Posts Tagged ‘Will Farish’

By Ray Paulick

One of the first projects that landed on my desk when I joined the Thoroughbred Times as managing editor in 1988 was a feature story on the Jockey Club, the organization historically entrusted with registering Thoroughbreds and being the keeper of the Stud Book. The article was accompanied by a lengthy mail-in survey of Thoroughbred Times readers. The story and the survey results were of great interest, for at the time I had no idea how broadly the Jockey Club reached across the entire industry and how unhappy rank and file breeders then were with the organization’s service, pricing and activities.

It should be noted that there was an agenda to the article. The Thoroughbred Times was then owned by Richard F. Broadbent, whose Bloodstock Research Information Services was facing new competition from a subsidiary of the Jockey Club. There were questions about whether a tax-exempt breed registry like the Jockey Club should create a subsidiary to compete with a private enterprise company like BRIS, which supplied statistical data to breeders, owners and various publications. A few years later, the Jockey Club helped form another for-profit company, Equibase, which competed with the Daily Racing Form to collect racing results (the Form eventually closed its track and field operations and became Equibase’s biggest customer). The Jockey Club has since started other for-profit businesses.

One of the things that struck me was the comparison between how the Jockey Club and the American Quarter Horse Association conduct their business. The Jockey Club is clearly a breed apart from its Quarter Horse counterpart. The AQHA, then and now, is a relatively transparent organization, one whose membership is open and whose leadership is democratically elected through regional and national elections. There is a board of directors, from which comes an executive committee and elected officers. The AQHA has term limits that prevent individuals from maintaining longstanding control of the organization. The AQHA web site publishes a great deal of information about its governance and membership rules, which can be read here.

By comparison, membership in the Jockey Club has always been by invitation only. Click here for an explanation about membership. It is "governed" by a rotating board of stewards, though that term is used loosely since the Jockey Club has been under the firm control of just two men since 1982, when Ogden Mills “Dinny” Phipps was named chairman and William S. Farish became vice chairman (pictured left). Click here to see the current list of Jockey Club members, stewards, and officers.

The AQHA is a huge organization that maintains the registration of more than five million Quarter Horses, with 135,000 registered in 2007 alone. There are nearly 350,000 AQHA members. According to Internal Revenue Service Form 990 for tax exempt organizations, the AQHA generated $54.4 million in revenue in the 2005-06 fiscal year, the most recent year available. At that time it had $73 million in total assets, including nearly $49 million in investment securities. Click here for the AQHA Form 990.

The AQHA, like the Jockey Club, maintains pedigree records, but also promotes the Quarter Horse breed through horse shows and publishes three magazines (the Quarter Horse Journal, the Quarter Horse Racing Journal, and America’s Horse) that had total circulation of over 400,000 in 2006.

The AQHA charges as little as $25 to register a Quarter Horse foal if done within seven months of birth. The organization is based in Amarillo, Texas, and its highest-paid officer, longtime executive vice president Billie G. Brewer, earned an annual salary of $424,928; treasurer Lee Callaway was paid $221,965 (both figures are from the IRS Form 990.) The two executive salaries represented 5.5% of the AQHA’s total payroll of $11,725,124.

The Jockey Club is also a rich organization, one that is exempt from federal taxes but also has several wholly owned for-profit subsidiaries. The Jockey Club’s 2006 IRS Form 990 states that it registered 37,300 foals that year. The Jockey Club generated $13.2 million in revenue in 2006, the most recent year the figures are available. It claimed $32 million in total assets, including $21.6 million in investment securities. Click here for the Jockey Club Form 990.

In addition, the Jockey Club claimed that its subsidiaries generated over $25.7 million in income for 2006 ($13.7 million by TJC Holdings Inc. & Subsidiaries, which is engaged in information services and software solutions; $4.9 million by The Jockey Club Racing Services, for the collection of Thoroughbred racing data; and $7.1 million by The Jockey Club Technology Services, Inc., for its technology services). Click here for more information on those subsidiaries, which include shared ownership in the data collection company Equibase, and full ownership of TJCIS (The Jockey Club Information Systems  and data supplier Equineline), and InCompass Solutions, which provides software systems for racetracks.

The Jockey Club’s IRS Form 990 lists its annual Round Table Conference in Saratoga Springs, N.Y., publication of its Fact Book, and providing financial support to other industry organizations among reasons for its tax-exempt status, in addition to its breed-registry responsibilities.

