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Thursday, May 29, 2008

The False Behind the Favorite

- Matt Hagerty reports in the Form that at least some of the IEAH investors are willing to cut Michael Iavarone a break despite the embarrassing revelations about his past originally reported by Bloomberg. I wouldn't be concerned either over violations committed when he was a 22 year old kid working in a sleazy penny stock firm that would eventually be shut down. And as long as he paid down those debts to Keeneland and the IRS, we can maybe chalk it up to his being sloppy or lazy. But what's up with telling the Times that he worked for Goldman Sachs? And how about that bio on their website which refers to him as a one-time high-profile investment banker on Wall Street when he worked exclusively at penny stock houses? That's the kind of dishonesty that would make me more queasy than his other rather minor transgressions.

Learning of his true background actually makes what he's accomplished seem that much more impressive to me, if in a somewhat perverse way. He must be quite the operator to have built up from a penny stock dealer to a man in his present position, heading up a multi-million dollar partnership, on the verge of winning a Triple Crown with his $50 million prize, and starting a hedge fund. Whatever the rough edges along the way, he certainly deserves fair credit for not only his financial acumen, but his horsemanship as well. He did after all pick out Big Brown after a maiden race on grass (and I really wish someone would post that race on You Tube so I could put it up here).

However, Iavarone certainly gave himself far too much credit when he told Joe Drape: "I guess what I’m most disappointed about is that this whole Triple Crown run has been turned into me first and the horse second.” I can assure him that that's not the case. This is all about the horse and the history of the past 30 years standing before him. Nobody really cares about this guy. It's just something to do between races, a little amusement. Just another guy with a history of misrepresenting himself - whether peddling questionable stocks, failing to live up to financial obligations (if temporarily), or portraying himself as something he has never been - getting a little comeuppance.

We have certainly seen human participants in the sport that were stories on their own, and this guy is not one of them. When those horses are on the track for the Belmont and the 108,573 in attendance start to buzz, nobody will be paying Michael Iavarone a single thought. And, with all due respect, I think that anyone who is (other than his mother), should probably find a different way to pass the time.


Anonymous said...

How nice but naive Alan:
As if he raised millions to buy race horses - where is the list of owners?
The origin of the investment funds, as of now, cannot be traced.

Alex said...

Thomas - that's a pretty serious accusation to make without any evidence.

Alex said...

Alan - Here's the Big Brown maiden race:

Now will you swap links with my blog ( :)

Anonymous said...

Wasn't he involved with this group when some NY crime family was making bets on IEAH horses? I'm surprsied he was able to get licensed in NY as an owner.

Anonymous said...

I agree with your point, Alan. Should Big Brown win the Triple Crown, let's celebrate his accomplishment, something that hasn't been done since the owner was but a young kid.

In a few years, who's going to remember the owner(s) of Big Brown anyhow?

Anonymous said...

Michael was simply following in the footsteps of his boyhood idol Bob Brennan.
Remember: "Come Grow with Us" and Due Process Stable.
There is a great movie whose title I can't rmember about these young guys who flog penny stocks in what used to be called "bucket shops."
I think Vin Diesel was in it but I might be wrong.
A really good movie if you want to get a glimpse of the how these young guys get corrupted by the prospect of easy money.

Alan Mann said...

Thomas - It's entirely possible that there is a story here somewhere that will come out at some point...perhaps there's a Scott McClellan in the group. But as for now, there's no abuse of public money that we know of, nor are there any accusations of fraud or embezzlement emerging from those who have ID'd themselves as investors (though, as I said, I think they certainly have a legitimate beef as to his misrepresenting his background). So why should we be concerning ourselves?

Anonymous said...

The whole Big Brown saga looks like a greedy, grubby Wall St hedge fund grab and unfortunately that is what people are going to remember. Assuming he wins the big race, when they announce BB's all done the media will pile on without mercy.

Big Brown, due to his unfortunate connections, is coming under much more intense scrutiny than would be the case with just about any other connections save the Sheihks.
I think it says something about the deep seated dissatisfaction with the trends in 21st C racing, and fans no longer willing to say "Whatever".

