Archive for the ‘Regulatory Issues’ Category

The Penn National tote failure was similar to the Hollywood Park problem in that a stop-betting signal was not communicated when the race began. United Tote, which has the contract at the Penn National Gaming racetracks, experienced a system-wide failure, allowing on-track and simulcast wagers to continue during and after  the running of the race. The Hollywood Park stop-betting signal from Scientific Games Racing tote equipment was not received by 33 simulcast sites.

John Pricci first wrote about the Penn National problem at Horse Race Insider.

United Tote personnel informed track officials about a communications router failure just as the second race was beginning, Chris McErlean, vice president of racing for Penn National, told the Paulick Report. “The stop betting command which is initiated here did not go out on track or anywhere in the network,” McErlean said. “The pools remained open and were opened well past the finish of the race.”

It was apparent wagers were made after the start of the race, but because United Tote cannot see details on every wager made, track officials were unable to segregate the late bets from those made before the race began, McErlean added. “We discussed with them the various scenarios and the best thing we could do was call the race a no-contest,” he said. “We took the position that the pools had been compromised, and based on the information we had at the time we took the most conservative path and made what we thought was the right decision.”

In Hollywood Park’s past-posting incident on Saturday, all  wagers from the 33 sites where the stop-betting signal was not received were thrown out of the pari-mutuel pools and the money refunded to bettors who retained their tickets.

A total of $164,000 was wagered on the race, which McErlean said may have been a little higher than normal but not exceedingly so. All wagers were refunded, though horseplayers were kept in the dark for some time as to why the race was not declared official. Those who had losing bets may have discarded their tickets before the  race was declared "no contest."

McErlean admitted that the decision was not communicated as well as it should have been across the wagering network. “I will say in terms of communication there was confusion,” he said. “The race was never made official. From a display point of view, the television monitors may have displayed official without tote prices. That was obviously not.”

The Pennsylania Horse Racing Commission and Thoroughbred Racing Protective Bureau were notified of the problems, McErlean said.

To his knowledge, this was the first time since McErlean joined Penn National Gaming in December 2006 that any of the company’s six tracks have experienced this type of problem. “It appears to be either networking or equipment failure involving a communications router ,” McErlean said. “The issue that has to be discussed and talked about is where is the potential safety valve if one system fails or one part fails. What is the backup or Plan B?”

Good question, and one racing regulators must demand from the tote companies that are jeopardizing the integrity of the wagering systems that are the foundation of this game. 

Be sure to vote in today’s Daily Paulick Poll asking whether you have confidence in the security of the U.S. pari-mutuel wagering systems.

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The past-post wagering was first reported by Mike Maloney, a Lexington, Ky.-based professional horseplayer and industry watchdog on betting issues, in an article posted on the Horseplayers Association of North America web site. Maloney, a frequent speaker at industry gatherings on the issue of integrity of totalizator systems, was recently named vice president of HANA.

At least that’s what Scientific Games apparently is telling Hollywood Park officials. This isn’t the first irregularity in California regarding the tote company, which in 2008 agreed to a settlement with the California Horse Racing Board over software errors related to “quick pick” wagers. Scientific Games knew of the software flaws for months, yet failed to notify the tracks or CHRB. It wasn’t until a horseplayer discovered the flaws while making “quick pick” superfecta wagers on the 2008 Kentucky Derby that the software problem was made public.

Other Scientific Games tote problems have been reported in other states, including a Philadelphia Park past posting incident last June 28 when wagering sites in Florida did not receive a stop-betting signal from a Scientific Games hub. Maloney reported a past-posting incident on a race originating at Fair Grounds in New Orleans, which also used Scientific Games. The most infamous Scientific Games/Autotote incident, however, involved the 2002 Breeders’ Cup Pick Six scandal when company employees hacked into the system to make Pick Six wagers long after the betting cutoff and took home the entire pool.

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Two horses that previously raced for the Paraneck Stable managed by Ernie Paragallo, who was recently charged with 22 criminal counts of animal cruelty at his Center Brook Farm in upstate New York, have been entered to race at Delaware Park on Monday under the name Nob Hill Stable.