The Jockey Club charges $200 to register a Thoroughbred foal, considerably higher than the AQHA’s fee. Its last increase was in 2000, when it was upped from $175. The Jockey Club, which for many years was known as the “New York Jockey Club,” relocated its registration department from New York to Kentucky in 1988. 

Its highest-paid officer is president Alan Marzelli  (pictured, left), who earned $672,796 in 2006, 58% more than the AQHA’s top executive. The Jockey Club has three executive vice presidents: James Gagliano, with a salary of $256,885; Daniel Fick, $243,546; and Laura Banllaro, $243,804. IRS Form 990 also lists but does not itemize another $542,776 in 2006 pension plan contributions for those officers. The salaries represented 39.1% of the Jockey Club’s total payroll of $3,626,092 (exclusive of its subsidiaries, each of which have its own executive staff and employees).

The Jockey Club’s 2006 tax return came to light recently when an entity called “CTBA Boardwatch” (which generally concerns itself with the inner workings of the California Thoroughbred Breeders Association) distributed IRS Form 990 to numerous individuals. A number of those people contacted the Paulick Report and were outraged over the salaries paid to Marzelli and his three executive vice presidents.

I don’t know the going rate of executive compensation for a tax-exempt company in New York, where three of the four Jockey Club officers are based (only Dan Fick, a former AQHA executive, is located in the Lexington offices of the Jockey Club). Perhaps those numbers are perfectly in line with other non-profits. I would imagine, though, that the going rate for an executive staff is higher in New York than it would be in Kentucky.

It does seem strange to me that the Jockey Club continues to maintain a nicely appointed office in the high-rent district of midtown Manhattan, on 52^nd Street just off Park Avenue. I doubt that it’s gotten many walk-in customers seeking to register their foals since the registration department was moved to Lexington more than 20 years ago. It is conveniently located near the headquarters of Bessemer Trust, the Phipps family-run wealth management firm whose offices are just a few blocks away on Fifth Avenue.

I asked Jockey Club communications officer Bob Curran why the Jockey Club continues to have a New York office 20 years after the organization’s primary function was relocated to Lexington. A few days later I received the following statement from Jockey Club president Marzelli: “Beginning in 1989, when the first of our commercial subsidiaries was incorporated, The Jockey Club has created and developed a group of for-profit subsidiaries and strategic partnerships, each designed to serve specific segments within the industry by utilizing highly efficient, state-of-the-art technology platforms. We have built and managed this growing list of technology-based companies with a corporate office based in New York and operations centers in Lexington, Ky., and Mountain View, Calif.”

That didn’t really answer the question “why a New York office is necessary” although it did tell me something I didn’t know; namely, that the Jockey Club now has a division in California’s high-tech Silicon Valley town of Mountain View.

The bigger question is who is the Jockey Club accountable to. Is it simply Phipps and Farish and their hand-picked stewards? Is the breeders who have paid registration fees over the 100-plus years of its existence? Is the Thoroughbred industry at large? If there is accountability to the industry, why isn’t there more transparency in the operational and financial activities of the Jockey Club and its various subsidiaries? Why is its membership so restrictive and its governance so secretive?

James Gagliano, one of the aforementioned executive vice presidents, touched on some of these questions, during the Jockey Club Round Table in August in which he discussed some of the activities of the Jockey Club and its affiliate for-profit companies. Click here to read Gagliano’s remarks.

Are you satisfied that the Jockey Club is properly and responsibly representing the best interests of the Thoroughbred industry? Let us know in the comment section below, or take the Daily Paulick Poll about the Jockey Club and its activities, located on the left-hand column of the Paulick Report home page.

Copyright © 2008, The Paulick Report

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By Ray Paulick

“How do you corral 30,000 horses, having taken them off the range where they lived, and just say ‘night night’?” asked Madeleine Pickens, the animal-loving wife of billionaire T. Boone Pickens and better known in Thoroughbred racing circles as the former Madeleine Paulson, who with her late husband, Allen Paulson, developed one of the most successful Thoroughbred breeding and racing operations of the 1980s and ‘90s. Allen Paulson died in 2000, and she remarried in 2005.

In recent years, Madeleine Pickens has spent sleepless nights agonizing over the plight of the American West’s wild mustangs, which have been rounded up and held in pens in increasing numbers over the last eight years by cowboys hired by the federal government’s Bureau of Land Management after complaints from cattlemen that the horses were depleting grazing areas. As federal funding for the wild horses was squeezed and the number of people interested in adopting them declined, BLM officials were faced with an unpleasant option: allow the horses to be sent to slaughterhouses or perform mass euthanasia.

