Archive for the ‘Maryland Jockey Club’ Category

COLLUSION, AN ONLINE FIRESTORM, AND SURRENDER

Monday, May 11th, 2009
By Ray Paulick
For those of you who decided to disconnect from the racing world on Sunday, let me just say that we had a little situation here.

Actually, it wasn’t so little. Collusion between the co-owner of Kentucky Derby winner Mine That Bird and the owner of runner-up Pioneerof the Nile to keep Kentucky Oaks winner Rachel Alexandra out of the starting gate for Saturday’s Preakness Stakes would have, if successfully orchestrated, created one of the biggest embarrassments this sport has seen in my lifetime.

Apparently, and thankfully, the plot to keep the filly out of the race was aborted on the same day it was hatched. And that says something about the world we live and how cable television and the internet not only have changed how we get our news, but have given the public an opportunity to swiftly react to it, and in some ways alter the course of events.

I was enjoying a quiet Mother’s Day brunch Sunday afternoon with my family when I got an urgent message that Ahmed Zayat, Pioneerof the Nile’s owner, during a telephone interview on HRTV said Mine That Bird’s co-owner Mark Allen called Zayat and asked him to enter an additional horse in the Preakness to block Rachel Alexandra’s entry in the race. The filly, newly acquired by Jess Jackson last week and expected to be supplemented to the Preakness at a cost of $100,000, would only get into the starting field if fewer than 14 horses were entered, because early Triple Crown nominees are given preference over supplemental entrants in the Preakness.

Allen said he would enter a maiden in the race, and if Zayat entered a second horse, there was a strong likelihood Rachel Alexandra would not get in. It would also put Derby-winning jockey Calvin Borel back aboard Mine That Bird after he chose to ride the filly.

The Paulick Report linked to Dan Farley’s timely dispatch in England’s Racing Post that quoted Zayat, who repeated part of the conversation he’d had with Allen. Internet forums (Thoroughbred Champions, Pace Advantage, among others) and blogs lit up with comments about “cowardice,” “unsportsmanlike conduct,” and actions that were “terribly unflattering to the sport,” and would take “the racing industry’s massive dysfunction to brand new levels.”

The late Paul Mellon, who for me defined the kind of sportsmen who helped make this game so wonderful, was, I’m certain, spinning madly in his grave over how racing has degenerated and deteriorated.

Officials of the Maryland Jockey Club must have had visions of angry, pitchfork wielding mobs of racing fans descending upon Pimlico Saturday in search of the two would-be evil-doers, Zayat and Allen. One of those officials called Zayat to explain to him that his actions weren’t being very well received and that it might not be such a bad idea to reconsider.

NBC Sports, which pays a handsome sum to televise the Preakness and has been promoting the hell out of the anticipated matchup between Mine That Bird and Rachel Alexandra, might have been a little upset as well if the filly was somehow excluded.

Before sunset, a flurry of online articles was published by Bloodhorse.com, Sports Illustrated, New York Times and others, quoting both Zayat and Allen with abandoning their ill-conceived plan and waving white flags of surrender–but not before humiliating themselves and embarrassing the sport.

The whole news cycle was over in about six hours. I’m convinced the internet reporting and commentaries, along with the public outrage expressed in online forums, drove the decisions of Zayat and Allen as much as the phone call from a racing official in Maryland may have done.

Twenty years ago, before racing had two cable channels and the internet to provide an explosion of instant information, this Sunday storm might not have ever made into the public spotlight. The late Joe Hirsch, the executive columnist for Daily Racing Form, would have gotten wind of the conspiracy first (Joe always got it first), but by the time the Form had its next press run on Monday afternoon, someone (probably Joe himself) would have smacked some sense into Zayat and Allen.

For those of you who on Sunday were plugged in to HRTV (or TVG, which also did its own reporting on the issue), the Paulick Report or other web sites, this whole unseemly saga would be old news by the time your daily newspaper hit the front door Monday morning, or the weekly trade magazines are delivered later this week.

