Posts Tagged ‘Ray Paulick’

By Ray Paulick
Pari-mutuel wagering on U.S. races nosedived in June, dropping by almost 17% compared with June of 2008, according to statistics released by Equibase. Purses fell by more than 10% in June. The number of U.S. race days fell by less than 6% for the month, compared with June 2008.

If the declines persist, 2009 will be the fifth year in the last six that pari-mutuel wagering on U.S. races has fallen, and the year-end totals may be the lowest since 1998, when just over $13 billion was handled. The record high came in 2003 when nearly $15.2 billion was wagered on U.S. races. Click here for the recent year-end handle figures.

By Ray Paulick
It’s generally agreed that the foundation of the entire Thoroughbred industry in the United States rests on a pari-mutuel system that handles upwards of $15 billion per year in wagering transactions. The integrity of that system, once a given, is now subject to widespread skepticism because of a series of incidents dating back to 2002, when a small group of employees of one of the totalizator companies hacked into the system and attempted to pull off a major coup involving the Breeders’ Cup Pick Six.

Since then, horseplayers have kept a wary eye on the tote board during the running of races, when they’ve routinely seen odds changing as late money pours in to the system. Officials with racetracks and tote companies have insisted those odds changes are not the result of wagers made after a race has begun –otherwise known as past-post betting—but occur because of the time it takes for legal wagers to cycle through the system.

But there have been more than a few incidents of actual late betting, just in the past year, where communications errors occur and a “stop betting” signal has not been received by all of the sites taking wagers. As a result, many horseplayers remain skeptical about the integrity of the wagering pools, and several racing commissions have looked into the problem. One of them, the Indiana Horse Racing Commission, became the first to take significant action by approving a contract between Hoosier Park and Indiana Downs and Advanced Monitoring Systems, or AMS, a Stamford, Conn., company that offers real-time transaction monitoring systems and services to the pari-mutuel, lottery and casino industries.

Isidore “Izzy” Sobkowski, the AMS president and CEO, was formerly a consultant with the National Thoroughbred Racing Association’s Office of Wagering Security, back when the NTRA felt the integrity of the pari-mutuel pools was a critically important issue. The NTRA, then under the guidance of Tim Smith, acted quickly in the wake of the Breeders’ Cup Pick Six scandal, hiring former New York Mayor Rudolph Giuliani’s company to investigate what happened that day and conduct a thorough review of the wagering systems. It found an antiquated system in need of serious attention and proposed, among other things, creation of the Office of Wagering Integrity. Only a few years earlier, Smth invited IBM Global Services to devise a solution for the industry’s aging tote infrastructure, but that project was shot down by small-minded track operators.

Sobkowski has, for the most part, been a one-man band in explaining the services of AMS to racetracks and racing commissions, but just this past week he has been joined by racing industry veteran Lonny Powell as a senior advisor to the company.

Powell (pictured, left) has been around. Or, as he likes to say, “This is not my first rodeo.” Following his graduation in the early 1980s from the University of Arizona Racetrack Industry program (which he headed for five years in the late 1980s), Powell has worked in many industry positions, as a racetrack manager (at Longacres, Turf Paradise, Santa Anita Park), regulatory chief (president of the Association of Racing Commissioners International), and as chief compliance and regulatory officer of the account wagering company Youbet.com. That’s real-life experience in the trenches.

As a member of the NTRA board representing Magna Entertainment, Powell heard the IBM pitch and was convinced then the industry was going upstream without a paddle with its wagering infrastructure. “But the Breeders’ Cup Pick Six scandal absolutely floored me,” he said. “That’s when I really realized the kind of trouble we were in. Then I started hearing about past-posting incidents. What (horseplayer) Mike Maloney said about some of these things during a University of Arizona Symposium absolutely made me feel as sick as when the Breeders’ Cup Pick Six happened. Our industry has so many other issues to deal with, but the fundamental integrity of our pools should be automatic. We need to be dealing with getting more racing on television, with revenue from slots, etc., We shouldn’t have to defend our pools.”

The deal between AMS and the Indiana Horse Racing Commission came before Powell joined AMS as a senior advisor, but it’s interesting that the executive director of the Indiana Commission, Joe Gorajec, is a fellow University of Arizona Racetrack Industry Program alumni. A core group of program graduates from the early 1980s has made a major impact on the industry: besides Powell and Gorajec, there’s longtime racing official Pat Pope; Remi Bellocq, an executive with the national Horsemen’s Benevolent and Protective Association; former Equibase chief and current consultant Phil O’Hara; Jockey Club executive Dan Fick; Jane Greely of the Thoroughbred Racing Associations of North America, Wendy Davis, a coordinator of the UofA program; and racetrack exec Cal Rainey.