The story of these wild horses – “America’s animal” she calls them – hit Madeleine Pickens’ radar screen at a time when she was putting considerable personal resources of time and money into efforts to end the slaughter of all horses. She studied the issue, then hired a polling company to gauge public opinion on the slaughter of horses for human consumption, finding out that seven in 10 Americans oppose the practice. She then paid for anti-slaughter advertisements in the New York Times, lobbied members of Congress and worked with other groups and individuals. Ultimately, however, those efforts ended in frustration because, she said, the pro-slaughter lobby, assisted by the cattle industry, was simply too entrenched with Washington, D.C., powerbrokers. Anti-slaughter bills passed by the U.S House of Representatives were stopped in the Senate. And she was outraged that so many Thoroughbred industry leaders failed to help.

“I would lay in bed, crying, and say, ‘How can we stop this? What can I do?” she told the Paulick Report. “I’m not a religious person, but a spiritual one, and I swear to God that I prayed for an answer.”

One night, she said, the answer came to her. “Why not buy a ranch and give every horse a home?”

Pickens’ plan for a horse sanctuary would be similar to how cattlemen got access to millions of acres of federal land, she said. “This is how the cattlemen got going,” she said. “They got the BLM land attached to their ranches with sweetheart deals. They pay a very low lease for it, and most aren’t even using the land now.”

Pickens has a private foundation in the formative stages, a key to which will be tax credits for donors, she told the Washington Post. She met with Senate Majority Leader Harry Reid of Nevada, where half of the wild horses are held. Pickens isn’t prepared to say how much she needs to raise for an endowment to make the plan work, but she is confident she will be able to make it happen. She envisions corporate sponsors, campgrounds and cabins for tourists to come and observe the horses. “There is so much support for this right now,” she said. “It’s amazing the number of calls and emails I’ve received from people who want to help or go to work there.” (Click here to see the official Madeleine Pickens Web site.)

She estimated that she will need upwards of a million acres, and is currently in negotiations on three different properties. She took her plan to BLM officials, who leaked the story to the Washington Post, prematurely, in her opinion. “The story got out way too early while I’m working on the land deal,” she said. “The land people may suddenly say, ‘Ohhh, deep pockets,’ and become unreasonable. I’m trying to  be responsible and do the right thing here. I’m very confident that next year this whole thing will be in place.”

Pickens said she felt like someone who’s been trying to walk through quicksand the last couple of years and can’t seem to get out of it. “Nothing was happening, and you can’t believe the idiocy of it all,” she said. “Why do people not get it?”

She grew weary of trying to work for a solution in Congress. “The people in the racehorse industry weren’t on board and we had all those cattlemen against us,” Pickens said. “We really couldn’t win. I give the people who have been fighting this for so long a lot of credit.

“I think this will work because I came up with a private-sector solution rather than trying to put a bill through Washington where politicians could have their way and destroy it. When the bureaucrats do it, it costs too much and doesn’t work. With private individuals, you’re not indebted to every group or compromised by lobbyists.”

Her proposal has been widely applauded, within the BLM and the general public. While her husband, a well-known corporate raider, oilman and philanthropist, has been a highly visible proponent for a plan to make America energy independent, Madeleine Pickens became an overnight celebrity because of her desire to save the horses. The week her plan went public, ABC’s World News Tonight named her “Person of the Week.” Some outside of the horse business remembered her as the heroine (pictured, left) who rescued hundreds of abandoned cats and dogs in New Orleans following Hurricane Katrina.

“I knew people cared, but I was somewhat stunned at the way this story took off like a wildfire,” she said. “It surprised me, but it really shouldn’t have."

A PLACE FOR EX-RACEHORSES, TOO
Pickens said the ranch will not just be a refuge for wild horses. She wants it to be all inclusive for different breeds, and especially ex-Thoroughbred racehorses that often end up unwanted or sold to killer-buyers who send them off for slaughter in Canada or Mexico. There are no remaining horse slaughterhouses in the United States.

“We’re going to have enough land where I don’t know how we can say no to anything,” she said. “It won’t happen overnight. But I want to give the Thoroughbred industry an opportunity to do something here, and to make people feel that they are being responsible for the animals in their sport. I’m going to ask the industry for their support. It’s going to be difficult for the racing industry to change their way of thinking. With this, I hope they can say they have an exit strategy for their horses.”