Paragallo and Paraneck Stable are being investigated by the New York State Racing and Wagering Board (SRWB) and its horses are banned from racing at New York Racing Association tracks until a new authorized agent is named to run the stable. Paraneck is listed with the SRWB as being owned by Jennifer and Kristin Paragallo, Ernie Paragallo’s daughters. Paragallo had his owner’s license revoked by the SRWB in 2005 because of financial irresponsibility but he was allowed to retain a license as authorized agent to the stable. NYRA is insisting Paraneck retain a new agent who is not related to the Paragallos in any way or has been an employee of the operation. Paraneck has been a leading owner at New York tracks for more than a decade.

The Paulick Report has learned that Robert Savitsky, a Melville, N.Y., attorney, has applied with the SRWB to be the authorized agent for Nob Hill Stable.

John Wayne, executive director of the Delaware Racing Commission, said there is “100% reciprocity” in Delaware regarding the New York ban on Paraneck horses and said his office is currently investigating whether or not NYRA’s requirements have been met.

Wayne said he began looking into the matter Wednesday when he first saw the entries for Monday’s racing program at Delaware Park. The Nob Hill Stable name listed as owner of the two horses, Another Hades and Pink Viper, is spelled differently than the Knob Hill Stable founded by the late Steve Stavro of Canada. Kristin and Jennifer Paragallo are listed as owners of Nob Hill Stable. Paraneck’s private trainer, John P. Campo Jr., is listed as trainer. (Note: Daily Racing Form past performances spell the owner’s name Knob Hill Stable.)

“Before anyone would be permitted to race horses whose connections have had a previous problem," Wayne said, "the owner and trainer in their application would have to file a sworn statement saying that they have no connection with the former connections of the horse. Those statements have to be notarized and signed under a threat of perjury. Once that affidavit comes back to me, I’ll review it and have it looked at by an investigator.”

Wayne said it was his understanding that no new authorized agent has been approved for Paraneck in New York. “As far as I know, there’s an application filed with the (New York) wagering board and I don’t think that process has been completed.” 

"An application has been filed which has not been acted on," SRWB spokesman Joseph Mahoney said, though he would not confirm Savitsky as the applicant. "It is being reviewed. We have a subpoena out for certain records involving the financial affairs of Mr. Paragallo, Center Brook Farm, and Paraneck Stable, trying to find out if he was the actual owner of the horses when he was only licensed as an authorized agent. We are also looking at questions involving what the daughters’ role has been with Paraneck. It is an intensive investigation. But we have certainly not acted on the application or approved it."

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I felt, for the first time in over 20 years of reporting on the RCI, that it actually might have a pulse. I flashed back to the cherubic Tony Chamblin, whose primary job as longtime head of the RCI was trying to keep his own job. When he could no longer win that battle, he left behind a legacy of a civil war among regulators, one that resulted in two national organizations, RCI and the splinter group North American Pari-Mutuel Regulators Association. Racing industry veteran Lonny Powell replaced Chamblin in 2001, and in his tenure helped put Humpty Dumpty back together. Martin finished the job in 2005, when he succeeded Powell as president of RCI, and the merger of the two organizations was completed in 2006.

So, a cynic might say, we once again have just one useless national organization of regulators with no real authority, instead of two.

Martin is hoping to change that image of the RCI, but it was clear in his rising voice and pointed words that his frustrations are growing. Betting scandals and pari-mutuel pool tampering continues, Martin said, but regulators do nothing. The industry spends $35 million on drug testing to little avail, he said, but virtually nothing on wagering security, the economic foundation of the business. Regulators  at the RCI convention hear proposals for how wagering security can be improved and then go home and do nothing. Tracks, he said, say they want to do their own thing but end up doing nothing.

Professional horseplayer Mike Maloney outlined ongoing problems with past-post betting and pool tampering and said regulators exacerbate the problems and suspicions about the integrity of wagering by shielding the incidents from the public. There must be transparency before you can insure integrity, Maloney said.

