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Wednesday, May 16, 2012

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.

20 Comments:

El Angelo said...

A smart, measured response. Well done.

Anonymous said...

Not very presidential, Mr. Cuomo. People will remember how petty and vindictive you can be. For we have seen the nipple on your soul!

Figless said...

We are witnessing a not very well disguised attempted Coup, similar to the politically connected takeover of Roosevelt Raceway in the 80's.

I hope Duncker and the rest of non-Albany appointed board members are prepared for battle because those of us that love NY Racing, horsemen and otherwise, need them to defend this franchise agreement as legally negotiated (and the current board structure) or NY racing as we know it will be a thing of the past.

Left purely to Albany only Saratoga would survive, they would probably recommend running the Belmont Stakes at Finger Lakes.

Nick Tammaro said...

Very well done. I couldn't agree more.

jk said...

A pox on all their houses.

The fans were ripped off for $8 million while NYRA, NYSRWB, Oversight Board, NYS Legislature, Horseman and all the rest sat on their hands and did nothing.

Remember, most of the money stolen from the customers will not be refunded and no one is lifting a finger to do anything about it.

John said...

Ask Cuomo where were the NYS auditors when NYRA was applying the wrong takeout for 15 months! THat's a lot of results incorrectly priced for a long time. Does NYS check anything?

jdemet@aol.com

Anonymous said...

NYS employees only check their pensions, sick leave and benefits. I knew once the demoRATS saw the large sums the casino was sending to the horsemen that the kibosh would be placed on the horsemen. DemoRATS will say they need the money for schools, healthcare, etc. They will take the money and spread it around to their friends.

Anonymous said...

The pompous prick in Albany fails to recognize that NYRA is bigger than he is and thinks he has all the answers when he doesn’t even know the questions.

FYI - When the 25% takeout was imposed NYRA increased their rewards program to offset the additional takeout.

Kudos to you Alan on a great post!

Ocala Mike said...

Far from checking on their pensions, NYS Pari-Mutuel Examiners couldn't "catch" NYRA's error because we were all let go by the Tax Dept. years ago "to save money." The last examiner in place was forced to retire a few weeks before the fiasco.

Remember, all you "government worker haters," sometimes you reap what you sow.

-Ex Senior Pari-Mutuel Examiner (Retired)

steve in nc said...

NYRA 1 account holders already got their refunds from the failure to reduce the takeout.

Now the questions, while this plays out, are what will happen to purses, and should NYRA 1 account holders trim their balances so they won't lose so much if they have to become creditors instead of account holders.

Anonymous said...

You NYRA apologists really make me chuckle.

Even if the withholding of the $8.5M from their customers wasn't intentional (which e-mails suggest it was), heads should have rolled. Imagine if a Las Vegas casino executive skimmed $8.5M, even by accident. His ass would be out the door quicker than you could say Bugsy Siegel.

And no one on the NYRA board had the common sense to say, "Ellen McLain was chief financial officer for most of the time this skimming was taking place, and after that she was chief operating officer. Maybe we shouldn't put her in charge?"

How STUPID could you be? Let's promote the fox to run the henhouse!

Oh, and let's blame the state regulators for failing to catch NYRA's screw-up. It was Bush's fault!

These arrogant SOB's at NYRA are getting everything they deserve.

Anonymous said...

Many years ago my mom told me something that I thought was patently wrong. Now, with 60+ years on the planet, I have come around to her way of thinking. What she said was, Son, you can't fight city hall. If The Guv wants NYRA out NYRA will be out, one way or another.

Dan said...

I would like the NYS Inspector general to investigate the NYS Racing & Wagering board. Did they receive any emails from the public about this issue? Are we to believe only Steve Crist from DRF received these letters from the racing fans? I doubt it. I was very puzzled how harsh they came down on NYRA even before the investigations are complete. The regulators(NYRA Oversight board- MEGNA) are covered with egg on this too & they just yell as loud as they can to distract the public. These guys are using classic deflection here. They messed up- (so did we but don't ask us any questions). These regulators are a joke but they are taking the orders from Albany- Just follow the Casino $. This is what its all about.

Ocala Mike said...

Dan, the IG should investigate EVERY state entity and agency involved in this. Let's hope they do so thoroughly and honestly.

Anonymous said...

Nyra had nobody other than McClain to step in. Unless you consider PJ Campo or Mahoney who is lifetime racing guy running the tote room. Neither of those has the PR smarts to be the front face. McClain clearly does as she knows nothing of racing other than gleaned the last couple years. Just a face. To be terminated once it is clear she failed to uphold THE most basic accounting measure as CFO. Sad.

Further, what capable people will want these nyra top jobs after this? Seems like a career killer unless you're ready to retire or a politician with a safety net.

Figless said...

Ocala Mike, why stop at the agencies involved in this?

The IG should be investigating EVERY agency in NY, they will find MANY more irregularities than they will at their favorite target NYRA.

The Port Atrocity for instance?

Oh, but they won't go there since those agencies are stock full of their appointees.

Hyprocrisy for political ambition's sake.

Figless said...

PS - or even better, do they even look at the regional OTB's?? When was the last IG or Comptroller audit of THOSE entities?

Sure they are all squeeky clean.

Ocala Mike said...

We used to do pari-mutuel audits at the Regional OTB's, but they had us stop those a year or two before the unit was disbanded. Guess we shold have read the handwriting on the wall.

First the OTB audits were stopped, then the per diem examiners were let go at the small harness tracks and Finger Lakes, then us.

C'est la vie.

Dan said...

So are we saying we need some overight? It would have caught the error. Oh yes the NYS comptrollers office caught this not the NYSRWB or the NYRA Oversight guys (Megna). Its funny how they are so tough on NYRA however the regulators need to get the egg off their facce first.

Anonymous said...

New York State takes control of NYRA.

That a big enough bite for you?