At Indiana, Gorajec and the Indiana Horse Racing Commission have developed a reputation for being tough on medication violators and progressive in solving problems. It comes to me as no surprise that it is the first commission to take tote security to the level it has. Racing commissions in Kentucky, California and New York are exploring ways to adapt real-time monitor of its wagering pools, but have yet to act. The Association of Racing Commissioners International, under the leadership of Ed Martin, has emphasized the importance of installing serious, real-time monitoring of pari-mutuel pools.

Powell said the industry has come a long way in at least recognizing the problems of tote security. “When I first started negotiating contracts with the tote companies, the only security that was ever discussed was that the tote room at the racetrack had to be secured with a lock,” he said. “That was tote security. We now know it’s so much more than that. Tracks have to ask more questions of the tote companies. Fans have to keep doing what they’ve been doing—keep raising the issue when incidents occur.

“I think (Keeneland president) Nick Nicholson said it best,” Powell added. “’Our most valuable asset is the pari-mutuel pool. If you can’t trust it, nothing else survives.’”

Here’s hoping that Powell and the AMS team can help restore the confidence in our wagering pools. Confidence in wagering integrity has fallen, and so has the amount of money bet: we’re at a 10-year low nationally in terms of total wagering dollars. It’s well past time we do something about it.

Liberation Farm celebrates the many horsemen and horsewomen who strive each day to make things better for horses and those who work with them.  To learn more about Liberation Farm, click here.

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By Ray Paulick
There were several byproducts of the Kentucky General Assembly’s special session called last month by Gov. Steve Beshear to tackle the state’s budget crisis and consider a bill to allow video lottery terminals or slot machines at racetracks.

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By Ray Paulick
Twenty-eight hundred miles  and about 20 minutes is all that separated the filly stars Rachel Alexandra and Zenyatta on Saturday afternoon. After two fillies were scratched, Kentucky Oaks and Preakness winner Rachel Alexandra had just a pair of 3-year-old foes in the Grade 1 Mother Goose at Belmont (one an allowance winner and the other a Grade 3 winner this year). Zenyatta, winner of 10 straight lifetime and 1-for-1 in her only start this year, had five opponents in the Grade 1 Vanity Invitational Handicap (in which she carried high weight of 129 pounds, spotting between 13 and 18 pounds to the others. Her opposition had won only six of 23 starts in 2009, with one of them a non-graded stakes winner and the others optional-claiming winners. Both races were at 1 1/8 miles, the Belmont on dirt and the Vanity on Hollywood Park’s synthetic surface.

Rachel Alexandra made short work of the $300,000 Mother Goose, settling into last place early in the long run down the backstretch, then vaulting to the lead on the turn, and drawing off to win with ridiculous ease, by 19 1/4  lengths (just one length shy of her winning margin in the Kentucky Oaks). Jockey Calvin Borel spent most of the stretch run taking in the sights behind him and apparently blowing kisses to the fans in the grandstand, still managing to set a new stakes record of 1:46.33 for the 1 1/8 miles on a fast track. (The track was playing very fast Saturday; maidens went six furlongs in 1:08.53 earlier in the card.) 

That final time was made possible by the sizzling early fractions set by Malibu Prayer and John Velazquez, who went the opening quarter-mile in :22.57, the half in 44.66 and six furlongs in 1:08.86. Malibu Prayer didn’t want to load into the gate, and when Rachel Alexandra ranged up next to her on the turn, we all found out why. The winner, a daughter of Medaglila d’Oro went into a different gear under Borel, leaving her two foes in a cloud of dust while scoring her seventh consecutive stakes victory and ninth win from lifetime starts, the last two carrying the colors of Jess Jackson and Barbara Banke’s Stonestreet Stables. Harold McCormick is the minority partner in the filly, who was bred in Kentucky by Dolphus Morrison. She has been trained to her last two victories by Steve Asmussen, who took over from Hal Wiggins when Stonestreet and Morrison purchased her following the Kentucky Oaks.

Mother Goose chart.

Zenyatta had to work a bit harder, but she also got the job done under Mike Smith, rallying from fifth position early to win drawing away by about 2 1/2 lengths for her 11th victory without a loss.