I had the opportunity to address the regulators at the RCI convention and tried to impress upon them that horseplayers are fed up like I’ve never seen before. I asked readers of the Paulick Report to tell me what they think should be the top priorities of state racing commissioners, and owners, breeders, trainers and horseplayers responded with legitimate and well-reasoned concerns. Foremost among them were calls for tougher enforcement of medication violations and uniform rules from one state to another, something that might not have been important 25 years ago when racing was a localized sport. Today, with interstate simulcasting accounting for nearly 90% of pari-mutuel handle, it is imperative that the rules are the same across the board: on medication, drug testing, penalties, wagering, and licensing.

There is cheating going on, and people in this industry know it, whether it’s medication violations by trainers and veterinarians who know how to game the system (and only get a slap on the wrist when they’re caught) or gamblers using off-shore account-wagering businesses that are not adequately regulated.

Your comments (all of which are being made available to RCI members) helped me convey to regulators how critically important it is for them to take serious action. If they don’t, I suggested, the federal government will.

That point was driven home earlier in the day by Keeneland president and CEO Nick Nicholson, who is also chairman of the American Horse Council and as a former U.S. Senate aide knows how Washington can work. “This particular Congress is not concerned where the problem is but they are determined that they will be part of the solution,” Nicholson said. “This Congress is going to be activist.”

Nicholson brought the Council of State Governments into play last year in hopes of creating an alternative to federal intervention, using interstate compacts, something that is common to other industries. RCI’s president, Ed Martin, also sees interstate compacts as a realistic solution to the challenge of having 38 state regulatory boards walking in lock-step with one another. But it’s going to be up to the individual state racing commissions to make a compact work.

John Mountjoy, director of policy and research for the Council of State Governments, explained to RCI members how interstate compacts work and outlined their various benefits. Among other things, Mountjoy said, interstate compacts offer a federal solution “without Washington.” Uniform rules, operations and training can be achieved through an interstate compact, he said, while allowing flexibility and state sovereignty.

Interstate compacts can’t happen overnight, he added, indicating it could take several years to have one fully operational.

This much we know. There is a crisis of confidence in this industry among the biggest stakeholders–the horseplayers who fund the economic engine with billions of dollars of bets each year. But those stakeholders wagered fewer dollars on U.S. racing in 2008 than in any year since 1998, and this year’s handle promises to be even lower.

Racing commissioners from different states have shown over time they are incapable of taking the necessary steps to address the fundamental problems. There may be a pulse at the RCI that I didn’t sense 10 years ago, and there are good people involved at RCI and many state racing commissions. However, I’m afraid that when most of the commissioners and their paid staff return home from the RCI 2009 convention, it will be business as usual and nothing significantly will change.

That will open the door to Congress and let the federal government come up with its own solution.

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We’ll be live at ringside in Lexington, Ky., for as much of today’s activities as we can put up with (before making our own remarks to the regulators later in the day).

Here’s the batting order: Kentucky Horse Racing Commission chairman Bob Beck, followed by Kentucky Gov. Steve Beshear, RCI chairman Joe Gorajec (an executive with the Indiana Horse Racing Commission), and keynote speaker Nick Nicholson, the president and CEO of Keeneland, chairman of the American Horse Council, and a board member with the National Thoroughbred Racing Association and Thoroughbred Racing Protective Bureau. Nicholson is the hands-down winner of the longest resume on today’s program.

9:15 a.m. … Gov. Steve "Boogity Boogity" Beshear was a no-show, unless you count the magic of videotape. Yes, he videoed it in. Beck explained that the governor was really busy this time of year. Yes, checking out those NASCAR tracks and then asking for tax breaks for their billionaire owner is time consuming. Thanks, Gov. He asked the attendees to have and get around Kentucky to see all that it has to offer. "We are the horse capital of the world. We are the home of beautiful horse farms. For centuries,horses and horse racing have been an integral part of our culture and our economy. We have a lot riding on the horse industry here in Kentucky." 

I’m betting more of them will drive up to the Belterra casino across the river in Indiana.

