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Saturday, December 24, 2011

So They Messed Up

The way I see it, the NYRA takeout fiasco is far more breathtaking in the sheer incompetence and ineptitude on display, by both the association and the bodies that regulate it, than its actual practical effect. "$8.6 million taken out of horseplayers' pockets" may sound draconian. However, over 15 months and thousands of affected wagers, it's really for the most part just relative dribs and drabs withheld from bettors who were probably overjoyed to have won and collected in the first place. Half of them will probably never even realize that anything untoward occurred.

And let's face it. This was not money that was going to go towards stimulating the economy or creating jobs. One could argue that the vast majority would have been churned right back into the pools. So NYRA was probably hurting mostly itself and its horsemen.

I mention this not in an attempt to diminish what happened. It's inexcusable. But with the fight over casinos starting to simmer, and just in the course of everyday politics and business with the rivalries and conflicts that accompany them, we're certain to hear that number used as a cudgel by those to whom NYRA is an obstacle to their business interests, or just the convenient foil they have been for quite some time. So I think it's important to keep things in perspective.

In any event, this whole affair is just so bizarre; there's no rational explanation for what occurred. I wrote in the last post about how the sunset provision was common knowledge when the law was passed, and how everyone seemed to have mysteriously forgotten about it (including myself). But, as it turns out, not everyone had. Pull the Pocket wrote of a poster on the Paceadvantage site who says that he actually contacted the Racing and Wagering Board in January of 2011 about the takeout being too high, and never received a response! How can that be? What were they thinking of?

The immediate reactions of the two main parties involved, NYRA and the Board, also left something to be desired as far as I'm concerned, as they tried to slip it by as if nothing major had happened. This is the audio of the meeting of the NY State Racing and Wagering Board at which the takeout overcharge was discussed and disclosed. The subject is brought up rather casually, second on the agenda after some routine matter involving Capitol OTB, and framed initially in the context of NYRA's request to lower the rate to a point under the maximum allowed. If you go to the 18 minute mark, you'll hear Chairman John Sabini praise his auditors for discovering the discrepancy. That doesn't jibe however with the subsequent reports that the error was found by Comptroller Tom DiNapoli. And Tom Precious reported in Bloodhorse that the Board and its Chairman may be on thin ice.

[Franchise Oversigh Board chairman Robert] Megna also said, interestingly, that he would be “remiss” if he did not also express his “deep disappointment in the failure of the racing and wagering board to adequately discharge its regulatory responsibilities” to catch the accounting error by NYRA.

The matter poses problems, state sources said, for NYRA and the racing board’s leadership, which was not appointed by the current Cuomo administration since it took office nearly a year ago. Given Megna’s unusual public rebuke, it remains uncertain whether NYSRWB chairman John Sabini can hold onto his post under the weight of the new NYRA controversy. [Bloodhorse]
As for NYRA, they tried to totally gloss the matter over with a press release entitled NYRA LOWERS TAKEOUT ON EXOTICS. And I think they may come to regret blaming the error on "the complexity of the takeout provisions in the Racing Law." The fact is that the sunset provision stands out in its clarity from the rest of the gobbledygook in the law. Sometimes contrition is the best course. Oops, we messed up, we're sorry. There's a great song on the Lemonheads' first album, the somewhat overlooked punk classic Hate Your Friends. I won't print the profane title here in deference to the blessed holiday that is now upon us. But the lyrics go:
So I f**ked up
I'm only human
So I f**ked up
I did the best I could do
And then I f**ked up
What do you want
I said I was sorry would it help if I said it again, and again, and again, and again?
Well, in this case....probably not. Have a great holiday everyone.

- And for a chill Xmas soundtrack, check out the awesome Christmas Lounge on SOMA FM.


Anonymous said...

Alan, great coverage on this controversial issue. Robert Megna keeps raising his voice and "yelling" at the NYRA, but this organization doesn't get sent to its room, as this is just one more in a series of misdeeds on the new NYRA's watch. Does it ever go beyond getting scolded or is the NYRA still sitting on a cache of political capital, chits, markers and favors? If the NYRA & NYSRWB can't get this right, wait until the real money starts flowing.....

jk said...

Thanks for the great reporting. It will be fun to watch where the chips fall on this one. Happy Holidays to all. Everyone is even for the year on Jan 1st.

steve in nc said...

I just finished reading an article about the Mets (lack of) finances and then clicked over here.

