Cuomo’s Coup: NYRA’s Future Now in State Hands

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New York Gov. Andrew Cuomo New York Gov. Andrew Cuomo

The swiftness and finality of Gov. Andrew Cuomo’s takeover of the New York Racing Association yesterday was nothing less than stunning. After decades of publicly-waged warfare between the privately run, not-for-profit racing association and New York’s various political entities, Cuomo planned and executed to perfection a bloodless coup d’etat, with not a single shot fired.

“We can do this one of two ways,” Cuomo is said to have told NYRA’s board of directors in a recent face-to-face meeting. “My way, or through a very drawn-out, public battle in which everything you have done will be investigated.”

Board members chose the first option, laying down their arms quietly, and giving control to the Democrat first-term governor whose father, former Gov. Mario Cuomo, was unable to do in three terms in office what the son now has accomplished in a matter of months.

It will take legislation to finalize the deal, but when the smoke clears, Cuomo will control the newly configured board of directors that runs Aqueduct, Belmont Park, and Saratoga. He will appoint eight board members, including the chairman, while the current NYRA board will select five individuals. The Senate and Assembly each have two board seats. That’s 12 of 17 positions appointed by politicians. Under the current board structure, less than half of the 25 directors are political appointees.

Why did NYRA and its current board chairman, Steve Duncker, capitulate so easily?  When NYRA was threatened with the loss of the New York racing franchise to rival organizations during a renewal process while Republican George Pataki was governor in 2006, it waged a very tough, bitter fight. There were threats that names of races like the Belmont Stakes, Whitney, Woodward, and Jockey Club Gold Cup would not be transferred should NYRA lose the franchise. Ultimately, NYRA won renewal by agreeing to give up its claim that it, not the state of New York, owned the land on which the tracks were built.

One theory for yesterday’s surrender – one I don’t believe – is the potential existence of some unreported “smoking emails” that would have brought the takeout scandal closer to the board. It was the discovery last December that NYRA had been overcharging its customers on certain bets for 15 months that started this latest battle between the racing association and state politicians. The scandal took $8 million out of the pockets of horseplayers and cost former NYRA CEO Charlie Hayward and general counsel Patrick Kehoe their jobs. A preliminary report published by the politically-appointed New York State Racing and Wagering Board suggested Hayward and Kehoe either knew they were overcharging horseplayers or should have known.

But Hayward and Kehoe weren’t the only ones who blew it, who failed to lower takeout on certain bets when a racing law affecting takeout expired in September 2010. There was the New York State Racing and Wagering Board and its chairman, former state senator John Sabini, whose department is charged with regulating such issues and clearly failed to do its job. There is also the Franchise Oversight Board, another state body that could have but didn’t catch the change in the law.

It seems hard to blame NYRA’s own board of directors for the failure, although one board member at the time of the change in law is a self-professed racing law expert named Bennett Liebman. According to his biography, Liebman, who left the NYRA board in June 2011 to become Cuomo’s Deputy Secretary for Gaming and Racing, “established the country’s first full-time racing and gaming law program that focuses on the study of law and policy as it relates to various aspects of gaming, including horse racing.” One would think Liebman should have been aware of changes in racing law and how it would affect NYRA.

Since joining the Cuomo administration, however, Liebman has developed amnesia on the takeout issue as it relates to racing law but has become the governor’s chief attack dog against NYRA.

As a result of the takeout error that Hayward, Kehoe, Sabini, Liebman and others made, along with other issues involving racehorse safety and backstretch living conditions, Cuomo cut off the cash spigot from the Aqueduct casino VLTs that only started six months earlier.

Cuomo’s takeover offer not only promised to turn the cash flow back on, but to provide future revenue to racing from other forms of gambling that almost certainly will be coming to New York. That is the more plausible reason NYRA’s directors agreed to give up control so easily. They put racing first, and their own self-interest second.

The reorganization of the NYRA board is intended to last only three years, after which it is to revert back to being privately run. Anyone who actually believes Cuomo or his successor will keep his word rather than extend the deal to maintain public control is naïve, at best.

