SARATOGA SPRINGS, December 23, 2011—Where do we begin; with the fact that NYRA has been fleecing bettors for 15 months? That there was no immediate outrage in the racing media and blogosphere after this story broke? Or that compared to this the Life at Ten incident was but a venial sin?

However, it is already having an effect in the horse-playing community. One California- based activist who was instrumental in spearheading the boycott of Santa Anita races last winter when exotic takeout rates were raised precipitously is talking about boycotting the NYRA races this winter.

The New York Racing Association press release issued Wednesday appeared to be positive with a headline reading “NYRA Lowers Takeout.” Until one reads further.

“The New York Racing Association has announced that takeout on Trifecta, Superfecta, Grand Slam, Pick 3, Pick 4, and Pick 6 wagers will be lowered by two percentage points to correct an unintentional oversight by which NYRA’s takeout for exotic wagers was one point above the statutory limit.”

“Unintentional?” For a period of 15 months? A lower takeout? Could they have been more disingenuous?

The news also raised other questions: Will this lead to the mother of all class action suits? Does this mean they were operating illegally and guilty of malfeasance? Will there be sanctions beyond those already outlined? What culpability does New York’s State Racing and Wagering Board share, if any?

The law on this is complex. The NYRA is a franchise of the state, not a licensee. As such, only the Franchise Oversight Board or the state legislature can apply sanctions.

In a sternly worded letter to NYRA President Charles Hayward, FOB chairman Robert Megna not only took the NYRA to task but also the State Racing and Wagering Board for failing to catch the “unintentional oversight.”

“Bettors across North America were overcharged by approximately $7 million,” said Megna at a SRWB board meeting Wednesday. “NYRA itself benefitted by more than $1 million,”

Continued Megna: “Whether this overcharge was due to malfeasance or inadvertence, swift action must be taken to repair the damage caused by NYRA.” And then this:

“You have repeatedly argued that that the high compensation paid to NYRA officials is to insure that talent is attracted to the Association. That position, of which we were skeptical to begin with, rings hollow in light of NYRA’s failure to manage a most basic accounting task.”

SRWB Chairman John Sabini acknowledged that his agency should have acted sooner—preferably when the statute was first breached on September 15, 2010. “Quick action is required not only to protect the bettors but to insure this mistake is not compounded going forward.

“It’s unfortunate this mistake wasn’t discovered sooner and an adjustment made [by the SRWB] in a timely fashion,” the Chairman continued. “But this is NYRA’s responsibility.”

Said FOB Chairman Megna regarding the SRWB’s miscarriage in this instance: “I would be remiss if I did not express deep disappointment in the failure of the Racing and Wagering Board to adequately discharge its regulatory responsibilities.”

The only power the SRWB has in situations like these is to deny a license to licensees. In New York, that means the state’s harness tracks and Finger Lakes Casino and Racetrack, but not the NYRA, a franchisee.

The SRWB can, however, pull the license of NYRA personnel if it is determined that a person or persons is found culpable. Anyone directly involved in horse racing in New York State needs to be licensed; owners, trainers, jockeys and backstretch workers.

In this case, those found responsible can have their licenses pulled if their “general fitness of character is not in the best interests of racing.” This clause was invoked by the SRWB when it ordered the 10-year suspension of trainer Rick Dutrow, a ruling currently under appeal.

Meanwhile, the FOB has ordered the NYRA to work with the SRWB to make reimbursements to overcharged customers. Account holders on and off track have the means to have their wagers reviewed, as do winners having IRS documentation. Everyone else is out of luck.

Some bettors were “lucky”--those super-exotics winners who were not required to pay IRS withholding because payouts were less than they should have been.

The NYRA has been given deadlines meant to address grievances and compensate bettors who can prove damages. Simulcast bettors into NYRA pools are highly likely to be out of luck, joining all those lacking the needed documentation.

Pools where the takeout should be 25% by statute; the Pick 3, 4, 6, Trifecta, Superfecta and Grand Slam, will be lowered to 24% effective December 28 for 15 months, the same time period bettors were overcharged.

Meanwhile, an ongoing investigation conducted by the State Comptroller and Inspector General Offices will continue. In addition to making payment adjustments to cheated bettors, NYRA will be required to make a $50,000 contribution to a racing-related charity.

NYRA must take measures to clear up tax issues created because payouts adjusted upward might now have IRS implications for winning bettors. It also is likely it will try collecting from their simulcast partners which benefitted from underpayment to winning bettors. However, it might lack the legal remedies to do so.

What a mess. What an avoidable mess.