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It was, to say the least, an interesting week to launch the Paulick Report.

First, we had the opportunity to take a close look at the Breeders’ Cup election for its board of members and trustees in a two-part series that looked first at the history of the organization’s governance. The current battle for control — the old guard vs. the new guard — was the focus of the second part of that series. The Breeders’ Cup election is now in full swing. A newly seated board of members and trustees will then be responsible for electing half of the 14-member board of directors, which has operational oversight of the Breeders’ Cup program and its championship event. The vote for the board of directors takes place in Lexington July 11.

The Paulick Report promises to keep a close eye on the Breeders’ Cup election process.

Then came the news uncovered here that Curlin might not be able to race in New York this year because of problems involving the owner’s license of Shirley Cunningham, a jailed attorney who is part of the Midnight Cry Stable that owns 20% of the reigning North American Horse of the Year. Cunningham, along with two other attorneys involved in a class-action lawsuit settlement, has been charged with a crime but not convicted of anything. Shortly after PaulickReport.com exposed the problem with Cunningham’s license, a mouthpiece for the New York State Racing and Wagering Board attempted to spike the issue through the Thoroughbred industry’s trade press by saying there would be no problems with Curlin racing in New York. If that was the case, then, why was Midnight Cry Stable’s Einstein not allowed to race in New York on Belmont Day in the Manhattan Handicap?

I can think of at least one person who was happy to keep Einstein out of New York: Dinny Phipps, the former boss of New York racing, whose family stable’s Dancing Forever won the $400,000 Manhattan. Einstein defeated Dancing Forever earlier this year in Florida, where the owner’s license was not an issue. It was not an issue in Kentucky, either, where Einstein ran second to Curlin in the Stephen Foster Handicap June 14. Even stranger: Curlin raced in New York last fall, winning the Jockey Club Gold Cup, one month after Cunningham’s license had expired. By week’s end, attorneys for Curlin’s majority owner, Jess Jackson, said they are confident the issue will be resolved.

Mid-week brought our focus to Washington, D.C., for a preview of a Congressional hearing on Thoroughbred racing by the House of Representatives subcommittee on commerce, trade and consumer protection. The hearings came in the wake of a series of high-profile events that seemed to begin two years ago with the tragic breakdown of Barbaro, then continued in this year’s Triple Crown with the death of Kentucky Derby runner-up Eight Belles.

The Paulick Report was the only racing publication to provide live-blogging of the hearing from Capitol Hill on Thursday, followed by an analysis of what could be a watershed day for the industry if Kentucky Rep. Ed Whitfield can push through legislation setting national guidelines on medication and other issues for the 38 state racing commissions to follow.

Finally, a glimmer of hope from an unexpected source. Emily Patton, an 18-year-old horse crazy girl, writes with passion about what attracted her to Thoroughbred racing at the tender age of 12. It was a wonderful reminder to us all about what is so appealing about this great game.

Thanks to the many of you who already have indicated your support for what we are doing by making a financial donation or contacting us about advertising at info@paulickreport.com.

Stay tuned, the Paulick Report is just getting started.

By Ray Paulick

Copyright ©2008, The Paulick Report

Have you ever been to one of those business meetings where the boss calls his managers together and “wants feedback” on an idea that, it’s clear to see, he has already decided to put into play? That’s what Thursday’s Congressional hearing, entitled “Breeding, Drugs, and Breakdowns: The State of Thoroughbred Horseracing and the Welfare of the Thoroughbred,” was all about.

The members of the subcommittee on commerce, trade and consumer protection weren’t at all interested in getting feedback from a broad mix of Thoroughbred industry participants. If they were, they would have invited track owners, jockeys and someone representing the Racing Medication and Testing Consortium to testify.

Most glaring, however, was the absence of any racing fans and horseplayers — the people who fuel the entire multi-billionaire-dollar industry with their bets. They would have had plenty to say. Where were all the fans?

Thursday’s hearing was all about reinforcing the predetermined opinion by some - if not all - of the subcommittee members that racing and breeding is in dire need of some form of federal intervention. It was a two-act play, masterfully choreographed by acting chairwoman Jan Schakowsky of Illinois and ranking Republican Ed Whitfield of Kentucky, who tipped their hand that they will try and amend the Interstate Horseracing Act to employ guidelines that could radically change how the sport is regulated and conducted.

