by | 11.17.2010 | 12:46am

Ray Paulick is live blogging the Task Force on the Future of Horse Racing's subcommittee on integrity of racing and pari-mutuel activities from the offices of the Kentucky Horse Racing Commission Monday afternoon, beginning at 1 p.m.

Edward (Ned) Bonnie, a member of the racing commission, is chairing the meeting, which is called to order at 1 p.m. “Hopefully we are going to be able to move this peanut down the sidewalk and take some action, however modest, by the end of this meeting.”

1:05 p.m. … Hold your horses, Ned! There are six members of the subcommittee and four are needed for a quorum to take any action, acccording to racing commission executive director  LIsa Underwood. Unfortunately, there are only three “voting members” of the task force on hand at the beginning of the meeting. Does that say anything about the task force's commitment to integrity? Hmmmmmmm.

1:10 p.m. …Sounds like Ned Bonnie may be filibustering till someone else shows up to give this group a quorum. Bonnie is talking about various white papers he has written on integrity issues in Kentucky. Earth to Ned: No one with authority has acted on those white papers. Try a different color.

Bonnie states that Keeneland employs the Thoroughbred Racing Protective Bureau (TRPB), the so-called “security arm” of the Thoroughbred Racing Associations of North America (not to be confused with the National Thoroughbred Racing Association). However, it is revealed Turfway Park, which is owned in part by Keeneland, does not use the TRPB. Is no one on this task force subcommittee curious why Keeneland doesn't use TRPB at Turfway?

Bonnie says Kentucky's racing regulators have been understaffed for many years in the area of security. “Feet on the ground is the most effective way to produce security on the backside,” he says. Bonnie says New York has 12 investigators. When vets show up at the back gate at a New York track, Bonnie says, the security chief for the New York State Racing and Wagering Board assigns an investigator to ride with them. New York's security arm recommends that each state have a good security staff, well paid, but that the industry also needs a group, not unlike the
Big Event Team that provides stable area security at major events. “If we are going to have the integrity the industry accepts the need for, then we are going to have to have the tools to get that done,” Bonnie says.

1:20 p.m. … First up is Isidore Sobkowski, an entrepreneur who said he has developed a system for wagering security in conjunction with the Association of Racing Commissioners International Integrity Services. Sobkowski said he used to nail insider traders on Wall Street and was an interim consultant to the NTRA on wagering integrity back when the organization hoped to have an Office of Wagering Security. Sobkowski told Bonnie he spent two years trying to sell his pari-mutuel security system to the NTRA, but it “became clear” they weren't going to buy it. As of Jan. 1, 2009, Sobkowski said, totes will be subject to a rule in New York State for “independent monitoring.” He said California, Oregon and other states will follow suit. Totes may be able to pass on costs TO THE CUSTOMER (see 2:15 p.m. update), Sobkowski added.

Izzy (easier to type than his full name) has some proprietary software called MonitorPlus that he said detects “potentially inappropriate activity in the transactional stream and security database.”

1:25 p.m. … Bad guys who want to break into the tote systems are getting smarter, Izzy says. Reminds me of “when guns are outlawed only outlaws will have guns.”    He is offering a “turn-key solution. ” Izzy says, “Plug it in, it works, take the plug out, it stops working.”

1:30 p.m. … Still no quorum for this meeting.

1:35 p.m. … Sobkowski and RCI president Ed Martin came up with the idea of RCI Integrity Services at a diner outside of Saratoga. Now he is filibustering, talking about “artificial intelligence” and all the people who were too stupid to buy his services until now. 

1:40 p.m. ,,, Denny Oelschluger (an associate of Izzy's … can't they hire someone with an easy name to type?) talks about some of the actual results the MonitorPlus system has detected. Examples: an advance deposit wagering account with computer assisted wagearing that has a rate of return of 1.5 on all bets (the normal is less than 0.80); in looking at 862 races (5,800 wagering pools, over six days), Monitor Plus detected multiple instances of cancel delays (bets canceled after the close of wagering). The canceled bets are losers, suggesting a similar pattern to past post wagering on winning bets; win pool odds are being manipulated by canceled transactions. The system also picks up suspicious wagering on “fixed” or “boat” races, Denny says.

