Tom Noonan

A week ago we awoke to the news that the Governor of New York, Andrew Cuomo, had seized control of the major thoroughbred racing in the state through an “agreement” with the Board of the New York Racing Association.  This followed a controversy involving an improper takeout rate, the Board’s firing of its President and CEO Charles Hayward and its General Counsel Patrick Kehoe, and the Board’s attempt to name the replacements for Hayward and Kehoe.  The agreement was reached by the Board’s agreeing to reduce its size from 25 to 17 members, and increasing the number of state-appointed Board members from a mere 44 per cent to 71 per cent, with the Governor appointing 8 members.  The legislative leaders would each appoint two additional state representatives.

The agreement was announced in a press release from the Governor’s office that identified no specifics as to what the new Board would accomplish other than gauzy statements about the “interests of racing” and ensuring the “integrity” of the sport.  Had these high-minded statements not been preceded by the most blatant intimidation and character assassination by the Governor’s staff, and the manipulation of an all too complicit media, it might be possible to take them seriously.

It’s not precisely clear  –  to put it mildly  –  exactly what the problems are, or what NYRA’s role in them is, that warranted the precipitous action by Governor Cuomo.  The current controversy began with the release of an “Interim Audit” by the state’s Racing and Wagering Board following the realization that NYRA had continued to collect a 26% takeout rate on exotic wagers instead of 25%, as seemingly required by an expired statute.  (This topic is covered in more detail in my previous post Something fishy about NYRA controversy?)  The Interim Audit, based on a review of 5,000 documents from NYRA but seemingly no actual interviews of anyone, suggests that Hayward was aware of the improper increased takeout but did not correct it.  Shortly thereafter, the NYRA Board fired Hayward and the General Counsel, although I have seen nothing to indicate that the Board actually conducted its own inquiry or interviewed either employee.  (The state’s Inspector General is now conducting its own investigation.)

The NYRA Board named replacements for Hayward and Kehoe.  This action prompted an outraged letter  –  although I think “outrageous” might be more apt  –  from two Cuomo appointees, John Sabini, Chair of the Racing & Wagering Board, and Robert Megna, Chair of the Franchise Oversight Board and Cuomo’s Budget Director.  The duo rejected the replacement appointments as invalid, without identifying any regulatory provisions or NYRA by-laws justifying that conclusion, and directed that payments due NYRA from Aqueduct’s VLT’s instead be sent to the Lottery.  Again, there was no authority cited justifying this latter action.

More troubling than even these actions of questionable legality, however, were statements in the May 15 letter disparaging the motivations or behavior of unnamed Board members with no substantiating evidence.  The letter raised the possibility that a majority of Board members may have a conflict of interest because of “specific financial interests in horse racing.”  This letter by the state’s two highest officials regulating horse racing fails to mention, however, that such “specific financial interests” are explicitly permitted under the state’s laws.  In addition, the letter warns that the Racing & Wagering Board “[u]pon completion of the Inspector General’s investigation … will commence a review of the licenses of management and Board members to determine whether standards of character and fitness have been violated sufficient to terminate an individual’s right to participate in horse racing….”  Or, to paraphrase, after an independent, objective review  –  the results of which are not known  –   we are still going to see if we can punish you.  Finally, the letter threatened to consider revocation of NYRA’s franchise  –  but again, only after the completion of an independent, objective review.

If threats and intimidation were not enough, the Governor and his allies found a media all too eager in the effort to portray a NYRA that is “institutionally rotten” or one that has “veered from scandal to criminal scandal.”  While there are those naive souls who think the Fourth Estate is an essential check on the abuses of government, some in New York’s print media have too often been a lazy and complicit abettor.  The NewYorkPost.com, NYDailyNews.com and Albany’s TimesUnion.com  –  the latter a publication that I am sure does not like to be grouped with the downstate tabloids  –  all ran editorials condemning NYRA and demanding reform.  What reforms were needed?  The Post didn’t offer any specifics other than getting rid of NYRA.  The Times Union didn’t get its hands dirty with delving into specifics, although the May 18 editorial did opine that it “would be precipitous of the Cuomo administration” to remove NYRA from managing the tracks now;  after Cuomo’s coup, however, it became “a step in what could be the right direction.”  At least the Daily News had some ideas for reform even if they were not ones NYRA controlled, such as closing Belmont or Aqueduct.

After Cuomo’s successful takeover (which does require legislation) was completed, another party jumped into the fray.  Joe Drape of The New York Times reported that the firm that had been NYRA’s “Integrity Counsel” had  distributed a report, in June 2011, to each member of the Board regarding two investigations it had undertaken.  Drape characterized the document as a “corruption report,” and intoned that any current board member retained on the new board would “have to answer for why they appear to have done nothing about the investigations.”  Drape does not describe any of the allegations in the report, nor does he appear to have asked any NYRA Board member for a response.  We have to leave that to The Saratogian (via the Associated Press) which quoted Board member John Hendrickson saying the report “was investigated and deemed to be without merit.”  Hendrickson said state government had the report and there was nothing to hide.

That did not stop Senator John Bonacic, however, from pontificating that NYRA’s failure to release the report publicly was “a sword to stab at the public’s request for integrity.”  Perhaps Senator Bonacic should save his umbrage for the two NYRA Board members who are appointed by the State Senate and apparently did not bring any of the allegations to public attention when they were disclosed to them a year ago.  Incidentally, the “Integrity Counsel’s” allegations were made in a court dispute the law firm is having with NYRA over termination of their contract.  The state’s Inspector General, in a letter on January 24, 2012, noted that NYRA had terminated the contract, but replaced it with a “more cost-effective, contract [sic] to a different integrity counsel.”

So, there you have it.  This current controversy has been going on since the Racing & Wagering Board released an “Interim Audit” on April 26.  What new facts have come out since then?  I cannot think of one, but that has not stopped a constant barrage questioning the integrity and character of anyone ever associated with NYRA.  We have a Governor and his staff who engineered a coup with an entity established by law, taking actions of questionable legality, and by engaging in threats and assaults on the integrity and character of NYRA Board members without citing any evidence justifying the attacks.  We have a media that has gone along all too willingly, either because they do not want to ask rather obvious questions, or because NYRA has become a convenient punching bag.  None of these players have identified anything they would do differently.  And this is the environment in which we are to believe that “integrity” will be the focus for New York racing?  I know I won’t be holding my breath waiting for their changes.