Many of racing’s numerous flaws were exposed during the three-hour hearing, which came to an abrupt end when the members were called to the floor of the House of Representatives for a vote. The happiest man in the room when that happened was National Thoroughbred Racing Association CEO Alex Waldrop, the last of a dozen speakers providing testimony. House members were interrupted just before a question and answer session got under way in which Waldrop was likely going to be grilled.

In short order, those problems are:

- Drugs have contributed to a decline of the Thoroughbred breed and Thoroughbred racing

- Research, drug testing programs and horse rescue/retraining efforts are severely underfunded

- The lack of a central authority or national regulatory standards, and the existence of state-by-state regulations, have led to dysfunction

- Existing industry organizations and perceived industry leaders have failed miserably to address the problems successfully

Allowing Congress to interfere with any industry is a frightening thought, given some of the pointless and idiotic questions directed at the two panels. For example, if one of the Congressman had his way, inbreeding would be banned. What’s next, nicking? However, doing nothing under the present industry leadership is the greatest risk we can take.

The uninformed comment about inbreeding was far from being the most outrageous aspect of Thursday’s hearing. It was the complete absence, both in body and spirit, of the racing fan and horseplayer. To my knowledge there was only one mention of fans (by Waldrop, in response to a question) throughout the day, as if they didn’t exist. Let’s not forget that the word “consumer” is part of this subcommittee’s name.

Shame on the committee for not including racing’s ultimate consumers who fuel the industry’s revenue engine.

The NTRA is attempting to put together a coalition of horseplayers, but the NTRA’s track record is not exactly inspiring on many levels. But before we bludgeon that 10-year-old organization to death, it should be pointed out that divisiveness, lack of trust and reticence from other alphabet groups (TOBA, TJC, HBPA, THA, TOC, AAEP, RCI, TRA et al) to give up control emasculated the NTRA and prevented it from having the national oversight and major league commission office status it was designed to have.

Jockey Club CEO Alan Marzelli was pressed hardest by House members and ultimately came out looking the worst of all the industry experts during the hearing. When asked what authority the Jockey Club has to ban steroids and enact other recommendations of its safety committee, Marzelli said it has the “power of persuasion.” It was a pitiful and embarrassing moment for the industry, or a bad attempt by Marzelli to imitate Don Corleone of The Godfather.

The Jockey Club’s same power of persuasion has been ineffective on getting a national license for racehorse owners. If that power of persuasion was so strong, a national owner’s license would have happened 20 years ago when the Jockey Club created an ownership registry, which could have been a first step toward that goal. That boat never left the dock. Instead, we have a patchwork system of state licensing that is a poster child for the industry’s complete and total dysfunction when it comes to regulatory oversight. Look at the situation involving Curlin’s minority owners, the Midnight Cry Stable. Their horse, Einstein, couldn’t run in New York on Belmont Stakes Day because of licensing problems, but could run at Churchill Downs a week later because Kentucky has different licensing rules.

If the Jockey Club’s power of persuasion isn’t strong enough to get something as simple as a national owner’s license accomplished, how can we count on the same failed leaders to persuade 38 state agencies to uniformly ban steroids and enact other necessary change to move the sport forward?

By Ray Paulick

Copyright ©2008, The Paulick Report

The fight for control of the Breeders’ Cup began in earnest in January 2006, shortly after the organization’s board of directors ratified a change in bylaws that would end its self-perpetuating nature and give anyone who nominates a foal or stallion to the program the opportunity to vote in an annual election.

The battle is ongoing, as witnessed by the 21 candidates seeking 12 positions on the 48-person board of members and trustees. Ballots were recently sent to nominators, who will have the option this year for the first time to vote via a secured web site. Results will be announced in July, after which a meeting of the new board of members and trustees will be held to vote for seven of the 14 positions on the board of directors, the group that makes most of the key operational decisions for the Breeders’ Cup.

