August 16, 2012--As the process of finding “new” NYRA Board appointees continues outside the hearing and view of the media, the resulting information vacuum has so far spurred more negative speculation than positive expectation. Indeed the prolonged silence from long-standing, transparency-in-New-York-racing advocate, Bennett Liebman, leaves the impression he is being held incommunicado.

With nearly a quarter-century’s experience dealing with racing’s administrative, political, legal, and ethical issues - documented through extensive public communication of his positions on those issues – Liebman is certainly the best-known (and arguably most-qualified) advisor on racing that New York Gov. Andrew Cuomo could have chosen. Not many merit a favorable endorsement, such as Paul Moran’s “Appointing Liebman a good start” (http://espn.go.com/blog/new-york/horse-racing/tag/_/name/bennett-liebman)

Perhaps by reviewing some of Liebman’s archived opinions, we can anticipate the characteristics of new NYRA board members and what their objectives might be. Prior to becoming Cuomo’s Deputy Secretary for Gaming and Racing, Liebman himself served on the NYRA Board as an appointee of Gov. David Paterson.

Liebman’s lone vote against pay raises for NYRA executives proved prophetic. It may have also reflected his thoughts from a February, 2006 article, “NYRA Trustees and the Duty of Loyalty: The Koala in the Board Room,” (http://www.governmentlaw.org/files/nyra_trustee_loyalty.pdf), in which he wrote, “The concept that board members owe a duty of loyalty to the New York Racing Association ought to be an issue for every one concerned with New York racing. …

The NYRA Board’s federal monitor – working with the State Comptroller and the NYRA board itself – should be establishing specific guidelines and standards … Board member understanding of their duties at NYRA can only help create a more transparent, better-governed NYRA, which should be in the best interest of the sport of horse racing in New York State.”
In his September, 2007 “Prepared Remarks to the New York State Senate Committee on Racing Gaming and Wagering” (http://www.governmentlaw.org/files/LarkinPresentation.pdf), Liebman confirmed his credentials as a champion of racing’s customers’ interests.

“What we want in a franchise holder is what is best for the fans of horse racing.

"That means the best quality racing at the best price, at the best facilities, and with an assurance of fairness in the racing.… it’s the one sport where the fans through their wagering dollars are true participants in the game. If we aren’t working for the fans of racing in government, we’re not working at all.”

Fewer of Liebman’s quotes appeared in other writers’ articles during his tenure on the NYRA board, but his perspective as a racing fan was expressed more frequently in his own blog for the N.Y. Times. Among the issues he covered in “Reasons for the Decline of Horse Racing” (http://therail.blogs.nytimes.com/2010/06/06/reasons-for-the-decline-of-horse-racing/), was…

“…Takeout Issues. Again, maybe this didn’t matter when racing was the only game in town, but how with a 20 percent overall takeout does it compete with slots (a 5 to 10 percent takeout), and many table games (skill games such as blackjack and poker) which give you an even better chance at winning. When you hear from the major rebate shops, that without the rebate, even their most skilled players almost never beat the takeout, you wonder why you play the game.”

My personal concerns with Liebman’s stated positions involve the issue of rebates, In his November, 2003 piece, “What Do We Do About Rebates?” (http://www.governmentlaw.org/files/rebate.pdf) and later in his March, 2004 presentation, “Rebates and Takeout: Can Racing Satisfy Its Biggest Customers and Still Survive?” (http://www.harnesstracks.com/2004_annual_meeting/Rebates_And_Takeout.htm), Liebman supported the practice of selective rebating based on wagering volume despite recognizing its opposition. The remaining quotes preserve the full context of Mr. Liebman’s remarks. His concept of “player equality” struck me as somewhat Orwellian.