Pickens is still angry over the National Thoroughbred Racing Association’s refusal to support recent anti-slaughter legislation in Congress. She was one of a large number of major industry participants to sign a letter written by owner-breeder Josephine Abercrombie to members of Congress stating their support of anti-slaughter legislation and their disapproval of the NTRA’s position. “The NTRA had to compromise themselves with Goodlatte (Virginia Rep. Bob Goodlatte, former chairman of the House Agriculture Committee and now ranking member), who has helped them with gambling legislation but has close ties to the cattle industry,” she said. “By getting behind my proposal, they won’t have to worry about the threat of someone like Goodlatte.”

The Jockey Club is another group that has disappointed Pickens. “They register 35,000 horses a year and they say those horses are worth millions and millions of dollars,” she said. “And they come up with some plan where people can give a few dollars when they register a foal and the Jockey Club says they’ll match up to $200,000 a year. This is the same old b.s. — $200,000 is a peanut. How dare they say this is all they’re going to put into a retirement fund for all the horses who don’t make it. It’s all part of what makes the system not work.

“In every business it’s leadership, and we’ve had horrible leadership in racing. Will Farish (vice chairman of the Jockey Club and owner of Lane’s End Farm, where Pickens retired Grade I winner Rock Hard Ten to stud) can be a good guy. He’s head of this and head of that, and people look up to him. But here’s a man who won’t go against slaughter. Why? Is it because he’s from Houston, where so many of the cattlemen are from?”

Pickens, who said she has withdrawn from the racing business largely because of its inaction on this issue, said she thinks the Thoroughbred industry can learn a great deal from how her proposal has been embraced by the public.

“Racing people can learn that they have a chance to endear the public to them,” she said. “They get a few gamblers here and there, but they are in trouble because they seem to have lost sight of the animal who is the athlete. They have too many fatalities and too many injuries that happen in public on national television. When that happens, it exposes the fact they have no exit strategy for the horses.

“Again, there is no leadership. Those who have been in it for a long time have done nothing to endear people to the business. Now they have an opportunity like the BLM has to try and resolve one of their problems.”

I asked Pickens why she is doing all this, what is driving her to take on a project so big?

She told me of how she emigrated to the United States from Iraq in 1969 because she wanted “to come to a new world and do something with my new country.”

But then she confessed to another reason, something that haunted her when she first learned about the horrors of slaughter: “Maybe it’s because I’m ashamed that I was in the industry for years and never knew there was a slaughterhouse for so many horses at the end of the day. I’m so ashamed I never knew. And people who know about it and aren’t doing anything, they should be ashamed, too.”

Copyright © 2008, The Paulick Report

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By Ray Paulick

The retirement of reigning Horse of the Year Curlin to Lane’s End Farm may be one of the more unusual stallion contracts with which the Versailles, Ky., farm’s owner, William S. Farish, has been involved. Farish said as much in an interview with the Paulick Report, although he would not go into details of the deal that was announced on Nov. 21.

Farish confirmed that Lane’s End did not purchase any interest in the Smart Strike 4-year-old colt, who will stand for $75,000 live foal as the property of Jess Jackson and the Midnight Cry Stable – at least until Midnight Cry’s 20% ownership interest is resolved in a legal battle that goes back to a 2001 diet-drug class-action settlement. The case revolved around the legal fees charged by plaintiff attorneys William Gallion and Shirley Cunningham, among others. The two men, who raced under the Midnight Cry stable and bought Curlin as a yearling for $57,000 in 2005, lost a $42 million judgment in a civil suit and face retrial on criminal charges of mail fraud after a previous trial ended in a hung jury. A third defendant was acquitted.

A court-ordered receiver has been charged with selling Midnight Cry’s 20% interest in Curlin, but the fair market value of the horse is in dispute. At a recent hearing, bloodstock consultant Ric Waldman estimated Curlin’s total value at $20 million, meaning Midnight Cry’s interest is worth $4 million – the amount Jackson and his wife, Barbara Banke, offered to buy it. Andre Regard, an attorney for Midnight Cry, said the figure is too low.

Because of the legal complications, it’s believed Jackson was unable to convey any breeding rights to Lane’s End, a standard part of most stallion contracts that gives the farm standing a horse a minimum of four to six annual breeding rights. In lieu of those rights, the assumption is that Jackson is paying Lane’s End an annual management fee, in addition to standard marketing and board fees. Unless the management fees are linked to Curlin’s stud fee (i.e., they increase if his stud fee increases), Lane’s End will not enjoy the potential upside it would if the farm owned shares or a percentage of the horse, or if the farm received a specific number of annual breeding rights.