Until the 2006 change in governance, the Breeders’ Cup had been tightly controlled by an executive committee consisting of a handful of Jockey Club members who stockpiled approximately $40 million in cash reserves but made precious few changes or enhancements since the championship event’s inaugural running in 1984. Thoroughbred breeders unhappy with the event’s status quo and with the Breeders’ Cup’s expensive alliance with the National Thoroughbred Racing Association saw the change in bylaws as an opportunity to bring in new blood and new ideas to the organization in an effort to stimulate growth and interest. Many from the old guard saw it as a threat to their long-established rule.

It became a classic battle of the new guard vs. the establishment. In some cases it was new money, self-made millionaires, against a wealthy group populated with members of what investment wizard Warren Buffett calls the “lucky sperm club.”

The contrast of the two groups is best exemplified by a pair of New Yorkers who are worlds apart in background but share a passion for Thoroughbred racing: Dinny Phipps and Bobby Flay.

Phipps, chairman of the Jockey Club and born into the wealthiest of old-money New York families, is a current trustee and member of the Breeders’ Cup. Until he was voted off the smaller Breeders’ Cup board of directors last July, Phipps was considered one of the most powerful figures in racing.

Flay, seeking election for the first time as a Breeders’ Cup member and trustee, is a high-school dropout who worked his way up from salad maker at a New York restaurant to become a master chef, restaurateur, television celebrity and highly successful businessman.

Phipps is the leader of the racing establishment’s inner circle that has held control over numerous organizations and initiatives. Flay has close ties to Thoroughbred Daily News Publisher Barry Weisbord, one of the industry’s most progressive thinkers but considered by some in the establishment as a thorn in the side.

The primary role for members of the large board that Flay seeks to join is to elect individuals to serve on the 14-member board of directors. There has been intense lobbying, politicking and deal-making among people seeking positions on that small board, beginning with the first election in January 2006, when two separate slates of candidates were circulated.

One slate was pushed by WinStar Farm’s Bill Casner (also the chairman of the Thoroughbred Owners and Breeders Association) and the other by Lane’s End Farm’s Bill Farish, the son of Jockey Club vice chairman Will Farish (the younger Farish is the son-in-law of Phipps). Among other things, Casner’s group was not happy with the Breeders’ Cup operating agreement and relationship with the NTRA and sought more transparency and accountability for the money spent by the Breeders’ Cup on administrative expenses. He and his allies also pushed for the 2006 Breeders’ Cup championship purses to be increased to $20 million.

The Farish slate was victorious, though not overwhelmingly. Six of the board members were establishment figures who were members of the Jockey Club. Farish was elected board chairman and Robert Clay of Three Chimneys Farm as vice chairman. It was Farish’s father who served for many years as chairman of the Breeders’ Cup executive committee that made most of the major decisions for the organization.

Nevertheless, enough critics of the status quo were elected to bring about some of the changes Casner sought. In May 2006, the new Breeders’ Cup board voted to approve $20 million for that year’s championship day purses, and in August the Breeders’ Cup terminated its operating agreement with the NTRA. The new board also reached an agreement with longtime executive D.G. Van Clief Jr. to step down as Breeders’ Cup president. He was replaced by Greg Avioli, an attorney who previously held key positions at the NTRA.

Lobbying, politicking and deal-making has not been limited to the small-board election. Nominators to the Breeders’ Cup program vote for the larger board using a formula of one vote for each $500 they spend on stallion or foal nominations. A farm with $500,000 in annual stud fees gets 1,000 votes, so it quickly became apparent that the largest stallion farms, including Coolmore, Darley, Lane’s End, WinStar, Taylor Made, Three Chimneys, and Gainesway had the most power in electing individuals to the large board of members and trustees. Alliances have been formed among some of the farms to support specific candidates.

Sources said a number of the people elected to the large board have not bothered to attend any of the annual meetings, when members of the smaller board are elected. Instead, they send in proxies to a trusted ally.