And when you start comparing your horse to the Immortals in the Pantheon, that really hits a raw nerve. Iavarone/IEAH/Dutrow are trying to build value in a hedge fund and racing fans want to see greatness proven on the racetrack in something more than 6 races.

Claiming greatness on the racetrack is the exact opposite of the Wall St mantra of reducing risk wherever possible. But the truly great ones roll the dice against all comers over at least 2 seasons and let the chips fall where they may. Many racing fans see the new paradigm as trying to do it on the cheap, too micro-managed, too manipulative, too Wall St.

Dutrow is coming off like Rev Wright and whatever limited accomplishments Big Brown was/is lucky enough to string together will be lost in the post-race spin. Think of how it would be different if Iavarone and Co had merely announced that BB would stay in training as long as he is fit? That gives cover for all kinds of eventualities, doesn't it?
/S/Green Mtn Punter

Anonymous said...

New York Newsday reported yesterday:

In 2003, he starts Garden City-based International Equine Acquisitions Holdings, Inc. That same year, he receives an $800,000 investment in IEAH from an unnamed European investor.

Who owns Big Brown? Iavarone or IEAH? If IEAH, who are they? How many other "unnamed European investors" are there? Does anyone check?

The last thing racing needs is a scandal arising from a Triple Crown winner. We're already half-way there with Mr. Dutrow's "I give him Winstrol every month but don't know why" comment.

Anonymous said...


Are you referring to "Boiler Room?" A great movie that shows the dark side of Wall Street.


Anonymous said...

What I don't get is why I keep hearing people say that racing needs a Triple Crown winner. That it will save the sport and bring in new fans. Are you kidding me? If Big Brown wins the Belmont we'll be lucky to see him race again. The owners already said he has no chance of racing next year.

So how does this horse winning the Triple Crown save the sport? If anything it might turn people away. If you are a new fan and you see this "super horse" destroying his competition, doing what no horse has done in 30 years and then poof he's gone, are you going to tune in the rest of the year and watch races? You think these same people will be back next spring? Why should they when they see potential superstars retired year after year with only a handful of races run.

This sport needs less owners like IEAH and more like Jess Jackson or more preferably The Phipps family. To IEAH this is nothing more then a business venture to make a couple of slick Wall Street guys rich. They don't care about the horse, the sport or the fans. They care about one thing and one thing only, money.


Anonymous said...

There is an excellent bit of commentary from the co-author of the book "Barbarians at the Gate" regarding racing ownership, it is worth reading:

Bloomberg, May 30 "Big Brown's Brio Can't Cover Up Bad News"

Also, in case it wasn't overly obvious in their absence, UPS is being very cautionary with the whole Big Brown story. I wouldn't expect them to get too much closer even if he wins the TC.

Portfolio magazine 'Horseracing's Winner, Really a Loser'

quote -

"We're not actually sponsoring the horse, we have a sponsorship with the jockey," said UPS spokesman Norman Black after hearing the news about Iavarone. After admitting that Iavarone's firm indeed sought the relationship with UPS and receives the bulk of the money from the sponsorship, Black added: "We have no continuing relationship with I.E.A.H."

Anonymous said...

Alan - I think you're right on in this post. Out in the blogosphere, there's a ton of angst about Big Brown's connections; I more or less assumed that we were representative of the population at large. But the more people I talk to -- tons at the Preakness, others since -- the more convinced I become that, other than a relatively small group of folks fretting, the vast majority of the public doesn't care about the connections at all, possibly finds Dutrow's up from the tack room story fascinating, and really, ultimately, simply thinks the horse is great.

That's not to say that we shouldn't be concerned about these guys, but my strong sense is that the public is much, much less concerned about them than the insiders are -- and much more fascinated by the horse.

Anonymous said...

What a joke. This guy bounces checks, gets caught pumping and dumping penny stocks and the NYSE lets him ring the opening bell.

He is going to be out there taking all of the credit so he has to take the lumps from his past.

Anonymous said...

``Big Brown'' has taken on a whole new meaning. It describes the stable-sized dung piles littering Iavarone's past.


