation.”

Hayward added that NYRA officials were worried an announcement about the takeout would cause politicians to block their effort to open 10 restaurants in New York City.

He told Crist that NYRA was engaged in internal debates about how much to lower the takeout percentage and how to present the news. “I would appreciate it if you could keep these details confidential,” he wrote Crist. Crist agreed.

The new report indicates that some NYRA officials were aware of the scheduled takeout percentage change weeks before it was supposed to be implemented in September 2010.

And the Racing and Wagering report notes that a bettor questioned Hayward by email about the changes shortly before the new rate was due to go into effect.

Hayward replied that the email query would be forwarded to the attention of NYRA’s general counsel; the racing board’s investigators were not able to obtain this promised communication.

The report also says that the takeout error was noted in a company spreadsheet clearly indicating the legal takeout percentages allowed and the current rate on exotic wagers, which was outside that range.

NYRA Chairman C. Steven Duncker said in a statement on Monday that NYRA’s board of directors is taking the report seriously. “I have already spoken with Franchise Oversight Board Chairman Robert L. Megna and will be in further communication him with as we review the report and respond in a timely manner,” he said.

No additional comments were provided by any other NYRA officials, and spokesman Dan Silver declined to answer questions.

The racing board is still waiting for thousands of documents from NYRA, including a report from its former internal integrity counsel. NYRA has opposed the release of Monday’s Racing and Wagering Board report, saying it is based on documents that should be protected as communications between NYRA and its attorneys.

The racing board also looked at its own responsibility in monitoring the takeout, concluding that Racing and Wagering officials believed the rate was being verified by the proper oversight bodies. Nonetheless, the report notes that the racing board is updating its procedures to prevent a similar failure in oversight from occurring again.

The report does not blame the Franchise Oversight Board for missing the error, citing its small staff. The state comptroller’s office is the primary agency responsible for auditing NYRA, but it is unclear, the Racing and Wagering report says, if the comptroller’s office has reviewed the takeout percentages in the last two years.

Since acknowledging the error in December 2011, NYRA has reduced its takeout percentage on exotic bets by two percentage points, so it is just under the legal limit, and has promised to donate money to a racing industry charity.

A letter from oversight board Chairman Megna to NYRA’s Duncker and the interim report from the racing board can be viewed in their entirety on the Capital Region Scene political blog at www.dailygazette.com.

 
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