Regard said he has requested a copy of the stallion contract from Jackson but has yet to receive it. He suggested the details of the contract could help establish Curlin’s true value. Regard contends that the $20-million appraised value is too low, based on the multiple of 267 times the initial $75,000 stud fee. Some stallions are valued based on a multiple of 400 (or even as high as 500) times the initial stud fee, Regard said.

Farish admitted the negotiations over Curlin were “difficult” because of the legal challenges. That Jackson and Farish ended up business partners on the horse is viewed by some as ironic, in light of Jackson’s crusade to reform the Thoroughbred auction business and his push to have bloodstock agents licensed. It is widely believed the politically-connected Farish used his clout in Kentucky’s legislative circles to restrict reforms and block the mandated licensing of agents.

Curlin was retired following his fourth-place finish in the Breeders’ Cup Classic, the only time in 16 career starts he finished worse than third. North America’s all-time leading earner, with $10,501,800 won in the United States and Dubai, will make a final public appearance this Saturday at Churchill Downs before joining his sire, Smart Strike, at Lane’s End.

Copyright © 2008, The Paulick Report

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By Ray Paulick

In the 46 years since the Breeders’ Sales Company – a co-op established by Central Kentucky breeders — was handed over to Keeneland, the Lexington, Ky., auction house/racetrack has gross receipts of more than $13.5 billion through its sales of weanlings, yearlings, 2-year-olds in training and breeding stock. During that time, the Paulick Report estimates Keeneland has earned commissions of approximately $750 million from horses sold and from buybacks (based on 5% commission from 1962-2000, and 4.5% from 2001 to the present).

That estimated three-quarters of a billion dollars in revenue does not include entry fees from the thousands of horses sold each year (UPDATE: see comment section for a clarification on entry fees) or Keeneland’s portion of the takeout on live racing, simulcasting and account wagering.

What does Keeneland do with all that money?

Because it pays no dividends to its shareholders the way most publicly-held companies do, Keeneland distributes its sizable profits in other ways. For starters, it supplements overnight purses during its two race meetings in the spring and fall, making those meetings among the highest in daily average purses among all North American tracks. The 2008 spring meeting offered total purses of $10,016,860, a daily average of $626,054.

Keeneland makes frequent upgrades to its physical plant, for example adding luxury suites in the early 1990s and expanding its sale pavilion in 2004. It recently contracted with HOK Sport, a leading stadium architecture firm, to examine the possibility of expanding Keeneland to accommodate larger crowds and possibly host future Breeders’ Cup championships. It is currently too small to host a Breeders’ Cup.

Finally, Keeneland makes charitable contributions to the local community and to the horse industry. Since 1936, according to its media guide, Keeneland and its Keeneland Foundation have given more than $15 million to various charities.

As detailed in the Paulick Report’s first installment of this history of Keeneland, the track was funded by Kentucky horsemen and local citizens through an offering of preferred, non-voting stock and common stock that gave shareholders voting rights in certain company affairs. At some point, certainly as early as the 1950s, Keeneland general manager W.T. Bishop began approaching stockholders and requesting they return their shares of common stock to Keeneland. That effort went on for years and was largely successful, in part, some sources say, because Bishop and other Keeneland directors or executives persuaded the stockholders that the shares had no real value, since dividends were not permitted under the 1935 articles of incorporation. As an enticement to return the shares to the association, sources have said Keeneland may have offered lifetime membership in the Keeneland Club or coveted clubhouse or grandstand boxes.

At any rate, of the 3,500-plus shares of Keeneland stock originally sold, only a few remain in the hands of individuals. Those individuals are entitled to attend the annual shareholders meeting, which usually is held in October. At that meeting, shareholders are given an opportunity to inspect the financial records of the company, but no financial materials are distributed.

The vast majority of shares given back to Keeneland are controlled by three trustees who make all of the critical decisions for the company. Keeneland’s board of directors is viewed as a “rubber stamp” board, according to several board members who spoke with the Paulick Report. “It’s usually ‘Here is what we’re going to do, and thank you for coming,’” one longtime board member said. Another said financial documents distributed at Keeneland board meetings are skeletal compared with those of other boards.

The current trustees are Will Farish, Louis Lee Haggin III and William M. Lear Jr. An attorney who is not active in the horse business, Lear only recently replaced another attorney, William T. “Buddy” Bishop III, the son of the longtime Keeneland general manager. Buddy Bishop, who died earlier this year, was named a trustee in 2005 following the death of Charles Nuckols Jr. Farish was named a trustee in 2005 as a replacement for James E. “Ted” Bassett III, who had to step down because of age requirements. Bassett has been associated with Keeneland since 1968 and served as its president and board chairman.  Haggin is the longest-running trustee.