In the earlier piece, Liebman wrote, “…Who wouldn’t want to get more bang from their gambling buck? Who wouldn’t want a 50% discount off the retail price of a bet? …

“If takeout at an average American [track] is 20%, the rebaters are likely to give between 5% and 12% back to their major bettors. …

“Proponents believe that it has the capacity to significantly increase handle in horse racing. Bettors who win or who lose far less are likely to increase the size and frequency of their bets. …

“Opponents of rebates believe that it creates a two-tier system in racing where only the $2 bettors pay more. They believe it ends the mutuality in the pari-mutuel system. …

"So the idea should be to devise a system of rebates that maximizes the benefits of the rebates while minimizing their downside. We want a system that encourages innovation, increases handle, contributes to the overall benefit of the industry, and treats all players equally. … To assure equal treatment of bettors, the determination of the size of rebates should be determined only by objective factors.”

In the later article, Liebman argued, “…Rebates are here to stay. Let’s make sure they work for the entire industry. Here are the five goals that a coherent, rational rebate system ought to fulfill:

Openness: Let’s develop a system where everybody knows where the rebates are. Let’s make sure that the rebates are open and available to all eligible customers. Let’s fully disclose the extent of the rebates to enable tracks and horsemen to make intelligent use of their simulcast decision-making status under the Interstate Horse Racing Act, and Let’s disclose the rebates to the customers so they know which rebate service or which track they should be betting at.

Fairness: let’s begin by recognizing that the free market has come to horse racing. Maury and Dave and others have just taken their business to Wal-Mart instead of Woolworth’s. They are buying their Calvin Klein jeans at Sam’s Club, not from the CK store. Under these circumstances, governments setting the takeout rates need to react so that racetracks don’t just turn into Woolworth. Fairness to bettors, who are also taxpayers, requires lower takeout rates. We have established a system where horse racing is largely uncompetitive with casino gambling. As casino gambling spreads throughout urban and eastern America, racing will need to lower takeout rates. They have to realize that a fair parimutuel system is one that does not gouge its customers.

Flexibility: overall legalization of rebates allows racetracks to be flexible. As I have said before, the market is now in control of racing. If racetracks want to be in the rebate game, there is no longer any reason for them not to be. It is absurd to see casinos and racinos offering rebates to their casino customers through player reward cards while being unable to offer rebates to their racing customers. Let’s s at least get our tracks in the game.

Mutuality: and I have not heard anyone discuss this. The reason for our parimutuel system is mutuality. All bettors are supposed to be treated equally. This has legitimized and distinguished our system of wagering from the old bookmaking system where bettors were not treated equally. In fact, there is an element of unfairness in offering rebates to a select few. My suggestion is to realize that mutuality does not require arithmetical, exact treatment. All it requires is that all people are eligible to have the opportunity to receive rebates. Make it the Discover card for racing--bet $100, get back two percent, bet $1000, get back five. Everyone can’t participate. Their level of participation determines the reward. What is wrong with that?

One thing that might be wrong is the criteria for a rebate. Now if I am running a track, and I can do anything I want to with a rebate, I am giving them to horsemen and owners. That will keep them racing as many horses as possible at my track. I am giving rebates to friends and contributors to the governor and leaders. Unfortunately, that is not what we want. That would be wrong. The criteria for rebates should be limited to the amount of wagering, the types of bets, and the tracks on which the player is betting. Again, the point of a responsible rebate system should be to preserve mutuality. Every bettor ought to be potentially eligible for the same rewards.

Integrity: this open mutuel system lets us see what is going on. We can tell if someone is sending their wagers through different hubs. We can track bets. We know what is happening. A rebate system with these elements can give players more confidence in the system and can help regulators track suspicious wagers more efficiently.”
The reader may recognize some “Doublespeak” in the preceding quote as defined by George Orwell in his novel, “1984.” If not, then perhaps the relevance to paraphrasing Orwell in another of his novels, “Animal Farm,” - All bettors are created equal, but some bettors are more equal than others - is more obvious.

TOMORROW: Rebates v Takeout, Leveling the Playing Field