Times have changed.

One final thought: What is it about fillies and the Preakness that brings out the worst in some people?

Twenty-nine years ago, Angel Cordero Jr. used intimidating, and many of us still believe unsportsmanlike, riding tactics aboard Codex to beat the Kentucky Derby-winning filly Genuine Risk in the 1980 Preakness.

In 1988, the late Woody Stephens hit a low point in his Hall of Fame training career when he had jockey Pat Day employ suicidal tactics in the Preakness aboard Forty Niner against Winning Colors, the front-running filly who defeated Forty Niner in the Kentucky Derby two weeks earlier. It ruined both of their chances of victory.

Interestingly, in both cases, the Daily Racing Form published front-page editorials criticizing the tactics used against the two fillies, an extremely unusual occurrence by the Form. The 2009 version of Daily Racing Form might well have an editorial printed on the Rachel Alexandra saga in the next day or two, but by then will anyone care?

Copyright © 2009, The Paulick Report

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MAGNA: HOW DID WE GET HERE?

Thursday, March 5th, 2009

By Ray Paulick

(UPDATE: Magna Entertainment filed for Chapter 11 bankruptcy protection today. Click here for the company press release, with details on the filing.) 

What a long, strange trip it’s been.

Hard to believe, but it’s been just over 10 years since Frank Stronach dove head-first into racetrack ownership with his December 1998 purchase of Santa Anita Park. Or perhaps I should say he did so with his company’s purchase of Santa Anita, since the 76-year-old Canadian auto parts magnate and Eclipse Award-winning owner and breeder has been careful not to spend too much of his own money on any of the racetrack ventures.

The strong-willed Stronach was hailed by many, including this writer, as a savior when he first rode into Southern California and purchased Santa Anita for $126 million. The historic racetrack was then owned by Meditrust, a real estate investment trust that had little to no interest in horse racing, and there were concerns about the sport’s future at the “Great Race Place.”

Stronach had big plans: a new stable area; a gated community to replace the infield parking lot; a grand entrance hall of sorts where horses of all breeds would be in the spotlight and robust women in lederhosen would serve an endless supply of cold beer. “I have no plans to move the mountains,” he joked, in a reference to the San Gabriel Mountains that serve as one of American horse racing’s most beautiful backdrops amidst concerns that he was going to change Santa Anita too much.

One of his biggest early supporters was the late Bob Lewis, a major horse owner and industry leader who had been going to the races at Santa Anita for decades. At a meeting Stronach conducted with horsemen who were worried that Santa Anita’s traditions would be thrown out the window, Lewis stood up and said:“Frank, you and I have had our arguments on the track, but as an owner I want to thank you for your magnanimous willingness to go ahead with your plans for Santa Anita. You’re going to be a breath of fresh air for this place.”

Stronach invested in some capital improvements, adding the new Frontrunners restaurant atop the grandstand and making Santa Anita’s track apron more appealing for railbirds. But big plans for a new stable area and other improvements were put on hold while he turned attention to his growing appetite for additional acquisitions.

He purchased Gulfstream Park in July 1999 for $95 million from a Japanese company that, like Meditrust, wasn’t interested in horse racing. Optimism abounded that racing in South Florida would improve. He also acquired land in Palm Beach County north of Gulfstream and built a state-of-the-art training center.

Then came deals to buy Golden Gate Fields along with the racing license for Bay Meadows in Northern California (though not the land on which the track was located); Thistledown in Ohio and Remington Park in Oklahoma; Portland Meadows in Oregon; Lone Star Park in Texas; and Laurel and Pimlico in Maryland. He also built Magna Racino, a racetrack/casino in his native Austria (since closed), and purchased plots of land for the possible development of a new track in Northern California and another in north central Florida. He started a racing cable network, HRTV, and an account-wagering company, Xpressbet. Once, when he disagreed with something I wrote in Bloodhorse magazine, he threatened to buy that publication – and he was serious.

