Posts Tagged ‘wagering integrity’

The horse business is Kentucky’s signature industry, employing tens of thousands of people, generating over a billion dollars of revenue throughout the year, and putting the international spotlight on the Commonwealth each spring at the Kentucky Derby. Yet, in many ways, legislators and other government officials have been dealing with the industry almost as an afterthought.

Tax breaks given to lesser industries have not been granted to farmers whose agricultural product happens to be a horse instead of a cow. Kentucky’s legislature was late to the party to create an incentive fund to reward breeders for doing business in the Bluegrass State rather than shipping their breeding stock (and jobs) out of state where more lucrative incentives have been created. And now, one of the most troublesome challenges the racing industry faces – questions about the integrity of the sport and its pari-mutuel wagering foundation – has been hampered by ongoing budgetary shortfalls at the state agency that regulates racing.

Simply put, the integrity of racing in Kentucky is being jeopardized by indifference by some at the legislative and executive level to properly fund the Kentucky Horse Racing Commission.

The problem goes back nearly eight years ago to the administration of Gov. Paul Patton, who cut $1 million dollars – nearly one-third – out of what was then known as the Kentucky Horse Racing Authority. Frank Shoop, then the chairman of the regulatory body, told the Paulick Report he thought the cuts were temporary and would be restored; they weren’t. Instead, the Racing Authority began assessing racetracks as much as $3,500 a day to pay for many of the functions that would previously have been funded by the state. “It’s so important to the signature industry of the state,” Shoop said. “They should have proper money to regulate the industry: transportation, insurance and other departments have proper regulatory budgets. This department has been short of money and short of money for years.

“I don’t know what the proper funding action should be,” Shoop added, “but something needs to be done that the legislature and governor can agree on.”

If something isn’t done, the Kentucky Horse Racing Commission will run out of money by Jan. 1, according to Tracy Farmer, a Thoroughbred owner and breeder and high-level operative in the Democratic Party that helped elect Gov. Steve Beshear last November. Farmer was named by Beshear to the current horse racing commission, where he serves as vice chairman, and is heading up a special Task Force on the Future of Horse Racing examining numerous issues related to racing and breeding.

Farmer told the Paulick Report that Kentucky’s General Assembly had $2 million set aside for the racing commission for the current fiscal year but they subsequently “raided our accounts to balance the (state) budget.” Farmer said he and others are looking at ways to fund the commission through such revenue items as the tax on claiming horses, which he estimated generates $2 million per year. “Money is being generated that’s not being put back into the industry,” Farmer said. “We’re looking at several different methodologies and will recommend one of them. This is the largest industry in the state. We have to fund the people who oversee it.”

State Sen. Damon Thayer, a Republican from Georgetown and a consultant in the racing industry who helped create the breeders’ incentive fund through existing revenue drawn from the tax on stallion seasons, pushed for legislation that would have Kentucky’s General Fund provide for the commission’s budget. That legislation failed, Thayer said, despite bi-partisan efforts to get it passed.

“The racetracks are struggling, the commission is without money, and the state is in a budget crisis,” Thayer said. “We need more money for the commission to have boots on the ground to do their job. And we were saying this before Eight Belles and Big Brown.” 

The death of Eight Belles in this year’s Kentucky Derby and the admission by trainer Rick Dutrow that Derby winner Big Brown raced on anabolic steroids (then legal) has prompted an outcry for tighter regulations, stricter medication rules, and more comprehensive drug testing. Anabolic steroids have recently been banned in Kentucky and several other states, and that ban requires additional testing be added to the existing drug testing program.

Thayer plans to introduce new legislation during the next session of the General Assembly.

“What needs to happen is Gov. Beshear needs to get behind legislation drafted by Sen. Ed Worley (D-Richmond) and me that would set up a reliable, recurring source of revenue for the racing commission so the tracks do not pay for drug testing and their own regulation. The racing commission needs to be funded by the pari-mutuel excise tax so we can expand drug testing to a respectable level.”

According to Thayer, the pari-mutuel tax currently helps fund the Kentucky Thoroughbred Development Fund, equine drug research and the University of Louisville’s equine business program.

The lack of funding came to a head at a recent meeting of the Kentucky Horse Racing Commission when it was disclosed testing was not conducted for performance-enhancing milkshakes (TCO2 levels or bicarbonate loading) at Ellis Park this summer because of a personnel shortage. Since that disclosure, the commission’s chief veterinarian resigned his position.

“We were shocked to learn that no testing was conducted,” said Farmer.

It may have taken weeks for commission members to learn that there was no testing for milkshakes, but trainers probably knew instantly, permitting cheaters to prosper. The absence of testing shook the confidence of many horseplayers about whether the state is doing enough to stop performance-enhancing drugs from giving an edge to some trainers.

The racing commission’s executive director, Lisa Underwood, who was hired during the previous administration of Republican Gov. Ernie Fletcher, has plans to expand the size of the staff if funding is provided. She has submitted a plan to add investigators, state veterinarians and other full and part-time staff to better regulate racing and ensure its integrity.

Ed Martin, president of the Association of Racing Commissioners International, told the Task Force on the Future of Horse Racing when he became aware of how little was committed to Kentucky’s commission that he was “shocked at how low a priority the integrity of racing apparently was, especially considering how important the racing industry is to the state’s economy and identity.”

Martin compiled a study of how much is committed to integrity issues in other major racing states and found that Kentucky, “instead of being first, is last.”