 1:50 p.m. … “How do we stop this?” Bonnie asks. I believe that's why we are here, sir. I assume he is talking about the illegal wagering, but maybe he is talking about the presentation of MonitorPlus (see below).

2:00 p.m. …  “We are not going to serve dinner here tonight,” Bonnie says. In other words, isn't 45 minutes enough time to deal with this issue of integrity? Please sir, just a little more time, Izzy begs after that remark. To her credit, Lisa Underwood steps in to say that it would be a good idea if the system could be explained further for the members of the task force subcommittee.

2:05 p.m. … It just occurred to me that this MonitorPlus system does not have the stamp of approval of the Jockey Club (no Jockey Club officials are at the meeting), which in my opinion is going to severely impact its chances of approval. Those Jockey Club tentacles have a long reach.

2:08 p.m. … Izzy does a quick “how the system works” presentation. It includes a national database that analyzes wagers everywhere. Bonnie questions whether a national data base has jurisdiction on account wagering systems based off-shore in places like St. Kitts (where many of the rebate shops are located).  Izzy says on Oct. 18 those off-shores are going to be “read the riot act” in a meeting in Oregon. Not sure why. Again, it looks like this could meander down the path of “lack of national authority.” Izzy says national legislation would help but then adds that the industry doesn't seem to want that. 

2:10 p.m. … “Clustering” is explained by Izzy as unusual things that happen in a betting stream. Once clusters are found, they are analyzed with such things as a SNA or social network analysis that looks at who is involved (jockeys, trainers, owners), what is their record, who are their associates …a who, what, when, and maybe a why the unusual cluster of betting activity occurred. 

2:15 p.m. … Customers will be paid by the month; fees will be assessed by how much the MonitorPlus system is used, and its price is based on the handle. Mike Maloney, the horseplayer on the task force, asks how costs are passed on to customers. Industrywide it would cost $6 million, Izzy says, with the increase to be added to takeout (approximately .0004% of handle, based on $15 billion in national handle). Maloney says takeout is too high already, but that the small additional amount doesn't bother him. A lot cheaper than the $50 million IBM wanted to charge a few years ago, Izzy says.

2:25 p.m. … Frank Kling, a member of the Kentucky Horse Racing Authority talks about the work his committee had done regarding problems related to the tote system before Kentucky Gov. Steve Beshear disbanded the authority and replaced it with the racing commission and mostly filled it with people who helped get him elected. Sounds like any good work that committee may have done will soon be forgotten.

2:35 p.m. … Horseplayer Mike ($10 million in bets a year) Maloney takes the floor. “I'll rely on my 30 years of hard knocks at the racetrack to help expalin this.” Maloney refers to a white paper he wrote for the commission and says a year ago no one was talking about wagering integrity. “We're at the very beginning of this process,” Maloney says. “This is an opportunity for Kentucky to take the lead. No one has really stepped forward.” Maloney believes that increased wagering security will lead to greater confidence among bettors, who may bet more in the future. “Our wagering system is flawed,” he says. “I hope everyone on this task force agrees with that. … Any reasonable person would have to agree with that.” Maloney sees problems with past posting (accidental, part of a sophisticated plan, larceny, incompetence, human error). There are delayed cancellations. “When they are used to take advantage at the racetrack, it's basically stealing,” he says. “Since we don't have a national authority, every bettor, every participant depends on the state racing commission to protect their interests. Today we fall far short of that mark, and it's in the hands of the racing commission. The racing commission is the protector of the bettor's rights.”

“Tracks don't record (in minutes and seconds) when their races begin,” Maloney says. “Betting sites are allowed to participate in our wagering pools without proper oversight. In order to protect all bettors' rights, no one should be allowed to participate in any Kentucky racing pool unless they agree to a certain level of oversight.”