There is little known about if, how or when a voting trust was established to represent the shares turned back to Keeneland. It also isn’t known how that trust might have been established, or whether it may have been created by a specific document. It is also unclear if there is a beneficiary to the voting trust, and who or what that beneficiary might be.

Phone messages and a fax to Bassett from the Paulick Report asking specific questions about the voting trust were not answered.

In 2002, a new holding company, called Keeneland Trustees, Inc., was incorporated in Kentucky as a non-profit corporation. The articles of incorporation of Keeneland Trustees Inc. state that the purpose of the corporation is “to operate for any lawful purpose or purposes, including, but not limited to, holding shares of stock of Keeneland Association, Inc. or ownership interest(s) in any other entity(ies) and perpetuating the purposes for which Keeneland was formed, including promoting the sport of horse racing, improving the breed of Thoroughbred horses and conducting annual race meetings. The Corporation is authorized to exercise any powers conferred upon corporations formed under the Kentucky Nonprofit Corporation Acts as may be necessary or convenient in order to accomplish the above-described purposes.” The officers of that company coincide with who serves as Keeneland’s trustees.

In other words, the Keeneland Association is now owned by Keeneland Trustees, Inc.

If Keeneland Trustees, Inc. is viewed as a non-profit company by the Internal Revenue Service, its IRS Form 990 is to be made available for public inspection as required by section 6104. However, Keeneland vice president Harvie Wilkinson and treasurer Jessica Green told the Paulick Report upon a request to view IRS Form 990 that Keeneland Trustees Inc. is not a non-profit company.

The Keeneland Association is a for-profit company and has been since the late 1950s. Its earnings are taxed, but the IRS apparently does not have the benefit of a second level of taxes that it enjoys with public companies whose shareholders pay an individual tax on dividends. Keeneland retains a large portion of its annual earnings after subsidizing purses and contributing to its Foundation. Its cash reserves, sources have told the Paulick Report, are in the hundreds of millions of dollars.

“They don’t know where to spend all that money,” one longtime Keeneland consignor said.

Some have suggested the retained earnings could present a tax problem, and that is one reason Keeneland is looking at an expansion project that could take a huge bite out of those cash reserves. Potential legal issues might also help explain why the last two individuals appointed Keeneland trustees are attorneys.

Breeders who have sold the billions of dollars of horses that have helped Keeneland earn that approximately $750 million since the Breeders’ Sales Company dissolved in 1962 might want to have a say in how some of those earnings are spent. Is it, for example, in the best interest of those breeders for Keeneland to expand its facility at great cost in order to attract the Breeders’ Cup? That’s a big investment for one extra day of racing every few years.

Nick Nicholson, the track’s current president, thinks not just breeders but others should have a say in Keeneland’s direction. In announcing the recent deal with HOK Sport to look at expansion, Nicholson said: “The citizens of our community, the state, and the Thoroughbred industry have a sense of ownership in Keeneland, and we respect and embrace that. Keeneland is an important part of Central Kentucky’s history and landscape, and we feel all should have a voice in its future.”

Keeneland was formed because of the widespread support of horsemen and the local community, and it became an extremely profitable company because of the many Thoroughbred breeders who sell their horses there.

It would be a refreshing change to see more than three people have a say in Keeneland’s future.

Copyright © 2008, The Paulick Report 

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By Ray Paulick

The Labor Day announcement that Stonerside Stables has been sold by Robert and Janice McNair to Dubai’s Sheikh Mohammed is troubling news – not over concerns that the sheikh’s Darley operation may become a dominating force in American racing and breeding but because of the symbolism of McNair’s departure from active participation in our sport.

With the exception of a few horses they are retaining, the McNairs sold the multi-state breeding, training and racing operation lock, stock and barrel for an undisclosed sum that surely approaches or exceeds $100 million.

The McNairs began development of the farm and racing stable in 1994, a mere 14 years ago. And now, just like that, they are getting out. Pfft!

Why?

The press release announcing the sale said Robert McNair found it increasingly difficult to devote enough time to Stonerside in light of his ownership of the National Football League’s Houston Texans, a franchise that McNair bid $700 million to buy and which played its first NFL game in 2002, five years after the Houston Oilers moved to Tennessee and were renamed the Titans. Despite going their first six seasons without a winning record, the Houston Texans were appraised by Forbes magazine as the fourth most valuable team in the NFL (behind the Dallas Cowboys, Washington Redskins and New England Patriots) with an estimated value of over $1 billion.