Briecat set the pace under Martin Garcia, going :24.46, :48.02 and 1:11.28 for the opening six furlongs. Zenyatta was kept wide and in the clear and was asked by Smith to pick it up going into the far turn, and she reached contention with just over a quarter mile to go. Briecat proved to be stubborn until the final eighth, when Zenyatta lumbered to the lead under the steadying 129 pounds and crossed the wire geared down by Smith. Final time was 1:48.15 after a mile split in 1:35.54. Briecat finished second, just ahead of Dawn After Dawn, with Hot n’ Dusty fourth.

There was no place or show wagering in the Mother Goose, with Rachel Alexandra paying $2.10 to win. There was no show wagering in Zenyatta’s second straight Vanity win; she paid $2.60 to win and $2.10 to place. The 5-year-old daughter of Street Cry carries the silks of Jerome and Ann Moss and is trained by John Shirreffs.

Chart of the Vanity.

The big question is whether the  appearances of Zenyatta and Rachel Alexandra brought enough fans to the track to at least crack the 10,000 attendance mark. The New York Racing Association promoted the Mother Goose heavily, with free admission for females and a pink Rachel Alexandra bracelet giveaway to the first 10,000 fans in conjunction with Jackson and Banke’s donation of a portion of the winner’s purse to the Susan G. Komen race for the cure for breast cancer. (UPDATE: NYRA reported 13,352 on hand for the Mother Goose; Zenyatta drew only 6,907 to Hollywood Park.)

But the biggest question is whether or not these two superfillies will ever meet, which according to their connections is not likely to happen this year. Before the Vanity, the Mosses and Shirreffs have indicated that Zenyatta will remain in California for the remainder of her career and defend her title in the Breeders’ Cup Ladies Classic on the Santa Anita Pro Ride synthetic track. Jackson has said he will not run Rachel Alexandra on "plastic," despite her impressive victory on Keeneland’s Polytrack synthetic surface last fall when she was two.

Both sets of owners are independently wealthy and neither are commercial breeders. They are also sportsmen–an all-too-rare commodity in the modern era of racing. Jackson kept Curlin in training for his 4-year-old campaign last year when he could have retired the Horse of the Year to stud. The Mosses kept Zenyatta in training this year after she won an Eclipse Award and was runner-up to Curlin in Horse of the Year voting. The only thing either owner has to lose is their pride.

But the most significant loss will be what this sport misses out on if Rachel Alexandra and Zenyatta do not meet later this year. Some way, some how, somewhere, it must happen. 

But where and when…what do you think? 

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UPDATE: The Kentucky Senate’s Appropriations and Revenue Committee rejected VLT legislation by a 10-5 vote on Monday night. The vote went pretty much along party lines, with Sen. Tom Buford the only one of 10 Republicans present  voting yes to send the bill to the Senate floor. Four of the five Democrats on the committee voted yes, with one abstaining.

Below is a live blog of the hearing….

After the Kentucky House of Representatives passed video lottery terminal legislation on Friday, the Senate’s Appropriations and Revenue Committee will give the bill a hearing late Monday afternoon. Ray Paulick is on the scene at the Kentucky Capitol in Frankfort and will provide up-to-the-minute coverage.

4:45 p.m. … The committee room was packed with people from the horse industry, but those without seats were told they would have to leave and move to adjacent room. Apparently, the Kentucky Senators may have feared an uprising.

4:50 p.m. … The hearing is called to order by Sen.Charlie  Borders,the committee chairman  who says opponents and proponents of House Bill 2 (VLT legislation) will each have up to an hour to provide testimony. He dismissed the notion that the bill would not get a fair hearing. He introduces Nick Nicholson of Keeneland, who begins by saying that he knew the bill would have a fair hearing because he knows the principals involved. Nicholson says the industry faces a problem not because of anything that’s happened in Kentucky, but because of what’s happening in competing states that have moved to offering slot machines. Eleven of 12 of Kentucky’s most compoetitive states offer alternative gaming at racetracks, Nicholson said, but the next time he testifies it will be 12 of 12 if Ohio goes in that direction, which Gov. Strickland said is now a necessity.

4:58 p.m. … Six casinos along the Kentucky border had a net win of $1.44 billion in 2008, Nicholson said. "I do know that hundreds and hundreds of millions of dollars of that $1.44 billion are hemorrhaging from Kentucky into Indiana," Nicholson said. 