2:45 p.m. … Maloney is stunned that no American track (until recently) records the actual start time of a race, in order to compare it to when the betting is cut off, then says an average group of eighth graders would make that as a requirement if they were to set basic rules for racing. Tote companies do record when the betting stops, Maloney said. Kling said that Nick Nicholson of Keeneland added the start time to television monitors for Keeneland's races. The times between tote companies and racetracks are not currently synchronized. “Lacking a national body of oversight I don't know where we start on this,” Maloney says. “How hard is it to do that?” Maloney asks. “You'd think we could do that with a conference call in an hour. We're not asking to reinvent the wheel or split the atom.”

2:50 (at least according to my clock) p.m. … Maloney is still stuck on time. He relates how Sunday at Keeneland a clock on Keeneland's monitor showing the time in hours/minutes/seconds and a monitor with a Belmont Park race showing hours/minutes/seconds each had a different time of day. He relates to how the Nevada Gaming Control Board closely monitors the game of Keno and how that regulatory agency would crack down on the kinds of problems that horse racing has. “In racing we know we have these problems,” he said, “we just let it go on. Nobody pays a fine, nobody loses their license. Who takes the brunt of that? The bettor. And the game of racing. The industry is hurting itself by not policing itself.”

2:58 p.m. … Maloney still going after them, saying that past-posting incidents only come up when they are discovered by the press. The tracks and the tote companies won't admit it until they have to, he says. It's up to the commissions he repeats. His solutions: 1) “invest in technology to make the longest wagering cycle no more than 15 seconds” (he refers to a five-year old study done in the wake of the 2002 Pick Six scandal at the Breeders' Cup that called for the 15-second cycle, and said it hasn't been done yet); 2) “use technology to directly link the pressing of the starter's button to the closing of the wagering system” (currently stewards push a button to close betting); 3) “require tracks to record when their races start. I would like to see that be in the regulations”; 4) “require all tracks and tote companies to synch their time systems to one industry standard.” Maloney said he is “so encouraged” after years of banging his head against the wall on these issues.

3:05 p.m. … Bonnie looks a bit deflated when he says the subcommittee can't take action on anything today for lack of a quorum.

3:10 p,m. … Bonnie asks Maloney why something hasn't been done yet. “The industry lacks oversight,” Maloney tells him. Duh. 

3:13 p.m. … Owner/breeder Gary Biszantz, a member of the subcommittee speaks up. “I'm not sure why I'm here today,” he says, then goes on to tell the story of how he told officials at the New York Racing Association five years ago that there was past posting going on and they said he was crazy. Biszantz pushes for a non-technological solultion. Close the pools at post time, before the horses are loaded into the gate, he says. “As a bettor, I'd have absolutely no problem with that,” Maloney said. “But the tracks wouldn't go for that,” Biszantz answers back, then goes on about all the problems the industry faces because of the lack of oversight at nearly every level. “It's total chaos,” Biszantz emphasizes.

3:18 p.m. … Bonnie calls for a break. Maybe he can round up another committee member and get a quorum.

3:30 p.m. … Frank Fabian and Curtis Linnell from TRPB are introduced. Fabian, a former G-man who worked in the terrorism division of the FBI, is a smooth talker. He applauded the TRPB's own wagering analysis program that the TRA funded to the tune of $600,000 and eventually fell into the lap of the Jockey Club. “For two years now, we have been doing quite a bit,” he told Maloney. “We've been quite successful,” Fabian said, adding the TRPB has the full support of all the Kentucky racetracks. Fabian said wagering anomalies have been identified and “reports have been filed” with the racetracks where those anomalies occurred. Maloney doesn't look very convinced, and I am reminded of the reaction of one industry leader to Fabian's similar presentation at a Jockey Club Round Table a couple of years ago in Saratoga Springs, N.Y. “That was total b.s.” this person said to me after Fabian's Round Table presentation. 

