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Monday, February 05, 2007

An Extra Side of Integrity, Please

- Integrity is the big buzzword in the NY franchise race these days; and when one of the rival bidders or a politician uses the word, what they really mean is "not corrupt like NYRA."

Empire Racing has been relentless in using the issue to distinguish themselves from the incumbent, and last week, they issued a press release announcing the appointment of Daniel R. Alonso, a respected former federal prosecutor specializing in white collar crime, as its new Integrity Czar, stating that his "ongoing counseling will support Empire Racing's unwavering commitment to restore integrity to the franchise and promote the highest ethical standards for New York racing."

The politicians continue to refer to integrity as a way to demonstrate that they, of course, are above the fray; and to put as much distance as possible between them and an entity seen as being corrupt. Spitzer, during his gubernatorial campaign, late last year criticized the concept of integrity being given a weight of 20% in the selection process, while the business plan was 50%.

Spitzer said having 20% of the bid's value be based on the integrity of the bidder makes no sense. Instead, he said, franchise suitors should be forced to meet the integrity standard before even having their bids considered.

"I would have said as a prerequisite that the bidding entities have an absolute clean bill of health when it comes to integrity,'' he said. [Bloodhorse]
Sheldon Silver echoed Spitzer remarks, though a bit clumsily, a couple of weeks ago.

It all stems of course from the 2003 federal indictment regarding tax evasion schemes by NYRA clerks, and lax oversight of such by management; as well as investigations by then Attorney General Eliot Spitzer, and another by former Comptroller Alan Hevesi that told of, among other things, country club memberships and excessive travel expenses paid for with state money.

However, it's been almost a year and a half now since a federal monitor, in recommending that the indictments be dismissed, praised the association for "taking a stand on integrity," citing its new management team, improved corporate governance and unprecedented efforts to address illegal medication. Even the now-disgraced Hevesi, amongst NYRA's most savage critics, said at the time: "There has been a remarkable improvement at NYRA. It is not the same agency it was 18 months ago." Yet the corrupt label sticks to the association as closely as does Jay Pandolfo on Jaromir Jagr, as further evidenced by the poor grades given to NYRA on integrity by the ad hoc committee.

And in what is the ultimate in irony, the federal monitor's report makes NYRA the only one of the bidders to have actually received something akin to the "clean bill of health" that the governor spoke about.

Though a Spitzer spokesperson has said, of integrity, that you either have it or you don't, Empire seems determined to out-integrity the competition. The press release speaks of an Integrity Task Force, an integrity Plan, a Corporate Integrity Program, an integrity hotline for employees, and employee Integrity Assessments. Next thing you know they'll be selling Integrity Fries in their cafeteria.

The release briefly touches on Jared Abbruzzese, under investigation for his business dealings with Senator Bruno, but refers to him only as a Director, and claims that the company commissioned a probe of the matter by an independent law firm. The investigation concluded that Empire acted promptly, properly heeded the advice of outside professionals and moved to resolve the situation in a manner that reflected Empire's commitment to the highest ethical standards. Meaning, they bought him out and told him to get lost, as if they really had any other choice.

A more meaningful investigation, of course, would have been to determine if the Director was inproperly attempting to influence an elected official and, if so, who, if anyone, knew about or directed those alleged activities. And a more meaningful discussion of integrity, at least to us fans, would involve that related to the racing itself.

It's another bit of irony that the June, 2003 press release that announced the findings of the Attorney General's office stated: Spitzer stressed that the integrity of the races at NYRA tracks was not being questioned in his report.

And that, I think, is what New York, and all racing fans really care about when it comes to integrity. Sure, we would never want to see anyone ripping off the IRS, and we expect management not to enrich themselves at the taxpayers' expense. However, possible attempts to buy influence with state officials aside, we have no reason to be concerned that either Empire or Excelsior would condone or participate in the kind of corruption that got NYRA in trouble. (We really know little about Capitol Play other than they have a lot of money.)

Empire is clearly just engaging in some political PR and damage control here. What we'd love to hear instead from them, as well as from the other bidders, is what they plan to do to enhance the integrity of the sport. NYRA instituted the pre-race detention barns. How do the other bidders feel about that? Would they continue and/or expand the program? What is their position on the concept of suspending the horses of trainers caught with positives, thereby making the punishments truly meaningful instead of a mere vacation in Mexico? How do they feel about a recent winner against $35,000 claimers suddenly entered for $7,500 and breaking down on the track? What steps would they take to prevent that from happening again?

With what we all hope will be the beginning of an enlightened age of new and sensible racing law and business practices in the state in conjunction with the change (or not) in the franchise holder, why shouldn't New York be the state to take the lead on positive steps in addressing illegal medication? We're still waiting to hear a meaningful discussion of those and other issues important to the fans other than not having slots at Saratoga.


Anonymous said...

Excellent points all. Good job as always.

How long does a corporate entity remain stained by the misdeeds of an officer, that is the question?

Every corporation that has been in existence as long as NYRA carries with it some stain on it's integrity at some point during it's existence, but when management is changed and the entity reorganized it is no longer considered corrupt.

NYRA should be afforded the same benefit of a doubt, especially since no officer or trustee was actually involved with the crime. It was deemed a lack of oversight, not willful disregard.