9:20 a.m. … Always thought Joe Gorajec was a bright and insightful guy. He quoted from the Paulick Report on something I’d written about the shelf life of "white papers" and urged the commissioners to go home and take action. That’s a good thing. How can I knock Joe? Gorajec cited a couple of articles from the current issue of Sports Illustrated that were extremely negative: Ernie Paragallo’s starving horses and Jeff Mullins’ "honest mistake" treating a horse in the Aqueduct detention barn. "The negativity is unprecedented," Gorajec said. "Hardly a week goes back without solme incident triggering an avalanche of criticism, from inside and outside the sport." For those who haven’t followed Indiana racing, Gorajec is a "hangin’ judge," imposing tough sentence on cheaters in Thoroughbred and harness racing. Other states should look to Indiana for leadership on regulations…and I’m not saying this just because he promoted the Paulick Report.

9:30 a.m. … Nick Nicholson …. how many of these speeches has he delivered over a lifetime in politics and racing? Slick Nick. Very entertaining story about the Blue Grass Stakes winner and the one-horse stable owner, former school teacher and principal Tom McCarthy. On to the serious stuff….

Nicholson calls the NTRA Safety and Integrity Alliance a "seminal moment" in showing "the industry and the country" that racing people can police themselves. Keeneland "killed a tree" to comply with the inspection team, he said. Hope he explains that one.

"I said at the press conference (when Keeneland was accredited) something I want to lead with this morning," Nicholson said. "I said at the press conference that day that this could not have happened without the competent regulation of the Kentucky Racing Commission. It would be impossible for Keeneland to be certified…were it not for the Kentucky Racing Commission." He then made executive dirctor Lisa Underwood and chairman Beck stand up to applause.

"We should not accept our status quo. We push ourselves to continually improve….We are all in this together. This could not have been done by Keeneland alone. The private sector and public sector have a joint necessity of working together."

10:30 a.m. … Forgot to mention that Richard Thalheimer, a numbers runner for industry groups (also known as a research consultant) is on the agenda to send everyone who likes horse racing into a deep, deep depression. Pari-mutuel handle down over 50% over time since lotteries and the expansion of casino gambling. I’ve seen this movie before, for the most part. Short message: we are doomed.

But Thalheimer has a new twist based on a Prairie Meadows study. Live racing helps slots handle, as does simulcast racing.  I guess the good news here is "racinos" that might consider getting rid of horse racing and just going with slots might be better off if they keep live racing and/or simulcasting. Who is the dog and who is the tail and who is being wagged here?

"Having slots at the track has saved our industry. On the other hand for the long run viability of our industry, (we) have to find ways to increase the pari-mutuel viability," said Thalheimer. He called it a "two-edged sword" that live racing helps slots, though slot machines reduce pari-mutuel handle. "Finally, I’d like to mention…racing has a viable product where you can sell your signal from ADW and online wagering. The time to do it is now."

10:50 a.m. … Touching on fans and the impact that the death of Eight Belles had on people, Waldrop spoke about how the Safety and Integrity Alliance came to be. He said revelations about Big Brown racing on steroids was a major concern with "core fans" and that the Eight Belles death had a bigger impact on "casual fans." After both incidents, he said, "Understandably there were calls for change….Others wanted a czar or commissioner. At the heart was a very serious and correct question: Does it have the will and can it change? Or is it doomed to disparate disjointed state by state regulations that is competitive and doesn’t represent the interest of the fans and the industry. That is the one we wrestled with at the NTRA last summer."

"We focused on safety and integrity." The integrity focus was more on therapeutic medication and drugs and not on wagering integrity,  he said. "Not that wagering integrity isn’t important." Waldrop asked:  "Is (the Safety and Integrity Alliance) an anti-regulation approach? Absolutely not." 

2:00 p.m. … Professional horseplayer Mike Maloney was introduced and began his presentation by urging commissioners to become familiar with a new organization, Horseplayers Association of North American (HANA), and he presented four things HANA would like to see achieved. all track signals available to accredited tracks, lower takeout, strict uniform medication and improved wagering security. Easy to state, hard to achieve, Maloney said. He talked about the confusion horseplayers have about wagering formats from track to track, especially on which races have trifectas or superfectas due to the different state rules that apply to field size of those races.