To get the Texans and return the NFL to Houston, McNair outbid entertainment mogul Michael Ovitz and billionaire oilman Marvin Davis, among others, who wanted to bring a franchise back to Los Angeles, which had lost the Rams to St. Louis and the Raiders to Oakland. McNair knew that the NFL was the sports world’s most valuable league, and understood the power that a strong league office, with the support of team owners, had in shared media rights, merchandising, sponsorships, and marketing. Stepping up with a bid of $700 million seemed like a big risk, but now it looks like a bargain.

While McNair was busy starting his NFL team, he also lent his support, time, personal resources and expertise to a project that the Thoroughbred Owners and Breeders Association was trying to launch: the Thoroughbred Championship Tour (TCT). The TCT was a property Thoroughbred owners would create through an investment of $25 million, hosting a series of races showcasing top horses in divisions tied to the Breeders’ Cup at tracks throughout the country. The TCT would control media and wagering rights for those races.

McNair was named chairman of the TCT, which after its public unveiling in 2003 was slow to get off the ground for a variety of reasons, including TOBA’s staffing inadequacies. TOBA board members and TCT officials went to the Breeders’ Cup and National Thoroughbred Racing Association (which at that time were effectively one organization) for support, but they were stonewalled by some of the same people who helped kill previous initiatives, including Fred Pope’s National Thoroughbred Association. Leading the charge against the TCT was G. Watts Humphrey, who along with Will Farish controlled the executive committee of the Breeders’ Cup until its governance was changed and its board elected by nominators.

The stonewalling worked. After a series of meetings among racing organizations that went on for years, TCT announced in 2005 that it was “suspending operations” – which might be a stretch. There never really were any operations…only discussions.

The opposition of Humphrey and other “old guard” Thoroughbred owners and breeders to the TCT and its “new guard” supporters had carryover effects beyond this attempt to create a series of races for the best horses in training. There were hard feelings by people like McNair who were trying to bring change to an industry that has long resisted it. Some in the new guard kept pushing for change through the Breeders’ Cup election and governance process, which still remains under the control of the old guard. Others have backed away from industry initiatives after getting a bad taste in their mouth from their experience with the TCT.

McNair is getting out of the horse business almost entirely, instead putting all of his considerable energy into the NFL, where there is more enlightened leadership and, as a result, heightened opportunities to grow a business.

This much we know: the NFL’s gain is the horse industry’s loss.

I felt a little angst when a friend called Monday night to say that “someone at the Thoroughbred Times is reading the Paulick Report, because they ripped off your story about past-posting on a race from Philadelphia Park and didn’t give you any credit.”

I was in the middle of a dinner celebrating my son’s 20^th birthday at the new Malone’s restaurant in the Palomar Center in Lexington (highly recommended, by the way, certainly up to the standards of all the Malone’s and with an appealing outside bar with large plasma screen TVs showing horse racing), so I didn’t get a chance to read the story until sometime later in the evening.

When I did, I was shocked and even more filled with angst when I read the article, written by the interestingly named Frank Angst, a ground soldier in the trade publication army of the Thoroughbred Times I’d crossed paths with on a number of occasions during my tenure as editor in chief of Bloodhorse.

Believe it or not, there are ethical standards among journalists, just as, I suppose, there are among horse traders. One of those standards is that publications that run exclusive stories should receive attribution or credit whenever another publication does a “cover your ass” rewrite, which is clearly what ground soldier Angst was ordered to do from on-high. To quote the leading media critic Howard Kurtz of the Washington Post and CNN’s Reliable Sources, “Making a couple of calls to confirm a story that a journalist would not otherwise know about doesn’t excuse the obligation to give proper credit.”

Dick Jerardi, an Eclipse Award-winning writer for the Philadelphia Daily News (and an occasional Thoroughbred Times contributor), found the past-posting article of interest and wrote a story for his paper, giving attribution to the Paulick Report.

The story by Frank Angst is not the kind of journalism my old friend Mark Simon, the longtime editor of Thoroughbred Times, expected from his employees 20 years ago when he hired me as the weekly magazine’s managing editor, and I doubt that Mark’s standards have changed very much. So I sent Angst a few angry emails Monday night that he’s had plenty of time to respond to, and hasn’t. (Note to Frank: It’s 2008. If you’re not checking your inbox 24/7, you’re no damned good.)