As for the travel and entertainment violations, these would be completely legal if incurred by for profit entities such as Empire, Excelsior, CD or Magna. They were only questioned becuase NYRA is a state agency so therefore should not be held against them.

I just can not get past the irony of NY State goverment officials questioning integrity of anyone.

Anonymous said...

Empire is connected to Joe Bruno who is being investigated by the FBI. Score that an F in integrity.

Spitzer took free airplane rides from one of the execs of Excelsior. Looks like another F.

As you mentioned, NYRA has the cleanest hands of the bunch. We can give NYRA a gentlemans C at this point.

Bloodhorse reported Spitzer wants to move forward with slots at the Big A. He needs the revenue for his budget which increases spending while cutting property taxes.

If NYRA wins the land claim it is game set and match.

Green Mtn Punter said...

Alan, another excellent post on the franchise situation. Glad to see NYRA finally getting some credit for it's many years of successful operations despite the pols cheap shots. In the things that matter most, i.e., day-to-day, major league racetrack operations,and all that entails, NYRA gets an "A", and by the way, Empire and all you cheap shot pols, NYRA gets an "A" in the integrity dept from those who know NYRA best: The horsemen and racing fans. And, yes, if NYRA prevails in the land claim, I will be cheering loudest.

Anonymous said...

I have no doubt that current NYRA management would do a fine job, especially with the slot money to spread around, but an A may be too generous. Still, rooting big time for them now, with a caveat that an annual full audit of the books and internal controls by a independent reputable accounting firm should be required for whoever wins the franchise.

Many of the historical problems could have been avoided if this were the case since day one.

Anonymous said...

I'm not sure what JK and GMP are basing their grades or what horsemen and fans GMP is talking about. When it comes to integrity, everyone has something rattling in the closet. As for NYRA, is it integrity to underfund your employees pension fund to the tune of $55 million dollars? To allow the track condition to deteriorate to where there are real concerns over horse and rider safety? Is it integrity to allow, as Alan pointed out several times, a huge drop in class to bottom claimers without some one asking what's going here?

Last time I looked, the group representing the NY horsemen are not supporting NYRA. And where are all those enthusiastic fans? At the OTB's? Because there surely are not coming out to the track.

Alan Mann said...

LS -

As always, I do appreciate you stopping by to provide your point of view, and your points are always well taken. I don't contend that NYRA is perfect, and there's no excuse for there being no questions raced about the incident with the class dropper this weekend. But I'd ask how much of what you describe is because of a lack of integrity or competence by NYRA, or due to the business model in the state that would make it unlikely that anybody could operate the franchise successfully?

Anonymous said...

Reformer Spitzer in Hot Water With Reform Groups

Anonymous said...

<<"how much of what you describe is because of a lack of integrity or competence by NYRA, or due to the business model. . ." Fair question, Alan. Long response coming.

The answer for me is one of interconnectedness (big word for a horseplayer). Like all things, NYRA does not operate in a vacuum. It is impacted by and in turn has an impact on its enviroment. The business model that they continue to operate under was OK in 1955. It started to crack in the 80's and 90's. It is now beyond redemption. But how did this come to pass? Lots of external chaallenges, for sure. But where was the innovation, the adaptation to changing times?

NYRA didn't want anything to with running the OTB's or simulcasting when they had the chance to get out in front and now they are dependent on them (85% of their handle). Heck, they even eschewed slots when they first heard about them.

What I think I'm getting at is that they are culturally and structurally incapable of adapting. By the time they finally realized that VLTs were the only way to bail out, they had alienated most if not all of the decision-makers as well as one of their key constituents, the horsemen. What do many say was a major contributor to that? Arrogance. Arrogance that said we know what's best for racing, for the horsemen, for the horses and for the fans.

Sure they put on a nice meet in Saratoga. And the giveaways are cool. But that shouldn't be enough to warrant unconditional support. Now they are telling us, the people, that they own the racetracks. Not those who make the game possible by betting, by investing, by caring. And who now have to loan them millions so they can sue us.

So is it lack of integrity, incompetence, arrogance, casinos, OTB's, internet wagering, and/or the business model that has brought us to this point? Take your pick. All I know is that I would like to try something different from what we have now.

If we don't, we will have only ourselves to blame.

Green Mtn Punter said...

As Alan has pointed out in numerous posts, and again in the comments for this post, NYRA's problems stem from the antiquated racing and wagering law straitjacket into which they were poured many years ago. I will concede that NYRA's rejection of OTB was, in retrospect, a major faux pas but who's to say 35 years later that they would have prevailed had they sought the OTB's? No, I still have seen no evidence that NYRA hasn't played the best hand possible with the cards they were dealt by Albany over the past 50 years. The pension underfunding, for example, is a result of revenue shortfall- they have to pay the operating expenses, including purses, before they can fund pensions, don't they? Otherwise, you're out of business. And in a showdown, once the Big A VLT $$$ is flowing into purses, I would guess that the horsemen, excepting, of course,those who support Empire, would vote for the devil they know vs the devil they don't know,i.e., NYRA being the devil we all know.

Anonymous said...

NYRA is one of many entities around the country having trouble funding pension plans, airlines and auto makers are in bankruptcy, as is NYRA, for this very reason. It is as much a sign of the times as it is incompetance.

IF the VLTS were not blocked by the state the plan would be funded.

You make a good point regarding the racetrack however, for whatever reason all the surfaces have detiorated in the last few years.