Maloney urged states to allow trifectas in small fields, something Kentucky has done. He said the handle increases when tracks do that. He then went on to talk about past-post wagering, late odds changes and wagering pool manipulation. Maloney called for wagering pools to close at one minute to post time. "That a bitter pill to swallow that we would ever have to do that," he said, "but it would solve these problems." He acknowledged that it would cause a reduction in handle. "But if that’s what we need to do, if a y ear or two from now if we are still sitting here and don’t have a solution, then I think we seriously need to consider closing the windows early enough so that the odds are final before the gates are open. That would bring back a lot of confidnece in that game."

Maloney also said he supports the NTRA Safety and Integrity Alliance. "I also support Alex Waldrop," he said. "I have a lot of faith and trust in Alex."

His final comment involved transparency. "Incidents of past-posting have been hidden from the public," he said.  Maloney wants all rulings from commissions to be made available to the public. Maloney himself was involved in a past-posting incident he reported, but he said he has not been able to find out from the Louisiana Racing Commission where the investigation has gone. "Lack of transparency" hurts the game, he said.

I hope Mike sticks around for the cocktail hour. There will be more commissioners there that he can give the message to than there were in the room for the meeting on Wagering Systems and Tote Standards. It needs to be heard.

That’s about all I can take. That’s it from the RCI Convention, where the empty seats outnumber the empty suits.

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By Ray Paulick
UPDATED 1:10 P.M.: 

If Jeff Mullins serves a seven-day suspension from New York authorities scheduled to begin May 3, he could be the first winning trainer in Kentucky Derby history who isn’t able to go to the stable area at Churchill Downs to check on his horse the morning after the race.

I Want Revenge, trained by Mullins, is the likely favorite in this year’s Kentucky Derby, to be run May 2. Mullins’ suspension is in connection with New York Racing Association detention barn rules he was found to have violated while administering an herbal product to Gato Go Win prior to the Bay Shore Stakes April 4, necessitating that the horse be scratched by stewards. It was at least the 22nd ruling by racing officials against Mullins since 2000.

UPDATE: After this report was published, we were reminded that Larry Jones, trainer of Louisiana Derby winner Friesan Fire, also will begin a seven-day suspension on May 3. That suspension resulted from a positive test for the bronchodilator Clenbuterol in a horse that won a June 8, 2008, allowance race at Delaware Park. It was the first ruling of any kind against Jones, according to the Association of Racing Commissioners International.

Suspensions generally prohibit licensed personnel from having access to secure areas of a racetrack, including the stable area. It is expected the New York State Racing and Wagering Board (and Delaware Racing Commission) ruling will be recognized by the Kentucky Horse Racing Commission.

If I Want Revenge (or Friesan Fire) wins the Kentucky Derby, perhaps Churchill Downs will schedule a press conference at Wagner’s Pharmacy, a popular breakfast spot for trainers just down the road from the stable gate. Dozens of reporters and camera crews traditionally flock to the barn of the winning Kentucky Derby trainer the morning after the race to get quotes for follow-up coverage. This year, they might be able to get some scrambled eggs to go with their stories.

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This alleged practice, which is prohibited as a Class 2 violation in the classifications of the Association of Racing Commissioners International, made headlines a couple of years ago when a racetrack veterinarian in Nebraska was charged in a criminal case with injecting alcohol in horses with the purpose of affecting the outcome of a race. Those charges were eventually dropped when witnesses couldn’t be located for the trial.

Things got quiet on the alcohol in horses front until last fall, when three trainers at Turf Paradise had horses test positive for ethyl glucuronide, a metabolite of ethanol. Ethanol is the alcohol in beer, wine and hard liquor.

One of the horsemen was Keith Bennett, a former leading trainer at the Phoenix, Ariz., track, who is currently second in the standings with 64 wins from 198 starts, a healthy win percentage of 32%. A second is Justin Evans, who is third in the current standings with 37 wins from 113 starts, a 33% win percentage. The third is E. Mark Welch, with nine wins in 82, an 11% win percentage.