There were rumors Stronach was set to purchase Suffolk Downs near Boston, Emerald Downs near Seattle, Monmouth Park in New Jersey, even Fairmount Park in Southern Illinois, among other tracks. In some ways, he looked like a kid in a candy store, and racetrack owners everywhere who were looking to unload their properties were hoping to catch his eye.

By now, Stronach’s racetrack interests were part of Magna Entertainment (MECA), a publicly traded spinoff of his Magna International (MGA) auto parts company that was formed in March 2000. A few years later, another Magna International spinoff, MI Developments (MIM), the real estate branch of the parent company, became the majority shareholder of Magna Entertainment after large shareholders in the auto parts concern protested that too much of their money was being invested in racetracks.

Stronach controlled the majority of the voting shares in all of the companies because of how they stock was structured into different classes. That allowed him to handpick board members and run the companies the way he saw fit. R.D. Hubbard, a very savvy businessman and racetrack owner who has had more than a few boardrowom battles of his own, told me very early on that only a fool would make a serious investment in a company that sells a majority of its stock in non-voting shares.

There was a constantly revolving door of top managers at Magna Entertainment and at many of the company’s racetracks that made it nearly impossible to ascertain who was in charge. (Click here for a partial roster of former Magna executives.) Some good people were brought in, but were never given the chance to manage without Stronach’s hands-on supervision. Other hires were head scratchers, including the appointment of former jockey Chris McCarron as general manager of Santa Anita. Stronach even called me once to see if I was interested in running one of his racetracks, something in which I had no experience or interest. I politely declined.

Interestingly, this is not how Stronach ran Magna International or his hugely successful breeding and racing operation, Adena Springs, where management was stable for years.

Stronach himself seemed to be afflicted with attention deficit disorder, lurching from one idea or project to another. All the while Magna Entertainment was accumulating massive debt that now totals $600 million and losing hundreds of millions of dollars. “We’re turning the corner,” he would say to increasingly skeptical analysts during conference calls to review financial results. Sometimes his focus bordered on the bizarre; witness his dive-off-the-deep-end launch of Frank’s Energy Drink, which now appears to be about as successful as his racetracks. Or his latest missive on how there should be changes in determining winners of Eclipse Awards, something Stronach wrote just days before Magna defaulted on the first of several debt obligations coming due this month.

In the early years, he seemed to love the limelight that came with owning racetracks. At a public forum at Gulfstream Park in 2001 that he used as a platform to publicize his views on the industry, Stronach said with glee, “I can’t wait to tear this place down.” Sure enough he did, rebuilding what many thought was a perfectly good grandstand and spending hundreds of millions to create a racetrack (and now casino) that is widely detested. He made similar promises to tear down and rebuild Pimlico, which would have been applauded, but those plans never got off the drawing board. Of course, Magna’s history in Maryland has been tainted by their recent folly in failing to file an adequate slot machine application for Laurel, after voters approved a statewide referendum last November. The company is now the laughingstock of the Free State.

Stronach also used his prominent position as owner of the nation’s largest racing company to air his differences with the National Thoroughbred Racing Association and Breeders’ Cup, calling for democratic elections to the organizations’ boards of directors (while overlooking the fact that his own companies weren’t democratic because of the different classes of voting and non-voting stock). His ideas did have merit, and he deserves credit for helping bring greater transparency to some racing organizations.

Stronach once told me that he would “create his own Breeders’ Cup” because of differences he had with that organization. A couple of years later, he made good on that promise, creating the Sunshine Millions, an annual event at Gulfstream and Santa Anita that matches Florida-breds vs. California-breds.

The late Bob Lewis, his onetime supporter, began to publicly criticize Stronach’s comments about the NTRA and other industry initiatives. “Frank got mad and stopped talking to me after that,” Lewis told me. Then, with his broad, trademark smile, Lewis added, “So, naturally, whenever he’s at Santa Anita I go out of my way to reach out my hand and say hello to him.”