According to several board members, Bill Farish has controlled more voting proxies than all of the other members and trustees combined. One current board member (not on this year’s ballot), who spoke on condition of anonymity, was critical of three of the people running for re-election this year: Joseph Shields, Leverett Miller and Maria Niarchos-Gouaze. “I’ve never seen either Joe Shields or Leverett Miller at a meeting,” the board member said. “Frankly, I have no idea who they are, what level of investment they have in the game, why they are on the Breeders’ Cup board of trustees, or why they are running for re-election. Maria Niarchos (Niarchos-Gouaze) is strictly a proxy vote for Bill Farish. Never, to my knowledge, has she been to one meeting in all the years she’s been on the board.”

(For the record, Shields is an investment banker and an owner-breeder who served as co-chairman of the board of the New York Racing Association prior to the federal indictments and bankruptcy proceedings. Miller formerly owned and operated T-Square Stud in Florida, where Shields’ horses have been boarded. Niarchos-Gouaze took over her family’s Thoroughbred operation after the death of her father, Greek shipping magnate Stavros Niarchos. Her horses are boarded at Lane’s End.)

“There is no question that guys like like Lev Miller and Joe Shields are good for votes for the old establishment,” said one of this year’s candidates. “It concerns me that the person with the most muscle tries to stack the board to have their philosophy represented. Doing that loses any free-thinking. How much free or creative thinking can there be if there is just one faction combating another faction.

“There was a lot of politicking last time,” he continued. “The way it’s heavily weighted, the factions know where they have to go to get the votes – the major stallion farms. In the last election, Bill Farish came to me and said here are the candidates I hope you’ll vote for. There’s no slate circulating this time, at least to my knowledge, and I haven’t heard from Bill. Maybe he thinks he’s got it under control and doesn’t need any more votes.”

Following last year’s election of the members and trustees, there was controversy involving Terry Finley, the head of West Point Thoroughbreds. Finley, previously a member of both the small and large boards, did not receive enough votes in the June 2007 election to remain on the large board. It was expected he would have to resign from the smaller board, since membership on the larger board is a requirement.

During the July 2007 meeting of the members and trustees, however, it was decided that Finley could remain on the small board for the duration of his two-year term, which expires this year. In a press release announcing the 2008 member and trustee candidates, the Breeders’ Cup said Finley was running for reelection to the large board—even though he was voted off last year.

Here are the 21 individuals running for the 12 spots on the board of members and trustees:

Helen Alexander–Middlebrook Farm
Doug Cauthen–WinStar Farm
Robert N. Clay–Three Chimneys Farm
Robert Cromartie–Briggs & Cromartie Bloodstock Agency
Bill Farish, Jr.–Lane’s End Farm
Terrence P. Finley–West Point Thoroughbreds, Inc.
Bobby Flay —B Flay Thoroughbreds, Inc.
Lucy Young Hamilton–Overbrook Farm
Arnold Kirkpatrick–Kirkpatrick & Co.
Allan G. Lavin, Jr. –Longfield Farm
James McAlpine–McAlpine Thoroughbreds
Leverett S. Miller –T-Square Stud
Maria Niarchos-Gouaze–Poseidon Services Inc.
Charles Nuckols III–Nuckols Farm
Bill Oppenheim–Bloodstock consultant
Don M. Robinson–Winter Quarter Farm
J.V. Shields, Jr. –Shields & Company
Mark Taylor–Taylor Made Farm
Ric Waldman–Overbrook Farm
Charlotte Weber–Live Oak Stud
Barry Weisbord –Media Vista

Editor’s note: The original version of this article incorrected stated Leverett Miller owns and operates T-Square Stud in Florida. Miller sold the major portion of that farm in December 2006.

Copyright ©2008, The Paulick Report

Will they or won’t they?

That’s the big question I have about a group of U.S. Congressmen who have nothing else to do (health care, foreclosure crisis, soaring gas prices, Iraq war?) but put the horse racing industry in the crosshairs during a hearing on Capitol Hill Thursday entitled “Breeding Drugs and Breakdowns: The State of Thoroughbred Horseracing and the Welfare of the Thoroughbred.”

The Paulick Report will attend the hearing and “live blog” the event, which begins at 10 a.m. EDT.

