Inspector General Report on Takeout Error Confirms the Obvious

If you missed it (and are interested), this is the Inspector General's report on the takeout "scandal" in which $7.4 million was improperly withheld by NYRA from winnings paid on certain exotic bets from Sept 2010 through December of 2011.  The report is a 122-page exercise costing who-knows-how much money that confirms what we already knew: it was a mistake.  An inadvertent error on the part of a multitude of people and entities.  A "snafu," rather than a true "scandal."  No smoking gun emails amongst NYRA executives plotting and scheming to squeeze a little extra revenue out of its customers by intentionally flouting the law.  You can bet that if there were, this report wouldn't have been issued on the Monday of the sleepiest week of the summer season, a couple of days after Odato reported on its existence in the Times Union. Though former CEO Charlie Hayward takes the brunt of the blame in newspaper reports such as Odato's, the most pointed criticism leveled against him in the Findings and Recommendations section is regarding his testimony that he did not completely read an email sent to him by Steven Crist in which a fan pointed out that the rate was in violation of the law.  "Regardless of the veracity of his representation, Hayward was, at best, careless in his reading of the email."

The error really came down to two things: the failure of the legal department to note on their calendars the date on which the temporary 1% takeout increase was to sunset; and, that notwithstanding, the fact that NYRA executives believed that they could rather than had to lower the rate.  Not to mention the failure of various people and entities, both inside and outside of NYRA (such as the now-defunct Racing and Wagering Board), to notice the discrepancy.

But we knew that.  And, I suspect, so did those who ordered and conducted the investigation.  It would have been a feather in a lot of caps had they found some organized effort to "rob" bettors, but it was not to be. As we knew.

Nonetheless, the release of the report gave the press and a politician the chance to catch up on a little NYRA bashing. Report: NYRA Cost Bettors $7 Million screamed a front-page headline in the Saratogian, as if this was some kind of new revelation.  State Senator John Bonacic, a strong supporter of the casino resort destinations (that contribute to his campaigns) - and therefore, an enemy of horse racing - took the opportunity to note the troubling lack of accountability that had existed within NYRA which resulted in the overcharging of the betting public. 

“Although more than $600,000 was refunded, there is more that can be done to set the overcharge right for aggrieved fans. [Capitol Confidential]

Actually, there are no aggrieved fans.  Nearly everyone who was affected never knew what hit them, and didn't miss an amount that was probably, in many if not in most cases, less than it costs them this year in increased admission fees every time they go to Saratoga.

Nonetheless, the matter was blown out of proportion - in my opinion, anyway - to became one of the key reasons/excuses used by the governor to take over the NYRA board, leading to the uncertain place where we find ourselves today, with the scheduled end of state control approaching next year.  We can only guess as to what will happen.....mine is that I continue to doubt that it will be anything nearly as drastic as Frank Stronach owning one-third.  But the direction of NYRA surely has changed drastically as a result.  Hayward was focused on teletheaters to fill the void left by NYC OTB - in fact, it was his concern about the necessary politics that was behind his failure to request a takeout reduction that he thought was optional at that time.  But under Chris Kay, the matter has been squarely on the backburner as he and Martin Panza try to attract more people to the track on 'big days' with an enhanced guest experience.  And the former CEO, as a racing guy, appreciated the logic behind lower takeout rates - ironically, considering his dismissal over a rate which was too high - and surely would have advocated for them at an appropriate time, if one there ever would be.  With the current focus on short-term P&L, you can just forget about lower takeout rates here, at least in the immediate future.  The bottom line is the priority now, no matter what it takes to get to the theoretical break-even without slots (whatever that really means as long as slots money is still supporting purses and capital improvement).  We shall see where this all takes us a year down the line, and beyond.

 - Frank Gabriel, who recently joined NYRA as the racing secretary at Belmont and Saratoga, has abruptly left his position and will return to Dubai.  He is the second high-level employee hired under the present management to resign shortly afterwards; Eric Wing served briefly as Director of Communications.