Clearly, Stronach can no longer be having fun as a racetrack owner. Though sources complain that he has surrounded himself with “yes” men at the corporate level — executives like Dennis Mills, CEO of MI Developments — he cannot help but hear the criticism that has come his way from racing fans, horsemen, state regulators, and shareholders in his various companies.

Magna Entertainment is teetering on the verge of bankruptcy, and institutional shareholders in MI Developments are threatening legal action if they feel that company’s board of directors breaches its fiduciary responsibility by extending additional credit to Magna Entertainment. Though some of its tracks are performing moderately well in this desperate economy, it’s too little too late, and the debt load is more than the company can absorb.

It’s sad, really, when I think back to the energy (sans Frank’s Energy Drink) and commitment Stronach brought to this endeavor 10 years ago. He had ideas – some good and many bad – that he felt could help reinvigorate racing. I have no doubt that his intentions were always to make Thoroughbred racing more appealing and successful. But his appetite for domination of the industry and his “my way or the highway” management style were a recipe for disaster. Several former Magna executives told me they tried to talk Stronach out of many bad decisions, but he seldom paid attention to them.

“You’ve got to listen, right?” Stronach said during a horsemen’s meeting at Santa Anita in April 1999. Unfortunately, he failed to take his own advice over most of the last decade. Now he’s paying the price, but so is the rest of the Thoroughbred industry. No one can be certain where those bad decisions will take us.

Copyright © 2009, The Paulick Report

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EQUINE VIRUS RESTRICTS HORSE MOVEMENT AT LAUREL

Friday, November 14th, 2008

(From Maryland Jockey Club press release)

LAUREL, MD. 11-14-08—The Maryland Jockey Club Friday announced until further notice no horses will be allowed to ship into Laurel Park except those from the Bowie Training Center on a Maryland Jockey Club shuttle. The limitations were instituted after a two-year-old filly in Barn 1 at Laurel tested positive for equine herpesvirus Thursday. In addition horses based at Laurel and Bowie are restricted to the grounds. The Pimlico Race Course stable area is closed for the winter. 

“This is a precautionary measure,” said Tom Chuckas, president and chief operating officer of the Maryland Jockey Club. “It is in our best interest to restrict the movement of horses in and out of Laurel until we see the outcome of the tests on the remaining horses in Barn 1.” 

On Wednesday afternoon, the Maryland Department of Agriculture (MDA) placed an "Investigational Animal Hold Order" on Barn 1 pending laboratory results after Nin, from trainer King Leatherbury’s stable, showed neurologic signs of the virus. The filly tested presumptive positive for equine herpesvirus, but the blood samples sent to the University of Kentucky were inconclusive so additional samples were taken today. 

The Hold Order limits all movement into and out of Barn 1, pending further testing. None of the other 29 horses are showing neurologic signs. Testing will continue in the barn. 

Today’s announcement forced 38 horses to be scratched from Friday’s nine-race card and another 29 shippers will not be allowed to race tomorrow. The Maryland Jockey Club racing office attracted 87 entries on the overnight for next Wednesday’s nine-race program, which were taken today. 

“Everyone is being affected financially but you can’t keep track of the movement of horses that come off the farm or another training center,” said Maryland Jockey Club racing secretary Georganne Hale. “Entries will be short but we are trying to keep this situation confined.” 

The Maryland racing community faced an outbreak of the virus in early 2006 when three horses at Pimlico and another at Laurel were euthanized, while three live racing cards at Laurel Park were cancelled due to lack of horses as racetracks in neighboring states barred horses from running in Maryland. 