5:00 p.m. …. Nicholson tells the panel that Kentucky’s horse breeders are the best in the world and that they are doing their job in producing the world’s best horses. "We aren’t going away tomorrow," he said. But Nicholson added that what is in crisis is Kentucky’s year-round racing circuit. He said the downhill slide of the racing  problem has come more quickly than expected. We didn’t think Churchill Downs would have to cancel one day of race a year, he said. "We thought we had more time." What’s changed the dynamic and caused the decline to happen more quickly than expected, was the bump in purses at Indiana racetracks, the increases in purses in Pennylvania and West Virginia, and the addition of a new track, Presque Isle Downs.

5:05 p.m. … Nicholson called the existing proposal "more moderate, more termparate," saying that the expansion of gambling would not be geographical. "I think it gives us the tools as an industry to compete with other states….We are asking you to give us the tools that our competitors have been given by their state government." 

5:10 p.m. … In the absence of House Speaker Greg Stumbo, Nicholson walked through the legislation and the differences between Stumbo’s version and the language proposed by Kentucky Gov. Steve Beshear. Among the differences, it’s worth noting, is that Stumbo’s version requires tracks to maintain the same number of racing dates they currently have. Stumbo’s version also charges a higher licensing fee to the various tracks, over $500 milliion to paid to the state over five years, versus $360 million in Beshear’s version.

"All 138 members of the legislature without exception want to help the horse industry," Borders said. He then referenced the "alternate" legislation proposed by Senate President David Williams that passed out of the Senate last week. That measure, obviously, was meant to be a pre-emptive measure to slow the momentum of the VLT legislation.

5:15 p.m. … Question time. Vice chair Bob Leeper wants to know if the projections were made before the financial markets meltdown of last September and suggests that casino gambling has taken it on the chin since then. Turfway Park’s Bob Elliston replies that "racinos" (racetrack casinos) have shown increases since then, going against the grain of standalone casinos.

5: 35 p.m. … Sen. Shaughnessy comments about the horse industry finally being together on the issue, saying that was far from the case when slots proposals first surfaced in the capital in the 1990s.  "I like the way you introduced this," Shaughnessy told Nicholson. Other industries have come to the capital for a bailout, he said, "but all you are asking for are resources to help make you competitive." He asks if the additional gaming will make it easier to market the overall racino experience, and be more than just a revenue enhancer. Tough question for Nicholson, since Keeneland is not planning to add VLTs to its racetrack and instead will share revenue from the Red Mile. "There are many, many disadvantages to being the last state to do this," Nicholson said. He added that being last does have the advantage of allowing Kentucky to see how other states have used the racinos to their benefit.

5:40 p.m. … Sen. McGaha gets a laugh from the audience when he said he’s in a hurry and demands "yes or no" answers from the slots proponents. First he asked Ron Geary of Ellis Park if he plans to run the original number of dates Ellis Park was given or the reduced number they now plan to run this year. Geary starts to give an answer that doesn’t start with "yes" or "no," then McGahah shouts "yes or no.," Geary says "yes," then McGaha says "Yes what?" I’m beginning to worry that the issue may be too complicated for some of these legislators.

5:55 p.m. … In closing, Sen. Borders reiterates his believe that every Kentucky legislator wants to helpo the horse industry, but then tips his own vote by saying, "We believe there is already a measure out there that does that. (the Williams alternate plan that taxes the lottery and out of state wagering on Kentucky racing."

The anti-gambling folks are next.

6:00 p.m. David Edmunds of the Family Foundation begins by complaining that Nick Nicholson’s PowerPoint presentation is getting stale. He also doesn’t think the VLT is constitutional, reading from Section 226 of the Kentucky Constitution. He evokes the name of Bernie Madoff in saying his type of pyramid scheme is unconstitutional under Kentucky law. How reassuring.

Edmunds continues to teach the legislature a history and civics  lesson….talking about the founding fathers and the evil of lotteries and horse racing. He also said House Speaker Greg Stumbo is very bad at bad. 

6:10 p.m. … Edmunds quoted from several published reports saying the Kentucky horse industry is doinig well, with great attendance at major events like the Kentucky Oaks and Derby, and even quoted from Churchill Downs CEO Bob Evans’ report to the shareholders at the company’s annual meeting, saying he had a bullish outlook for the company.  