His study showed Kentucky commits $7,692 per race day, less than half of the $17,948 committed by Florida for integrity enforcement. Martin said the Kentucky commission is sorely lacking investigators to monitor backstretch activities. Kentucky has two investigators, he said, compared with 14 in New York, 15 in Pennsylvania, 17 in Florida, and 18 in California.

“Perhaps the most glaring weakness in the funding can be seen in the fact that no resources have been dedicated to policing the pari-mutuel system,” Martin said.“Kentucky in the past has dedicated nothing in this area while other major racing states have made a considerable commitment in this area, not only in terms of staff, but to ensure that an independent computerized monitoring system is deployed to protect against past posting, odds manipulations, cyber crime, and larceny. In public forum after public forum, large bettors have expressed a growing concern about the lack of commitment to wagering security.

“While some states have committed as many as six people to wagering security and made arrangements for independent monitoring, Kentucky has yet to commit one.”

Many bettors are convinced the technology used in today’s pari-mutuel wagering system is archaic and able to be exploited by techno-savvy players who are making bets after the gates to a race have been opened. One member of the Kentucky Racing Commission who asked not to be named agreed: “There is no question people are betting after the horses are out of the gate,” he said. “They are somehow getting into the pool. It’s frightening.”

Copyright © 2008, The Paulick Report

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What’s different this time, different enough to herd the cats that refuse to be herded?

Speakers at the Jockey Club Round Table on Matters Pertaining to Racing have been calling, encouraging and hoping for change for most of the 50-plus years that this annual gathering has been going on. Whether it’s uniform licensing, uniform medication rules and penalties, uniform marketing, a uniform spirit of cooperation or a uniform approach to fixing an archaic tote system, the disparate groups in this industry refuse to put on the same uniform.

So there was the death in this year’s Kentucky Derby of the filly Eight Belles. There was also the admission by trainer Rick Dutrow that he routinely gave anabolic steroids (legally, it should be added) to his horses, including Kentucky Derby winner Big Brown. (Hell, it wasn’t that long ago that Kentucky allowed bicarbonate loading, or milkshakes, to be given to horses.)  In recent years there have been highly publicized suspensions or positive tests for medication violations of the conditioner who has won the last four Eclipse Awards as outstanding trainer; the trainer of the reigning Horse of the Year; the trainer of the Kentucky Derby winner; and the trainer of the Kentucky Oaks winner. There is scientific data showing that toe grabs can increase the incidence of catastrophic injuries, yet most states still allow these racing plates to be used.

Racing has had high profile fatalities before, anabolic steroids like Winstrol have been  called a therapeutic medication and advertised for years in the trade magazines, and successful trainers have been charged with medication violations. Those incidents were never enough to move the needle; why should it be any different this time?

Maybe, just maybe, it’s the threat of federal intervention. People like Congressman Ed Whitfield of Kentucky are telling the industry “fix your problems or we’ll fix them for you.” That’s a scary thought to many. Perhaps, however, that’s the only way significant change will occur.

Many (but not all) within the industry sense the serious nature of the threat and understand that change is no longer an option if we want to turn the tide of negative publicity, declining popularity and serious economic challenges. Unfortunately, the group responsible for making many of the desired changes in policies related to medication, drug testing and other regulatory matters have the least invested in the industry. These are the state regulators, the “gnomes” as former Churchill Downs CEO Tom Meeker once referred to them. In many cases they are political appointees with little or no knowledge of the racing industry and who fail to see how their myopic maneuverings negatively impact the industry’s big picture.

Let’s look at the establishment of drug testing laboratory standards and the possible creation of a national laboratory (or regional labs), one of the centerpieces of the Jockey Club Safety Committee recommendations announced at Sunday’s Round Table. Which racing commission is going to be the first to jettison it own state college or university lab? California, New York, Florida? Which commissions will redirect funding from labs within their state to out-of-state facilities?

The makeup of the safety committee was strategically formulated by the Jockey Club. Its members include Don Dizney from Florida, John Barr from California, Kentuckians Jimmy Bell, Hiram Polk and Dell Hancock, and chairman Stuart Janney from Maryland. But will those individuals be able to convince regulators in their home states and others around them to support the committee’s various recommendations?

Industry conferences, whether it’s the Jockey Club Round Table, University of Arizona Symposium on Racing, or Thoroughbred Racing Association/Harness Tracks of America Simulcast Conference tend to produced short-lived enthusiasm. Does anyone remember the report Rudy Giuliani delivered on wagering integrity, less than one year after the Breeders’ Cup Pick Six Scandal, at the 2003 Jockey Club Round Table? Several inches of dust have gathered on that report and on Giuliani’s very specific recommendations for fixing a tote system that is hideously outdated.

The industry would not work together to address that problem, and five years later there are racetrack operators who are unconvinced that their pools are not being manipulated by past-post betting. Tote problems represent a giant accident waiting to happen.

I hope I’m wrong. It would be nice to see every state racing commission adopt uniform medication rules, including the abolition of anabolic steroids, and ban toe grabs and other racing plates that lead to catastrophic injuries.  It would be productive for the various laboratories to work together instead of competing with each other. If the industry developed a national laboratory and had the funding for serious research and development, it’s possible we could eradicate some of the designer drugs that are currently undetectable that many in the game feel are prevalent.

The industry has faced crises before, and it’s failed to act on its own accord. What makes this crisis any different?