Equine herpesvirus causes upper respiratory infection and can lead to severe neurological disease. There is currently no known method to reliably prevent the neurologic form of EHV-1 infection. It is recommended to maintain appropriate vaccination procedures in an attempt to reduce the incidence of the respiratory form of EHV-1 infection, which may help prevent the neurologic form. Transmission occurs primarily by direct nose to nose contact or contaminated hands, equipment, feed and water. It can also be spread up to 35 feet by airborn droplets. This virus is not associated with any human health risk.

3:50 pm update:

The Maryland Department of Agriculture reports that testing from the University of Kentucky confirms that the 2-year old filly in Laurel Park’s Barn 1 is positive for EHV-1.

MAGNA SHARE SPIKE ON EVE OF MARYLAND SLOTS VOTE

Tuesday, November 4th, 2008

By Ray Paulick

UPDATED TUESDAY EVENING:

 Stock prices soared Monday in Magna Entertainment, the racetrack company that operates Laurel Park and Pimlico in Maryland, where voters are deciding today on an amendment to allow 15,000 slot machines at five locations in the state.

The share price jumped by 92%, from $1.82 at the opening bell to $3.50 by the day’s close. Magna Entertainment, which also operates Santa Anita Park, Golden Gate Fields, Lone Star Park, and Gulfstream Park, among other tracks, trades on the NASDAQ under the symbol MECA. One-day trading was the heaviest that it’s been since Sept. 30, when the stock plummeted from $4.00 to $1.75. Earlier this year, Magna exercised a 20-for-1 reverse stock split to maintain its position on the NASDAQ.

UPDATE: Tuesday afternoon, Magna Entertainment sent out a press release saying the company "is not aware of any specific developments" connected with the sudden increase in share prices. MECA closed at $3.97 Tuesday afternoon, an increase of another $.47 (13.4%). 

Even with Monday’s gains, adjusted share prices are down 95% from what they were when MECA went public in 2000. The company is saddled with hundreds of millions of dollars of debt.

Polls indicate the Maryland constitutional amendment permitting slots will pass, though there is no guarantee that Magna Entertainment will be one of the operators of the slots parlors. Approximately 7% of revenue from the machines will subsidize horse racing purses, with 2.5% going to racetrack renewal.

When Magna Entertainment purchased the two Maryland Jockey Club tracks from the family of Joe and Karin De Francis, the agreement gave the former owners 18% of any future profits MECA earned from slot machines.

The company announced Monday that a previously announced deal fell through to sell excess property near Ocala, Fla., where company chairman Frank Stronach had once hoped to build a racetrack.

 Copyright © 2008, The Paulick Report

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MINOR TAKES ON MAGNA

Monday, August 25th, 2008
By Ray Paulick

While CNET founder Halsey Minor continues his efforts to purchase Hialeah Park from current owner John Brunetti, he also has contacted financially troubled Magna Entertainment about the possible sale of Santa Anita Park near Los Angeles and the company’s two Maryland Jockey Club tracks, Pimlico and Laurel. But after speaking with Magna’s chief financial officer, Blake Tohana, Minor doesn’t think Magna is a serious seller, despite recent comments by company chairman Frank Stronach during a conference call to discuss second quarter financial results.

“I had the most baffling conversation in my life with a CFO, particularly one whose job depends on asset sales,” Minor said in an email to the Paulick Report, which he also copied to Tohana. “Basically, nothing is for sale. Maybe they have some time shares for you. (Tohana) said Frank misspoke when he said he was considering selling a majority interest in Santa Anita. Now it is back to a minority interest.

“You can only buy (the Maryland tracks) if you have a gaming license. (Tohana) did not specify what that meant or why it was important. …  This is despite the fact that Magna is not guaranteed any slot franchises in the current legislation, and they would need to post a $50-million bond which they don’t have to get one. At the very least if he had been on his toes he should have asked to borrow the money.

“You need to call him and hear this for yourself,” Minor suggested. “You would think you were talking to the CFO of Microsoft sitting on a pile of cash, given the attitude. Self-effacing, Blake is not. Not a good quality in a salesman. Without an investment bank, nothing sells if my experience is any guide.”

