Going Nuclear on NYRA

Here is the link  to the "nuclear letter," as described by Tom Precious on Bloodhorse.com, sent to NYRA Chairman of the Board C. Stephen Duncker by John Sabini, Chairman of the NY Racing and Wagering Board, and Robert Megna, Governor Cuomo's budget director and the head of the Franchise Oversight Board.  It was sent on the governor's stationary, as if it already wasn't serious enough, coming as it does from the heads of the two bodies empowered to revoke NYRA's franchise. And it constitutes the first specific threat to do so.  Once again, this is the relevant language in the Franchise Agreement: 

The franchise oversight board shall notify the franchised  corporation authorized  by  this  chapter  in  writing of any material breach of the performance  standards  or  repeated  non-material  breaches  which  the franchise  oversight  board  may  determine  collectively constitute a material breach of the performance standards.

The agreement grants NYRA the "reasonable opportunity" to cure any such violations.

Interestingly, the letter comes a week after Governor Cuomo himself expressed doubt as to whether the franchise could indeed be revoked. 

"I don't know that NYRA can lose the franchise....There is a contract ... the question is how you make it better." [Albany Times-Union]

The governor sounded there like a man who was speaking after having explored the possibility of revocation, perhaps concluding that the state didn't have a sufficient case.  And when I see that one of the three violations cited in the letter is: "The failure of NYRA to provide basic living conditions to the backstretch workers in its dormitories in Saratoga," I'm thinking that that may indeed the case.  If the state is resorting to playing that card at this point, then they must know they don't really have enough to make a clear-cut case for revocation.  We all know that the backstretch at Saratoga needs renovation, and Hayward always maintained that this would be the first use of the 4% share of VLT revenues designated for capital improvements.  And, if you go to the NYRA website, there's a 'Capital Projects Information' link at the bottom of the left-hand margin that discusses those plans as a project for later this year.  Of course, since that VLT money is now being held by the Lottery, NYRA would be denied their reasonable opportunity to cure any breach.  And, in fact, the "Backstretch" clause in the Performance Standards section of the Franchise Agreement specifically ties NYRA's obligation to make such improvements on its receiving that money.  So the state may run into a Catch-22 situation there if it continues to hold the funds.

What else is there?  There's NYRA's failure to produce documents related to the takeout investigation, which can easily be cured....the investigation itself, which I expect will show that NYRA acted out of oversight rather than malice....and the question of the spate of breakdowns on the inner track.  Regarding the latter, I think it's a stretch to frame that as a violation of the Jockey and Equine Safety clause in the Performance Standards section, which requires NYRA to weigh the installation of synthetic tracks and to "consider other steps in consultation with industry experts to ensure jockey and equine safety."  In fact, the latter is exactly what NYRA is doing with the investigation into the breakdowns (even if it was pressured into doing so), and that probe is of course still pending.  We don't yet know what caused the breakdowns despite what Joe Drape says, and it's surely unclear and subjective as to whether NYRA can be blamed no matter what the conclusion is, short of outright negligence.

And the criticism of NYRA's appointment of Ellen McClain as the new CEO is unfounded.  Section 2.5(d) of the Franchise Agreement reads, in its entirety: "New NYRA shall determine all officers of the corporation."  Period.  With the Belmont Stakes coming up, it's only natural and sensible that NYRA would want to have someone familiar with the organization running things for now.  Her appointment does not hinder the investigation of Takeout-gate, nor exempt her from being a subject of it.  However, surely the governor would like to have some kind of a say as to who runs NYRA and I suppose he doesn't like the fact that they went ahead and appointed one of their own.  I'm sure he'd prefer to have some tool in place there.  There's always Larry Schwartz.

So, to me, this may be more of a hissy fit by the governor and two men who have a direct personal and professional interest in deflecting any scrutiny whatsoever of their own roles in failing to notice that the takeout was too high, rather than a substantive threat to the franchise.  Unless, of course, Cuomo has changed his mind from his statement last week.  Surely, if NYRA is to stay, the governor will demand control of the Board, and this seems a tactic to ensure that he gets that, and whatever else he wants.  As he usually does.

 - Regarding the withholding of slots money, the letter refers to"racing support payments."  According strictly to the letter of the law, this would include all of the Genting money, including the funds earmarked for purses and breeders.  However, Precious reports in his piece:

Government sources confirmed the diversion of VLT proceeds to the lottery will not affect the breeding fund and purse accounts.