Thursday, December 29, 2011

You’re Entering the Wondrous Dimension of Imagination. . .Welcome to the Spin Zone

SARATOGA SRINGS, NY, December 29, 2011—When it comes to managing the fallout from the takeout error made by the New York Racing Association by which bettors were overcharged by more than $8 million over a 15-month period, it turns out that NYRA and several media outlets know more about spin cycles than a Maytag repair man.

After keeping a low profile for nearly a week during the Aqueduct Christmas hiatus, NYRA CEO Charles Hayward surfaced in a Daily Racing Form interview Tuesday. “I’m the CEO, ultimately I’m responsible,” before adding the qualifier “a lot of people both inside NYRA and the state [had a chance] to review [the statutory reduction] and the bottom line is that we missed it.”

In Thursday’s Saratogian, Adirondack Trust Co. president, CEO and board chairman Charles V. Wait, also a NYRA Board of Trustees member, said the incident was “clearly unintentional,” that “these things happen in business from time to time” and that no one should lose a job over this, only that “it’s something for the [NYRA Board] Audit Committee to review.”

Beneath the headline “NYRA’s Hayward says takeout reduction permanent,” somewhat akin to a NYRA press release on this situation last week (“NYRA lowers takeout)” came a second admission of culpability and a belated apology: “We’re trying to do what we can to fix that for the customers,” Hayward told the DRF, “but it doesn’t eliminate the fact that we made a mistake, for which I apologize.”

Hayward also said that the 2% compensatory takeout reduction on five exotic wagers would be permanent, “not for only 15 months as had been reported by some outlets.” Those outlets, however, were only reporting what the language led them to believe.

A New York State Racing & Wagering Board statement from a hearing on this situation read in part: “Chapter 115 of the Laws of 2008, Section 238 of the Racing Law… the matter remains under review; the Board approved the request to bring NYRA’s takeout on exotic wagers into compliance with statute. Furthermore, the Board approved the following actions in relation to approval of this request and consequences of the use of the excessive takeout rate for approximately 15 months.”

Those who blamed state racing law as being very complex seemingly knew what they are talking about. The language “approximately 15 months” apparently can be taken to mean forever, even if the minimum amount of reduction time proscribed must be in place for at least that length of time. If, then, NYRA does not request an increase back to higher pre-existing levels, the 24% takeout rate would remain in effect permanently.

The language in the statute relating to the Pick Six is also parsed, the bet defined as a “super-exotic.” All combination bets consisting of at least three elements up to five are termed merely “exotic.” Since NYRA is permitted to charge anywhere up to a 36% rake on the Pick Six—who conjured up that number?—the 26% rate Pick Six bettors were charged during the 15 months in question falls within the parameters of the statute.

Capice?

HRI has not seen any language that governs what measures the state’s harness tracks or Finger Lakes Thoroughbreds must take to correct overcharges made on their customers. All simulcast organizations were unintended beneficiaries of the illegal rate. The SRWB did, however, instruct the state’s OTB corporations to follow NYRA’s lead to make bettors with documentation whole.

The 15-month error was in all probability an oversight, albeit one of enormous magnitude, falling between the cracks of a betting chasm as wide as the Grand Canyon. But it makes no sense, especially given that Genting’s New York City Casino on the grounds of Aqueduct Racetrack is a sign that happy days may be here again. That the Association would take such a gamble and show such utter disregard of racing law seems unreasonable, although history could contradict that notion.

However, it would have been better had Hayward’s apology come quicker, getting out in front of the flack before setting the spin cycle on high. It would have appeared more sincere had he not pointed out in the DRF story that the Association has been acting without a designated chief financial offer since October 5, or that takeout rates are published daily in the official track program, Daily Racing Form and off-track locations. This was not a time for playing the caveat emptor card.

Nor was it timely to state that NYRA was “opposed initially” to the 2008 takeout increase as part of the franchise agreement because “it was bad for business.”

And so the action taken by the Association “brings NYRA into compliance with the statutory provisions. NYRA states that they are requesting to lower the takeout rate an additional one percent to 24% to compensate their customers for the prior higher rate. It should be noted that the allowable range set forth in statute for exotic wagers is 15% to 25%. The requested rate is within the allowable range.”

That means that if it wanted, NYRA could request takeout reductions in “exotic” pools as low as 15%. But what are the odds, especially after Hayward declined to comment on whether NYRA would seek a takeout reduction on straight win, place and show wagers, and two-horse wagers such as the exacta and daily double?


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