A number of senators have walked out on Edmunds’ presenation, and can’t say I blame them. Edmunds is providing statistics compiled by people who have been educated at Harvard and MIT…that’s sure to impress some of these senators. His biggest concern seems to be an increase in the suicide rate if VLTs are allowed (oh, wait, they already allowed, just not in Kentucky). That’s the last straw: Edmunds tells us that the definition of insanity is doing the samme thing and expecting different results. No, Mr. Edmunds, you are the definition of insanity.

Next witness, please!

Sen. Shaughnessy ridicules Edmunds’ accusations that the state lottery is a "blood-sucking vampire." He then reminds Edmunds that he supports Williams’ bill to tax the lottery further as means to increase purses at racetracks. Edmunds stutters and hems and haws and then mercifully is done.

6:35 p.m. … House Speaker Stumbo enters the room..,..apparently the House has adjourned for the day. 

6: 40 p.m. …  The next witness (whose name I did not catch) slams the Herald-Leader for its accuracy and then cites a Herald-Leader story questioning the number of jobs the horse industry says it contributes to Kentucky’s economy. He then says the horse industry doesn’t spend enough money promoting itself and said Churchill Downs should have gone to night racing years ago when baseball and football went to night games. "Welcome to the modern world," he said.

6:45 p.m. Before the head of the charitable gaming association speaks, chairman Borders recognizes House Speaker Stumbo and tells him the pro-VLT legislation team did "an adequate job" presenting their position.  When riverboat casinos began in Indiana, charities on the north side of the state suffered a loss in players, Ron Morris of the charitable gaming association said. He said other developments such as anti-smoking laws have also hurt charitable gaming.

6:50 p.m. … Sen. Boswell moved to pass House Bill 2 to the Senate floor without comment. Chairman Borders said the motion was out of order but would be honored in a few minutes. That woke a few people up.

6:55 p.m. … One last speaker on the opposition side represents CAGE (Citizens Against Gambling Expansion). The spokesman for the group said people will be sold into bondage to slot machines in order to support racetracks in Kentucky, that they will spend hundreds of millions of their own money, and money they steal from their employers and credit card companies.

7:00 p.m. … Sen Boswell’s motion is made to pass the bill without expression (meaning no support or opposition stated). 

Boswell votes yes, but gives a lengthy explanation as to why he supports the legislation Buford votes yes but wants a local-option amendment to be added on the floor of the Senate.Sen. Angel also votes yes, saying her 81-year-old father is a retired trainer, and she also represents the district where Churchill Downs sits. Yesterday, Angel, said she heard from many constituents by email saying the people want a floor vote on the senate.

Harris votes no, saying the Senate has already passed a bill that protects the horse racing industry through improved purses and breeders’ incentives. "I’m also concerned that the (VLT projections) just don’t work," Harris said.

"This is a tough vote," says Sen. Kerr of Lexington. "I too feel that we have proposals on the table that could help the horse industry without damaging our most vulnerable decisions." Her vote will be a "no."

Wingnut Sen. McGaha says a yes vote for the bill is a vote for suicides and employee theft. Certainly the most rational explanation I heard during the hearing.

Sen. Shaughnessy complained before his yes vote that the committee did not represent a fair hearing, in large part because the committee is stacked disproportionately with Republicans. Shaughnessy said Senate rules call for committees to be divided between Democrats and Republicans along the ratio of their seats in the Senate. Democrats have 40% of the Senate seats but half that on the A&R Committee, he said.

7:15 p.m. … Let’s cut right to it. After a computer failure at just the wrong time, I can report that the measure failed to get the committee support and will not be sent to the full Senate. Voting no were Sens. Borders, Leeper, Harris,  Kelly, Kerr,  McGaha, Smith, Stivers, Tapp, and Tori.. Voting yes were Boswell, Buford, Angel, Pendleton and Shaughnessy.Sen. Palmer abstained and Westwood was absent.

The room cleared quickly, many of the people from the horse industry leaving with long, sad faces. One horse owner, Jack Smith, shouted in the direction of Republican Sen. Damon Thayer, "You will never get another penny of support from me," Smith told Thayer, who is a consultant to the horse industry and a former Breeders’ Cup and Turfway Park executive. Thayer called the remark inappropriate and said he was not a member of the committee that rejected the slots bill. Thayer never came out in support of the bill, either. And for a senator who claims to be the Thoroughbred industry’s point man on Kentucky legislation, that speaks volumes.

That’s it from the live blog