Will the U.S. House of Representatives’ subcommittee on commerce trade and consumer protection recommend federal intervention in the form of national oversight or national horse racing authority of some type? Led by Arizona senator and current presidential candidate John McCain, Congress took on boxing in 1996 and created the Professional Boxing Safety Act when it determined that the individual state commissions regulating the sport were not acting in the best interests of the fighters to protect their safety and financial well being. They amended that act four years later with the Muhammad Ali Boxing Reform Act.

Cleaning up boxing wasn’t easy, nor have the federal reforms been wholly effective. Additional hearings on the sport have been held by the same subcommittee that is looking into racing, but there continue to be problems with enforcement of the federal boxing laws.

There is a precedent and a similarity between the two sports. Boxing and horse racing in this country are both regulated by state commissions, many of them with distinct rules and regulations. Both sports can occasionally be brutal, tragic and scandalous. Both boxing and racing have participants who can be exploited and whose health and welfare have been called into question by a sizable percentage of the public.

The federal government does regulate gambling on horse racing with the Wire Act and Interstate Horse Racing Act, but it does not delve into issues of the health, welfare and safety of its human or equine participants — at least not yet.

This same subcommittee of the House’s committee on energy and commerce has called in racing participants to testify on previous occasions: first, when the Jockeys’ Guild was being run amok by its leaders, and riders had limited catastrophic injury insurance; and second, earlier this year, when the use of anabolic steroids in several sports were questioned.

Based on who is providing testimony on Thursday, you can be assured that racing will come off as a divided industry, and one that is not able to make across-the-board reforms because of the multitude of state regulatory bodies. Another recurring theme you can expect is that the National Thoroughbred Racing Association and its president, Alex Waldrop, cannot speak on behalf of the industry in the same fashion that the commissioners of the National Basketball Association, National Football League and other major league sports do. In fact, according to sources, the NTRA had to fight with the subcommittee’s ranking Republican, Ed Whitfield of Kentucky, to even get Waldrop onto the witness list. Apparently, Whitfield and others were not happy with some backtracking Waldrop did after testifying to Congress about medication rules in February when he made comments that a number of NTRA members privately told him later they would not support.

The hearings have been called because Whitfield, more than anyone else in Congress, has been convinced by his wife, Connie (a member of the Kentucky Horse Racing Authority), among others, that racing has a drug problem that may take federal intervention to resolve. Whitfield’s poster child is Eight Belles, who died a tragic death after running a gallant second in the Kentucky Derby. Eight Belles did not race on steroids and was trained by Larry Jones, someone with a squeaky-clean reputation on medication use.

This showdown at Gucci Gulch will be an interesting display. During the first and more lively panel, horsemen Arthur Hancock, Jess Jackson and Jack Van Berg can be expected to say that the industry is badly in need of reform and isn’t doing enough to protect horses and people from “drugs and thugs.” Others, like California Horse Racing Board chairman Richard Shapiro and Jockey Club president Allen Marzelli, will point to changes they are trying to enact. The Jockey Club made a preemptive strike Tuesday by announcing its recommendations to ban steroids and toe grabs on racing plates and regulate whips.

Congressmen will pointedly ask what authority the Jockey Club or the California board has to enact the recommended changes in all racing states. Rick Dutrow, who trained Big Brown with permitted steroids to win the Kentucky Derby and has a long list of medication violations, is scheduled to be the closing act to the first panel and is the wild card in that group. Dutrow might say anything, although he has been coached by a p.r. adviser to defer as many questions as possible to others (and to not call any of the Congressmen “babe,” as he is wont to do with most people).

During the second panel, a number of veterinarians will send House members scrambling for NoDoz pills with statistical analysis of racing injuries and tedious descriptions of new surgical procedures. The two-act play will come to a resounding crescendo if Waldrop is brought in last, allowing Whitfield and others to make him horse racing’s whipping boy.

Powerful Thoroughbred people are betting their bottom dollar that no significant action will follow in Congress, and that the industry will be able to hide under the skirts of its longtime ally in Washington, Republican Sen. Mitch McConnell.

Depending on what happens in November’s election, however, McConnell may not have enough control to derail federal action. Thursday’s hearing may be just the tip of the iceberg.

By Ray Paulick