Like any good politician, Cuomo talks a good game, and says this reorganization is being done for the benefit of the horseplayers who entrust their faith in racing, along with the taxpayers, and the horses themselves. Nowhere in his statement did Cuomo display any concern for horse owners or those employed in New York’s horse industry.

More than a few people believe Cuomo is creating something akin to the New York off-track betting system that has been a model for how not to do things: a structure that allows political hacks to give jobs to friends and family and eventually create a bloated bureaucracy that is doomed to failure.

Let’s hope that is not the case. As part of yesterday’s stunning developments, it was announced a nationwide search would soon begin for a new CEO to run NYRA. By August, a new NYRA board will be in place.

There is serious work to be done. Capital improvements are desperately required in the stable areas of the NYRA tracks. Belmont Park is an aging facility that could use an injection of cash for modernization. A bid to host a future Breeders’ Cup needs polishing. NYRA’s tote contract is up for renewal. A plan by Hayward to form an industry-owned ADW company was in the works at the time he was terminated. And then there is the matter of hosting upwards of 100,000 people at the Belmont Stakes in a couple of weeks.

Cuomo placed a big bet that he is up to the task of running horse racing in the state of New York. Let’s just hope the industry doesn’t go bust under his watch.

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  • Sal Carcia

    It disheartens me to see Bennett Liebman singled out so negatively in this column. Bennett has been nothing but a very positive influence in this game. His gaming and racing news website was a precursor to this website.

    It is symbolic to what ails this game. It can’t unite itself on most issues. Ray, forgive me if I am wrong, but I don’t remember you defending Charles Hayward very much here either. The industry needed to come to his defense right there and then in order to curtail this coup.

    As I saw it, most everyone in this industry sat back a let Charles Hayward be politically assisinated. If we could not make a stand there, then where does this industry stand up for itself?

  • JohnDavey

    Michael Del Giudice, closely aligned to the Cuomo family
    (Mario Cuomo’s Chief of Staff) and Speaker Silvers appointment to the Board of NYRA where he has been Vice
    Chairman since 2005, orchestrated the bankruptcy of NYRA in 2006 and secured a
    $200 million bailout by the State, a new 25 year franchise and an additional
    $1.0 billion in VLT revenue from the Aqueduct casino over the next 20 years,
    money which would otherwise go to the State’s education fund.

    http://online.wsj.com/article/

    Yesterday’s move by the Governor smacks of a time-honored
    tactic of federal and state politics to throw a tarp over the toxic dump,
    invoke higher authority, freeze the situation from the prying media, and work
    things out with the lights off.

    A major scandal, especially one involving an old family
    friend, and old-style machine pols, while on the Governors watch and he didn’t
    clean it up and distance himself, could be fatal for a presidential bid,
    especially with his Mr. Clean image. He may have to gore an ox or two before
    this is over.

    Ray, it is more that fair to question whether Bennett Liebman knew that NYRA was being corrupt in its dealings. After all he had been a Board member for several years and an expert in racing law.  At the end of the day the whole Board of NYRA, including Liebman, Hayward and Kehoe have to accept responsibility for this mess which once again has tarnished the image of racing not only in New York but throughtout the nation.

    JD

  • voiceofreason

    “My way, or through a very drawn-out, public battle in which everything you have done will be investigated.”

    Well, um, heck no. ANYTHING but look at our past. PLEASE don’t investigate what we’ve done to the sport.

    Question folks: Don’t we deserve a fair accounting of what’s happened here? Talk about paying a price for silence…

  • Francis Bush

    Good luck. If Cuomo runs the NYRA like everything else in New York, expect the worst outcome. I can’t imagine the OTB returning with a satisfactory finish. Here we go again.

  • Hrprfan

    Gov. Andrew Cuomo made the right move. NYRA doesn’t deserve the privilege
    of operating New York Racing.

    The serious work such as capital improvements to stable areas, Belmont’s
    modernization, Breeders’ Cup bid polishing and an industry-owned ADW company
    are long, long, long overdue.

