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Thursday, May 17, 2012

NYRA Response Just the Prelim

By now, you may have read NYRA's response to The Letter which represents a potential first salvo in a bid by the state to revoke its franchise.  The statement deals strictly with the accusation that NYRA acted improperly, and in violation of unnamed regulations and by-laws, in appointing Ellen McClain as the new CEO President (CEO position is still open), and Kenneth Handal as General Counsel.  Not only, according to NYRA, were the appointments part of its "fiduciary obligation to exercise its business judgment to protect the best interests of racing and the income stream that pari-mutuel wagering provides to the state," (good one!), but, NYRA claims, they were actually encouraged by Racing and Wagering Board Chairman John Sabini. 
  On May 1, 2012....Sabini sent a letter to the NYRA Board of Directors, which stated “…it is imperative that you provide an interim operational plan to the Board, especially who will be performing functions as Chief Executive Officer and Counsel.”  This letter contained no indication of any concerns or limitations with respect to these appointments.
However,  Chairman Sabini shot back that he never told NYRA to appoint a president and secretary, but did urge it to promptly set up interim leaders. [Albany Times Union]  Looking at the (clumsily worded) May 1 letter from Sabini, it's really a matter of interpretation and intent of the language, and each side can make a case in my view.

But that's just a pissing match, really.  For one thing, NYRA was fully within its rights, if not acting out of its "fiduciary obligation" (I love that phrase), to appoint Ms. McClain as CEO - interim, acting, or otherwise.  Reasonable people can surely argue over the wisdom, or even the appropriateness, of appointing the person who was the Chief Operating Officer while the takeout was too high as the new CEO President.  But the investigation into the takeout mess will run its course, and look, heaven help NYRA should it determine that Ms. McClain was involved in any improprieties whatsoever regarding the takeout being 1% too high on certain exotic wagers.

What will be of far more interest and significance is how NYRA responds to the most explosive elements of the letter - the withholding of its share (not, we're told, the horsemen's or breeders') of slots money, and the point-by-point accusations of material and/or non-material violations of the Performance Standards laid out in the Franchise Agreement and/or the Racing Law that could in theory lead to revocation.  Matt Hegarty writes in the Form
In contrast to portions of the letter pointing to its authority to revoke the franchise, the letter did not cite a section of racing law in which the state had the authority to suspend the casino payments, so it was unclear how the state arrived at that position. As a result, it’s likely that NYRA’s attorneys are exploring whether the state has the right to authorize the suspension of the payments, either under the franchise agreement or the state’s racing law.
   And you can sure expect NYRA to push back strongly considering that its attorney is Brendan V. Sullivan, Jr. - a Washington, D.C. defense lawyer considered one of the top in the business - that, according to James Odato in the Times Union.  Sullivan has represented, and quite successfully, such illustrious characters as former Senator Ted Stevens, Oliver North (“I'm not a potted plant. I'm here as the lawyer."), and Richard Grasso (in approximate ascending order of contemptibility).  Not only did Stevens get off, but the prosecution ended up being accused of prosecutorial misconduct in a scathing report by a special prosecutor earlier this year.  That might be something for Racing and Wagering, and the Franchise Oversight Board to think about considering their own failures, as the ultimate regulators, to themselves correctly regulate the takeout rate.

 - Here's a story about Pepsi dropping its sponsorship of the annual Tennessee Walking Horse championship in the light of horrifying allegations, some backed up by video evidence, of not only abuse, but outright torture of horses.  That video led to a federal indictment of a leading trainer. 
  The tape shows McConnell and his stable hands beating horses with wooden sticks and using electric cattle prods on them as part of a training protocol to make them lift their feet in the pronounced gait judges like to see. [ABC News]
It actually gets worse if you read on.  Sounds like this guy could use Brendan V. Sullivan, Jr.  But what I'd like to know....considering how so very concerned they've been of late about the treatment of the equine breed, why hasn't this been on the front page of the New York Times?  (Or on any page of the New York Times for that matter?)


Figless said...

Great analysis, good job cutting through the fog while analyzing the key issues.

NYRA can really tear them an here if they decide to go on the offensive, and I hope they do.

Dan said...

I want all the entities investigated in this. Charlie took the fall so far. After hearing Steve Crist this week on WFAN Steve thought NYRA needed approval for this reduction. He was incorrect & should have done his homework on this. I'm sure an email trail exists with the NYS Racing & wagering board. The IG should follow the email trails on this.

Keep in mind what happens to the regulators when they don't do their job- SEC on Madoff- Did any govt official lose their job or go to jail for this? I don't remember any?

El Angelo said...

Agree with Dan except that Crist should have done his homework. I agree he may have let his friendship with Hayward cloud his role a bit, but it's not *his* job to investigate the takeout rates and NYRA's responsibilities.

Dan said...

I agree with El Angelo. It was not Steve's responsibility & he has had a friendship with Charlie. I still find the state regulators at fault here too. They should have automatically caught this error. I believe the state has an agenda & if it wasn't this error they would have nailed them on something else.

NY should backoff until all the investigations are over.

Anonymous said...

As you wrote, Ellen McClain will not be at the top of the food chain in the NYRA. The top job has yet to be given to someone.

Dan said...

Remember a few months ago the NYS Racing oversight board was going nuts about NYRA advancing $500 to their NYRA rewards players?

The funny thing was that NYRA called them out on this & stated that Nassau OTB was advancing much greater amounts than $500 a day. Its so obvious NYRA would of have to be squeaky clean on everything they did. NYRA needs to get a good PR firm & fight back these guys. I know NYRA messed up with the takeout & should be held accountable but the treatment they have been getting is over the line.

Anonymous said...

If all the NYRA did was look the other way during the takeout scandal, why bother to hire this chap Sullivan, a reknowned criminal defense attorney? From Ollie North to NewsCorp, he has attempted to minimize criminal intent amongst his clients, now the NYRA.

There must be something more than meets the eye here or Cuomo wouldn't be out to bury the NYRA without extreme cause?

Seems a continuation of so many years of questions.

Anonymous said...

The Democrats want the slot money for welfare payment (buy votes).