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