  • voiceofreason

     NYRA couldn’t win the bid for the Breeders Cup – because it would mean they’d have to clean the bathrooms at Belmont… and you KNOW that ain’t happening.

  • Watcher

    When was the last time a liberal democrat argued against the state taking more control over private enterprise?

  • Ace

    Ray, I think you are for the (prior) NYRA idiocracy, thinking the new idiots will be worse?  I’ll take my chances.  The only thing not to come out in the wash would be the ousting of the so called “journalist” Steve Crist from the Racing Form.
    He is more guilty than his pal who got thrown under the bus-because he knew better than to withhold the information the public had a right to know.  If he had an ounce of fairness in him he would resign now.

  • RN

    John
    I googled Michael Del Giudice (it appears you got the spelling of his last name incorrect) and Andrew Cuomo.  This guy is clearly the consummate insider in New York Politics.  This is the most recent article which was published on May 4th.  http://www.buffalonews.com/spo
    However there are lots of other articles on this guy.
    I agree with you that this takeover by the Governor is an attempt at a whitewash.  I wonder what will now happen with the current investigations.
    Rose

  • Don Reed

    Well, that’s ironic.  The State of New York staged the coup d’etat that many people had resolutely predicted would have been executed – just as brutally – by the most obvious entities, the Trojan Horse casinos.

    NYRA’s fate, although they didn’t realize it, was sealed the minute the New York state voters ceased electing ineffectual/self-destructive governors. 

    As long as the ham-handed Pataki, the raging idiot egotist Spitzer & the permanently distracted Patterson were in charge, you could write your own ticket. 

    The only path back to the good old days now is the unlikely devekopment of Bill Clinton getting tired of praising himself at the podium of Manhattan charity balls and launching a challenge to Cuomo’s re-election campaign (can disbarred lawyers run for governor?).

    The only silver lining would be the long-awaited arrival of a legitimate reason to forgive him for Monica Lewinsky.

  • Don Reed

    I can’t swear to it, but I believe that you’d have to go back to the Copperheads during the American Civil War.  And even then, although they were Democrats, our present-day of “liberal” would be meaningless in that context.

  • Don Reed

    “The scandal took $8 million out of the pockets of horseplayers.”

    Yes it did.  But where is the factual statistic of how much was RETURNED by NYRA to the smart bettors who retained their physical losing tickets, and the NYRA Rewards customers who were eventually reimbursed, electronically?

    And where is the actual financial number – the actual expense – created when NYRA had to pay out (salaries, overtime) to set up the retrival process (accounting for who got screwed and how much they were to be reimbursed)? 

    These political articles are valuable, but without the financial facts, they are exceptionally incomplete. 

    *****

    I’m looking for a significant number of NYRA non-board owners & ex-board of directors owners to whom this latest development is the last straw, leading to dispersal sales. 

    If you’re independently wealthy, and these current  events are reminding you of the crazy stuff that had to be tolerated while you were working in your 20s-30s-40s (prior to retiring, or still going on today), how long would you hang around before deciding that the chaos deja vu isn’t worth the benefits of winning races?

  • RN

    Ray, I agree that we should ask what Bennett Liebman knows
    about the corrupt take out scandal. 

    Liebman is a lawyer (former Executive
    Director of the Government Law Center, Albany Law School), an
    expert on racing law and was a NYRA Board member for years until he left last
    July 2011 to join the Cuomo Administration as the Governors horse racing guy:

    http://www.governor.ny.gov/pre

    Liebman appeared with the
    Governor yesterday when he announced this latest NYRA deal.  He should be asked what he knew and if he did
    not know, why not.  Surely he is either
    guilty of knowing and choosing to do nothing or guilty of being totally incompetent.  Either way he should immediately resign from
    the Cuomo Administration.

    Charlie Hayward and Patrick Kehoe
    should not be the fall guys for this bunch. 
    They are both fools if they allow this to happen to them.