Minor said Tohana had no idea who he was when he called (“which is odd because I am the only person in America acquiring tracks right now and they claim they are selling them”) and eventually hung up on him. “I will go on record as saying these assets are going to be sold by banks,” Minor continued. “Banks don’t necessarily have good bedside manners, either, but they have good prices.”

Tohana responded to Minor with a terse email of his own, which he also copied to the Paulick Report, saying that Minor had “misrepresented” their telephone conversation. “Further, your manner of communicating to me via email and telephone was inconsiderate, rude and misinformed,” Tohana wrote. “In doing my job, I have always carried myself with dignity and professionalism. I think that view would be shared by anyone who has dealt with me during my career.”

Tohana went on to say that MEC has sold more than $400 million in assets “without investment bankers,” adding, “We will continue to pursue other asset sales and joint venture transactions as we have previously publicly disclosed. However, I do not have to take your personal insults just because you purport to have an interest in Santa Anita Park and the Maryland Jockey Club.”

Tohana also seemed irritated that Minor had called him to discuss the possible sale of the tracks during a family vacation, a comment that seemed to heighten Minor’s disdain for Magna’s CFO.

“I find interesting that you are on vacation at all and that you feel so offended I have bothered you on your vacation,” Minor wrote Tohana in a follow-up email. “My company is not imploding and yet I am fully engaged working to clean up some of your mess while here in Hawaii (on a vacation) with my family.

“Blake, you are condescending and that is no way to be with a company whose market value is less than many of our farms, whose massive debt is unserviceable and where you work in the service of the company that has literally blighted our industry.

“Enjoy your vacation, Blake, because when you get back things will only have gotten worse, not better, and you pissed off a potentially valuable ally royally. And if you haven’t noticed, you didn’t have many to start with.

“I believe results in life speak volumes, and I believe this applies equally to my career as it does to your company. Neither failure or success is an accident. A quick check would reveal that I have created billions in value, even exceeding your leader’s car parts business, while your outfit has not only destroyed massive amounts of shareholder value, but possibly the Thoroughbred business with it.”

When reached by the Paulick Report, Tohana said Minor was not “respectful” during their conversation. Tohana said he was fully aware of who Minor was when he received a call from him. “I had heard of the guy,” Tohana said, “but I wasn’t happy with some of the things he has said about our chairman (Stronach).”

Tohana has been Magna Entertainment’s CFO for more than five years, outlasting many of the executives who have come and gone in a revolving door atmosphere. He joined the company in July 2003 after serving in a number of executive positions at Fireworks Entertainment, a Toronto, Canada-based concern that produces and distributes television programs and movies.

“I’m quite a reasonable person,” Tohana told the Paulick Report. “I’m pretty straight up. Look, it’s not a secret (that we’ve had a great deal of executive turnover). This company hasn’t performed very well.”

Tohana insists Magna is “continuing to sell” some properties but said Stronach’s comments about possibly selling a majority interest in Santa Anita were “misreported.” He also said there remains the possibility that MI Developments, the real estate operating company that holds a controlling interest in Magna Entertainment, could be reorganized to relieve the debt-ridden racetrack company’s financial pressures. MI Developments recently extended by one month a bridge loan in excess of $100-million owed by Magna Entertainment and due at the end of August. Dennis Mills, a former member of Canada’s parliament and one-time vice chairman of Magna Entertainment, was recently named interim CEO of MI Developments following the departure of John Simonetti.

In the meantime, Minor continues to work on a business and operating plan for Hialeah. He has had a second meeting with Brunetti in Del Mar, Calif., and said Brunetti is working with his team on developing a business plan. “That’s a tremendous benefit,” Minor said, “and it shows that John really wants to help get Hialeah reopened.” Minor said the architects he would use to renovate Hialeah Park have inspected the long-shuttered track to get a better estimate of what the price tag would be to return it to its former condition.

Copyright © 2008, The Paulick Report

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