“I think TRPB is doing all it can to bring the engagement of wagering integrity in the environment we are in now,” Fabian told the commission subcommittee. Fabian said the TRPB has analyzed off-shore wagering activities and is putting these betting shops through a due diligence process, but would not comment when questioned on whether or not anything found in that analysis was “alarming.” Malone presses Fabian on whether or not RGS (a major rebate shop) has agreed to a due diligence process. Fabian employs an artful dodge, then introduces Linnell.

3:45 p,m. … Linnell gives a history lesson about how the NTRA blew through $3 million after the Pick Six scandal of 2002 without solving the wagering problems it was charged to examine.

3:50 p.m. … Linnell focuses his report on “stop betting,” showing the varous ways and times betting can be stopped. As a representatiive of the racetracks (it should be remembered), he reminds the commission that betting should be left open as long as possible. A nifty bar graph on the close of betting shows that 23% of the entire win pool of a race is wagered between the “off time” when a race is scheduled to go  and the final close. Linnell calls it “counterproductive” to close wagering pools early because “betting device technology is improving.”

4:00 p.m. … During a Q&A session on some of Linnell's presentation, Biszantz complains that we are listening too much to the tote companies instead of doing the right thing. Malone shakes his head in agreement. Linnell returns to his presentation and focuses on factors that slow down the posting of final odds (which infuriate horse players who see the odds change midway through a race). One factor is the cancel-delay — the time that bets can be cancelled after betting has closed. Cancel delays are sometimes allowed for pari-mutuel clerks to make. Double hops from betting hub to betting hub can also slow odds, Linnell said, as can tracks who are not on-board an “almost final” tote update. (It's all too complicated, which is probably the point of his presentation.)

4:05 p.m. The TRPB is investigating past-post incidents, Linnell said, using its wagering analysis tools. Those investigations are launched as a result of multiple points of contact, whether from tracks, commissions, major horseplayers and even England's BetFair betting exchange, which takes bets on U.S. races. Linnell then explained several reasons for how past-post betting can occur, including human error or technology and hardware or software failure. Linnell is losing me again, talking about master systems, slave systems, and clones. It must mean something to someone.

The committee then discusses mistakes by tote companies that allow past posting and how they should be penalized in some way if the tote companies make a mistake similar to the kind that occurred several months ago when past-post wagering took place at Tampa Bay Downs on a race at Philadelphia Park that had already been run. “Every bet made was a winning bet!” Linnell joked.

4:20 p.m. … Linnell gave his solutions to the problems of the stop-betting issue: conduct daily testing of stop betting system; have a back-up to the stewards/judges function that currently stops betting; have a second stop-betting command; get rid of all cancel delays; and  have tote time recorded on the video feed from every track.

4:25 p.m. … Maloney wants more accountability and transparency regarding the public disclosure of past-posting incidents and their causes. “I see this as a big problem with the confidence of bettors,” he said. Linnell didn't disagree, laying out a series of actions that TRPB recommends in the event of past-posting incidents, including more disclosure and transparency on the incidents, and the extent of wagering that took place after a race began.

4:35 p.m. … Linnell wraps up his presentation, and I'm afraid that Bonnie didn't live up to his promise to move the peanut up the sidewalk. No quorum, no peanuts, and no sidewalks are in sight. 

4:50 p.m. … Bonnie asks Fabian how Kentucky can improve its backstretch integrity related to the use of performance enhancing drugs in horses. “It's through (on-track) investigators that helps us focus (TRPB's) scant resources to work with commissions to have targeted investigations and targeted searches,” Fabian said “We have to get back to some of the basics for our investigatve techniques. We have fallen short on having quality investigators.”

5:00 p.m. … After a meandering discussing about the need for backstretch security to deal with catching cheaters who use performance enhancing drugs, Bonnie closes the meeting. “When we have a quorum we'll take some action,” he says.

Let's hope someone holds the commission to that.

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