Amazing how incompetents end up entrusted with gazillions of dollars and then go on to other jobs, also at lofty salaries. Just like at banks and financial companies. And if they fuck up in their new jobs (surprise!), they get a generous severence package at worst.

The not so funny joke about our "free market" economy is that the market for top executives in is anything but a rational. General principles of supply & demand & competency requirements don't apply. It is just a club that one can only join if one knows someone, and the lucrative membership is good for life regardless of how badly one tanks what had been a perfectly healthy business.

But, here's to a great holiday for everyone regardless! 85 entered in AQ's Wednesday card, a big increase over the 55 or so in the last few cards I played there.

Figless said...

The NYRA CFO deserve some publicity here.

Who is the CFO, how much does he/she get paid, and when will they be fired?

Because clearly they are responsible and incompetant. To not be aware of the percentage applicable to a major revenue source is beyond comprehenson or explanation. Goodbye.

Figless said...

In truth it would not be surprising if everyone at NYRA knew about this and chose to ignore it due to finances.

steve in nc said...

Ditto on both of your posts, Figless, and if any of the SRWB's members are allowed to stay on, or serve as boards of other entities, that is only more evidence of a broken system. And how about the corporate counsels' roles?

Coal in their stockings, not in the power plants!

Alan, thanks for thorough & common sense reporting on this, and may all LATGers who play this weekend get a visit from Santa with lots of jingle jingle.

Anonymous said...

NYRA has twenty-six directors, what is their responsibility in this fiasco? I suggest that two-thirds of them do not know what the intials NYRA represent, and the other third couldn't find Belmont Park without a GPS.

Hayward is a joke. NYRA is a Good Ole' boys' Club; also known as the Gang that can't shoot straight. How or why any executive at NYRA is paid more than $50,000 in salary is, again, a joke. 'Dinny', the big guy of the directors of NYRA, controls it all. The only tough decisions that NYRA's executives face, day-to-day, is whether the deodorant pads in the urinals should be pink or white. or if the subscription to Golf Magazine should be renewed.

I wonder how many times the executive pension plan has been rewritten in the past six months.

Will someone with authority fire all of the executives at NYRA, and the current directors, and develope a qualifed group of people who will operate NYRA as a business instead of a 'club' for the 'boys'?

Anonymous said...

Spitzer was foolish when he said "The NYRA is the most qualified.....". Perhaps bad advice? What other explanation is there? Somewhere deep in the bowels of Albany the truth is known.

Anonymous said...

Among the many misconceptions in the comments here is that there is some viable entity out there that even wants this franchise. NYRA was then, and is now, the best and most qualified to run this franchise. Perhaps some of you should read Alan's blog again and stop flailing away and pointing fingers.

Happy holidays to all. Hopefully this time will allow people to see the bigger picture. Here's hoping.

Anonymous said...

Seems the error was right in front of everyone involved before it became an issue. Wonder why the federal monitor Getnick didn't catch it? They were on duty for many of the months (before being replaced with new firm), when the takeout violation went unnoticed. Fingers will be pointing in all directions as this thing gets sorted out.

Happy Holidays!

Anonymous said...

Does anybody know if the Franchise Oversight Board has deemed this takeout debacle a material or non-material breach of the racing franchise performance standards?

Anonymous said...

I'd like to see the takeout 35%.
I'd love to see these stupid bettors lose the money even quicker.hahaha.

Anonymous said...

NYRA would be well advised to do something like "No Takeout New Year!" where the overage is clawed back by the bettors by reducing the takeout to ZERO on ALL wagers for the first full week of the New Year.

Figless said...

All good points above but ultimately the CFO is responsible with the external independent auditor a close second.

This may set a record for most people overseeing an entity while failing to catch a significant accounting issue.

Time to call Guiness World Book.

SaratogaSpa said...

I still think it is funny that the comptroller who has no financial or accounting is alleged to have found the error...only in NY

Alan Mann said...

Thanks for commenting everyone, and hope the holidays are treating you well!

In response to Anon 2:55 regarding the Oversight Board...great question - the question of what is 'material' is one of those vague legalities that attorneys make money on. I would argue that this would not qualify as material, but you never know.

Anonymous said...

NYRA = Not Your Racing Association

John Sabini = Puffed Pigeon

Anonymous said...

Amen. Ellen McClain incompetent. A CFO with zero relevant experience. Zero. Another political appointment.