This is the same Thoroughbred Times and same Angst that was so anxious to report my demise from Bloodhorse last August but failed to run even a brief note about the start-up of the Paulick Report a few weeks back (neither, incidentally, has the Bloodhorse, though traffic reports on the Paulick Report web site show Bloodhorse IP addresses  as a frequent, daily visitor…perhaps looking for news leads?).  Someone once suggested that there is something  Machiavellian about the trade press, that the ends (keeping the trade publications in a cozy, friendly relationship with the industry they cover) justify the means (parsing and lifting from non-trade press). That led me to run a picture of the Italian diplomat and author Niccolo Macchiavelli, especially since Frank Angst isn’t famous enough to have a photo on the Flickr web site.

I never read The Prince, Macchiavelli’s most famous written work (I’m sure I’m not the only one who likes to say something is Macchiavellian without knowing what the hell we are talking about), but I do know something about the Thoroughbred trade press and the cozy relationship it has with advertisers and industry organizations it covers. I plead nolo contendere to charges that I was influenced at times during my 15 years at Bloodhorse, succumbing occasionally to brow-beating from advertisers, members of the organization’s board of trustees, its parent at the Thoroughbred Owners and Breeders Association, or from a publisher whose frequent jaunts to Margaritaville were made possible by a contented, free-spending group of advertisers. I’ll never forget the chilling words one of the Bloodhorse trustees said to me when I first met him: “We can’t tell you what to do or write. All we can do is fire you.”

The trade publications, for example, are not going to report on something that nearly every breeder in Central Kentucky already knows – that top older stallion Seeking the Gold has been shooting blanks this breeding season and may be finished – because 1) the farm that stands the stallion, Claiborne, is a  major advertisers at Bloodhorse and Thoroughbred Times and hasn’t sent out official word yet through a press release, and 2) the stallion is controlled by Dinny Phipps chairman of the Jockey Club, and the people who run the two publications don’t want to do anything to upset Phipps since they enjoy being invited to the Jockey Club Dinner in Saratoga Springs, NY, in August.

Of course, in the Jockey Club’s Macchiavellian manner of controlling as much of the industry as possible (did I just insert Niccolo Macchiavelli again?), one of the members of the board of trustees at Bloodhorse is Bill Farish, who has a double-barrel blast of lucky sperm as the son of Jockey Club vice chairman Will Farish and son-in-law of Dinny Phipps. The chairman of the Bloodhorse board is Stuart Janney, the cousin of Dinny Phipps.

As someone once said to me, “Why should the Jockey Club buy the Bloodhorse when it already controls it?”

The lifting by the Thoroughbred Times of the Philadelphia Park story wasn’t the first time in the brief history of the Paulick Report and certainly won’t be the last time something like this happens. I’m happy to say I may even be influencing their coverage.

In the wake of our breaking story last week on the election of the Breeders’ Cup board of members and trustees, the Paulick Report headline read: CLAY CANNED IN CUP ELECTION.  A short time after that story was posted, the Thoroughbred Times apparently did another hasty rewrite, but with the bland headline:  BREEDERS’ CUP ELECTS 12 TO BOARD OF MEMBERS AND TRUSTEES.

Later that night, apparently someone at the Thoroughbred Times with at least marble-sized testicles changed the story headline to read: CLAY NOT AMONG 12 ELECTED TO BREEDERS’ CUP BOARD OF MEMBERS, TRUSTEES.

Bloodhorse.com apparently transitioned the other way in its brief rewrite and headline treatment. Its original headline, posted hours after the Paulick Report broke the election story, read: CLAY LOSES BREEDERS’ CUP BID. Sometime later, it was changed to the milquetoast: FOUR NOT RE-ELECTED TO CUP BOARD.

Perhaps someone thought the latter headline told the story more accurately than the former. It’s more likely that someone reminded the editorial side of Bloodhorse how much money Clay’s Three Chimneys Farm spends on advertising on its web site and magazine.

The Paulick Report will not be beholden to industry organizations like the Jockey Club or to major advertisers. We are operating on the simple premise that the Thoroughbred industry needs and deserves independent reporting and analysis. Similar to listener or viewer supported operations like National Public Radio or Public Television, we believe we will receive support from readers like you.

By Ray Paulick

Copyright ©2008, The Paulick Report

CORRECTION: THE ORIGINAL VERSION OF THIS STORY INCORRECTLY STATED THAT A.P. INDY "HAS BEEN SHOOTING BLANKS" DURING THE 2008 BREEDING SEASON. ACCORDING TO STATISTICS PROIDED BY WILL FARISH, A.P. INDY HAS COVERED 113 MARES AND HAS 80 OF THOSE MARES IN FOAL. THE PAULICK REPORT REGRETS THE ERROR.