El Angelo said...

Alan, I kinda disagree--I think it's important to know who's running IEAH
Stables. If the business wants to promote a sport where the main athletes don't speak, they have to look to the human connections; the jockey, trainer and owner.

By contrast, I disagree strongly with the posts who keep asking where the funds for IEAH came. Unless they're stolen or from sovereign wealth funds, who cares?

Erin said...

To all the people who are worried about Iavarone and his hedge fund plans, any promotional publicity BB is generating for IEAH is being equally countered, imo, by the equal amount of coverage given to Iavarone's unsavory past.
And I agree that the media, always happy to drudge up the dirt, really are the ones so concerned about his connections. Most people see the horse, most else is trivial details.

Alan Mann said...


Manohla Dargis writes:

"A little Botox goes a long way in “Sex and the City,” but a little decent writing would have gone even further."

Oh man, she may not know a good horsie documentary from :58 Flat, but I still love her!

Anonymous said...

IEAH even had someone pumping their horses on the now extinct NYRA message board during the A One Rocket fiasco, the same crap you would see on a penny stock board, had all the makings of a Boiler Room operation.

This is why I questioned the ownership a few weeks ago. The principals have very small stake in the company, if any.

Why should we care?

A) Legally, all owners need to be licensed and pass a background investigation. If they have not disclosed ownership, they have broken the law.

They can clear this up with one simple statement that all investors are legally licensed in the State Of NY, end of story.

So why don't they?

B) EVERYONE remembers the owners of Triple Crown winners, Peggy Chenery and The Taylors are constantly discussed this time of year, and the Funny Cide gang became part of racing history, so ownership is part of the story.

I would prefer not to be discussing this and focus on this perhaps great animal. It is the one thing I agree with Dutrow on, do not penalize the horse for his connections.

But unfortunately it does matter and needs to be discussed.

Anonymous said...

Why do I keep associating IEAH with the betting saga surrounding the Gregory Martin indictment and the great "milkshake" controversy?
Is my memory failing?

If not, we may have some inkling into who is really giving a novice millions to invest in thoroughbreds - which is, as we know, similar to "investing" in lottery tickets.

El Angelo said...

If Iavarone and Schiavo are going by the hedge fund model of taking profits ("2 and 20"), then they have a huge interest in the stables. If the fund is ultimately worth $100 million and makes $2 million a year, that's $2 1/2 million in their pockets directly.

Teddy, I know where you're coming from, but unless we think organized crime is using racing to launder money (not the craziest idea I've heard), I don't know why they would just throw money willy-nilly into a business in which the vast majority lose money. Then again, organized crime in recent years hasn't been known for its foresight...

Erin said...

If "EVERYONE remembers the owners of Triple Crown winners" then you'd think at least the pointmaker would get Penny Chenery's name right. Kinda shot yourself in the foot there.

Anonymous said...

Not to quibble but ...

As posted by Erin - 'then you'd think at least the pointmaker would get Penny Chenery's name right. Kinda shot yourself in the foot there.'

While known as Helen "Penny" Chenery today she was at the time of Secretariat's racing Mrs. Tweedy.

She was married for 25-years (until late 1974; divorced) to Jack, an executive V.P. of the California-based Oil Shale Corp.

steve in nc said...


Everyone is expecting the media to pile on mercilessly if BB wins. So i guess you guys decided to beat them to it.

Sounds to me like Iavarone is a great symbol of so much that is wrong with our current financial system, brought on in large part by the deregulation requested by Wall Street and happily provided by the Bushes, Clinton, and the bought & paid for Congress. Succumbing to lobbyists for the richest of the rich is probably the only bipartisanship Congress has shown in 2 decades.

False advertising, criminality, lack of transparency, pretentions of great sagacity and courage. Probably we'll find the capital behind IEAH is either shady or nonexistant, just as so many corporate buyouts have happened with almost the entire transaction totally a house of debt cards.

My difference with you is I hope he wins. Because I love the horse. And any publicity about Iavarone's operation will help expose things for what they are not just in racing but on Wall Street and in Washington.

Erin said...

but not ever Peggy Tweedy.