  • http://Bellwether4u.com James Staples

    lets just hope Gov. Cuomo isn’t speaking with a FORK TOUNGE…I really want to believe hes being STRAIGHT UP…we will start finding out JUNE 9th…stand by… 

  • Sal Carcia

    I couldn’t think of a worse thing to happen horseracing. As a group we are imploding here. Half of the government officials involved who were involved with NYRA horseracing knew about the law. Maybe, you might want to call for their resignations before you call for self-inflicted damage to horseracing.

  • http://Bellwether4u.com James Staples

    a blind man/woman can see all the three race tracks are dumps…PERIOD…NOW GET BUSY!!!…PLEASE…

  • Rufusous

    Just a bit of irony, don’t you think? Imagine, a New York politician accusing others of being corrupt, and promising to clean up somebody else’s house, when he can’t even clean his own.

  • Tklptch

    Donny boy, I take it you don’t like Eliot so much.

    But let’s give the Gov the benefit of the doubt here. He has made a strong move. Many don’t like it because they let there political philosophy cloud there view. Would it have been better for him to just spew rhetoric? Me thinks not! 

  • Don Reed

    All together – although I’m uncomfortable with the idea of trusting Cuomo – it was better to torpedo the old NYRA board than to continue to issue repeated ineffectual warnings (“For The 39th Time, We Really Mean It!”) that serious consequences would ensue if things continued to get screwed up.

    But who replaces them?  What’s to stop the appointment of people who know nothing about racing to NYRA’s vacated positions?

    What a wonderful birthday present it was, sitting in sunny San Diego in the month of March, reading about the Day One events of the Elliot Spitzer career implosion.  I guess that answers your question. 

  • ktq1

    They couldn’t even get them to work for BB’s TC run!  What a nightmare day that was…100,000+ drunk fans on 100 degree day with no bathrooms..

  • Tmbald

     Look – we all know where this is headed – Aqu will be shuttered in less than two years.  The political hacks will divvy up the existing pie to pad their pockets and racing in NY will suffer.  It’s all going down the drain…….

  • Dave Parker

    Thank you for this informative article  I never thought that NYRA was corrupt — never.  I always thought they were well-meaning.  It was reported on the other website that the Governor wanted to put a convention center in at Aqueduct which NYRA did not want to do.  I’m sorry this happened, sad about what has happened to NYRA.  How can the horseman’s and breeder’s groups not even have a vote ?  The other irony is how hard horse folks fought for slots revenue at Aqueduct, only to have this happen.  I guess it’s too late to rename “Fight for VLT’s.”

  • Lost In The Fog

    I know little about the inner workings of NY politics so I have nothing to add to that part of the discussion.  But if you are one of those who opposes the idea of a state takeover of NYRA then you have Hayward, Kehoe and (indirectly) Steve Crist to blame for it.  Hayward and probably Kehoe for knowingly defrauding bettors out of more than $8M, and Crist for his utter failure as a journalist in withholding vital information from his readers.  Without the takeout scandal none of this would be happening.

    And finally, while Ray feels otherwise, I wouldn’t be the least bit surprised if the reason the NYRA board capitulated is because there is indeed a smoking gun that implicates them in the takeout scandal and perhaps even other dastardly deeds.  

  • Stanley inman

    Right on target,
    You see what others ignore
    because you’re not selfishly putting your own interest above the sport.
    You have to diagnose what’s makin you sick FIRST-
    Like a smoker who won’t quit
    Worrying about what follows NYRA
    Is just an excuse to do what’s in your best interest.

  • StopTheInsanity

    If you are correct that the reason NYRA’s board of directors gave up control so easily is because “they put racing first, and their own self-interest second”, it will mark the first time in the 40 years since the Jockey Club seized control of NYRA that a capitulation of self-interest to the interests of the Sport and Industry has occurred.  As in the first time EVER.  I simply must believe, given the nature of the Boss Tweeds who have dedicated their lives and legacies to the control of New York Racing, that major subsequent issues and allegations existed that would have thrown NYRA board members and JC stewards into legal trumoi. Given what they’ve done to New York racing in the 40 years since they siezed control, I applaud Governor Cuomo’s takeover, and look forward to new management’s installation.
         I wonder if all the best boxes at Saratoga will still be granted to the Jockey Club and it’s members?
      