Evans had three horses test positive for ethyl glucuronide positives in a 12-day period between Oct. 31-Nov. 11, 2008. The chief veterinarian for the Arizona Department of Racing ordered tests for the substance in late October 2008. A search of Evans’ barn uncovered six or seven 7.5-liter bottles of vodka in a file cabinet. Evans said in a hearing that he used the vodka as an “old trainer’s remedy,” soaking a pad in the alcohol and using under leg wraps on all of his horses.

The testing was conducted by Industrial Laboratories. Tests for ethyl glucuronide had only been developed a few years earlier by the University of Pennsylvania and had not been widely available until recently, an employee of Industrial Laboratories told the Arizona Department of Racing.

As a result of the multiple positives, stewards ruled that Evans should be suspended a total of 18 months. He was also fined $3,150 and the owners were stripped of purse winnings. Evans appealed, and an administrative law judge reduced the suspension to 120 days. Click here to read the adminstrative judge’s ruling.

According to sources, Turf Paradise officials exercised their right to exclude trainer Evans from the premises, though he was told he could apply for stall space in the future. He is currently stabled at Lone Star Park in Texas, where he won with one of his first four starters of the recently opened meeting, with two third-place finishes.

Another trainer, speaking on the condition of anonymity, told the Paulick Report alcohol is also being used in connection with so-called milkshakes, which contain baking soda and electrolytes and are designed to reduce the lactic acid buildup that causes fatigue. The concoction is mixed together as a paste, the trainer said, and can be administered through a dose syringe, though it is more effective when given through a tube into the horse’s stomach.

“You’re getting them carbohydrates at the top of the lane where some horses are running out of gas,” the trainer said. “I tried it, and believe me, it works. But I quit doing it because I couldn’t afford to get caught.”

Scot Waterman, executive director of the Racing Medication and Testing Consortium, said he is skeptical about the effectiveness of alcohol in milkshakes. It’s his understanding the substance is given to calm horses, not to increase carbohydrates. But he said the use of alcohol in horses has “always been in the rumor mill,” and is something the RMTC takes very seriously. The organization funded a study several years ago to develop the most effective detection methods for ethanol using blood and urine tests and even experimenting with a breathalyzer. “It’s easier to detect when given orally (than intravenously),” Waterman said. “The absorption is slower.”

Turf Paradise steward Ismael Trejo said backstretch security has been employed as an adjunct to testing in hopes of acting as a deterrent to trainer who might otherwise consider giving alcohol or other banned substances to their horses. “We put state investigators on trainers’ barns and have had investigators shadow private veterinary practitioners,” he said. “Maybe we won’t catch them, but we hope we can stop them. The fear of getting caught can be the best deterrent.”

“We do catch cheaters,” said Eugene Joyce, general manager of Turf Paradise. “It might be painful to read the headlines, but we do catch them. We want trainers and $2 bettors to have confidence in the game and to make people believe it’s being contested on a level playing field.”

There are concerns in Arizona and other racing jurisdictions that budget cuts by state government will lead to fewer post-race tests and reduced personnel for backstretch security and investigations. And security is a key to deterrence, said Dr. Rick Arthur, equine medical director for the California Horse Racing Board.

“Our security has been specifically alerted to watch for this type of thing (administration of alcohol),” he said. “Investigators know to watch for it, and this is one of the reasons we are adamant about our ‘water only’ rules on raceday. If it’s not water, the investigators can tell the difference.”

Arthur said some “old-time trainers” will say they used to dose horses with alcohol “somewhere in the neighborhood of four ounces. It is something we are concerned with, something we watch for.”

The CHRB regularly confiscates and tests syringes used by veterinarians to ensure raceday injections are Lasix only, Arthur said. “When we confiscate one syringe, everyone on the racetrack knows about it an hour later," the former racetrack practitioner and surgeon said. "If somebody wants to bend the rules, I don’t want them to be comfortable doing it. That’s why we do barn inspections, vet vehicle inspections, to make people say, ‘Hey, this isn’t worth it.’

“We have no problem prosecuting people we catch, but the goal of our program is to stop people from anything illegally.”

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