  • Bill Liberty

    It seems funny about the 8.1 million overcharge.  How much did the state get in their share of pari-mutuel taxes. By their receiving the tax money on the overcharge aren’t they as guilty as NYRA because they knew about the expiration of the take-out percentage, or is it just an oversight by the state while it is gross negligence by NYRA.
    The only way to ensure that the contract is honored at expiration is the media keeping this in the public’s eye.

    Bill Liberty

  • http://Bellwether4u.com James Staples

    Charles had the calling card too…but like the rest of em he blew it…@ the very least he could take a second of his time to LISTEN…by by Charlie… 

  • http://Bellwether4u.com James Staples

    they will not beat this dead HORSE (“other dastardly deeds”)…Charles & his crowd have had one foot out the door for a long time…now its by by choo choo!!!…i’ll bet my bread on the GOV!!!…good luck to em…

  • Bingo_The_Chimp

    Bennett “Bozo” Liebman? Ha-ha-ha-Ha-ha-ha-Ha-ha-ha-Ha-ha-ha-Ha-ha-ha-Ahhhhhhhhh-ha-ha-ha-haha-haha-haha-haha-haha-ha! Hooooo-ho-ho-hoooooooooo!

  • Barry Irwin

    The worst part about this outcome is that NYRA was entrusted to run racing in the biggest market in the nation and, by their actions, they allowed the politicians to run them out of town because of their ineptitude. If New York racing goes down the tubes, all racing in North America could follow. This could turn out to be the worst event in the modern history of our industry. NYRA was given so many chances and they failed miserably. By the time the Governor is finished with NYRA, the casino interests will be firmly in charge, their money will not go to horse racing and our game will be reduced to a side show. NYRA has only its self to blame. What a complete travesty. It is sickening.

  • Don Reed

    In the context of countless idiots trying to get in on the Facebook IPO gold rush, and getting burned, once again, racing secures its economic Hall of Fame niche as An Accounting Rounding Error.

  • Cjjoy

    Too many people were aware of this takeout scandal for it not to be disclosed. How come ? Maybe Cuomo also had knowledge of it in a roundabout way that made him somewhat accountable . I would look at Cuomo’s actions from now on through the prisim of the Presidency .

  • Figless

    I concur that NYRA was not corrupt but rather incompetant.

    This entity was investigated more than any entity in history, been a political whipping boy for decades, and nothing substantial was uncovered until this most recent debacle, which I truly believe Charlie intended to rectify but was waiting for a more appropriated political moment to negotiate. It was a huge mistake and it cost him his position, but it should not have cost NYRA the franchise.

    Just because you may believe NYRA was incompetant does not mean this takeover is a postive, be careful what you wish for.

    I would have preferred another entity, led by horsemen, emerged to run the franchise during the 10 year bidding process, but every single entity that bid had significant issues so NYRA was granted the renewal, lesser of many evils.

    This was inevitable the minute the State was transferred the deeds to the land, game over, goodbye Big A and probably Belmont as well. And before you applaud the demise of the Big A remember the winter meet results in a net profit to the purse account, it supplement the Saratoga purses.

    Its a complicated business model and there will be unintended consequences to shortening the racing seson including bankrupting many of the everday trainers and owners resulting in less competive racing.

  • Ridindirty3

    It will be very, very hard to find ANYONE who will do a poorer job than the NYRA! Give somebody else a shot!

  • Don Reed

    It would take Governor Cuomo, were he so minded, 15 minutes to reasemble the old OTB personnel, with which he could (certainly not intentionally) destroy New York racing in less than 30 days. 

  • Ridindirty3

    Yeah…Right! THAT’ll get traction! Hey! Gov.! Let’s resuscitate OTB….the ONLY bookie joint to EVER handle a billion a year & go broke! Although I DO love a good Rent/Employee scam!

  • Don Reed

    Given the track record of the last forty years, we can laugh about it without the slightest assurance that history will not repeat itself – no matter how gruesome the results of the last cycle of “genius.”

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