The New York Racing Association board of directors will be dominated by a new panel of members selected by Gov. Andrew Cuomo and state legislative leaders under a deal announced May 22.
The agreement was unanimously by NYRA board members, who have been under fire from the Cuomo administration over everything from a pari-mutuel takeout scandal to equine deaths at Aqueduct Racetrack. The weaker role on the NYRA board for racing industry insiders will last three years for a new panel being called the NYRA Reorganization Board.
“We know that long-term this is not a venture for government to run," Cuomo said of the state control of NYRA.
The new 17-member board will include seven members appointed by Cuomo, as well as two each from legislative leaders in the Assembly and Senate. NYRA would be permitted five board seats.
Cuomo will end up choosing the future board chair. Breeders and horsemen will continue to have non-voting representation on the board.
Cuomo portrayed the need for the board’s reorganization as coming at a time when NYRA is facing another scandal that has undermined its public reputation. He also stressed that a number of key decisions will be made by the state and stakeholders over the next couple years as the state tries to legalize Las Vegas-style casinos on non-Indian lands.
“This definitely is the best path going forward for New York racing," NYRA board chairman C. Steven Duncker said in an interview. “I think the structure, at a time when gaming is changing like it is, is the best structure for racing. I also think it is just a huge deal and very important for the industry that the governor has put his support behind the racing industry.”
When asked if the NYRA board felt it had a gun pointed to its head, Duncker said: “No."
Cuomo had floated a number of possibilities, including stripping NYRA of its exclusive franchise to run Aqueduct, Belmont Park, and Saratoga Race Course. The controversy comes as NYRA seeks to bolster its standing with the upcoming final leg of the Triple Crown June 9.
The governor praised the NYRA board for going along with the deal. “We had an alternative: We could have fought, (but) we decided to come together," he said of the possibilities of a protracted legal fight in the courts over the NYRA franchise.
The current board has 25 members. Duncker, whose term is ending in September as NYRA chairman, said it has not been decided which five of the current 14 NYRA board members will remain on under the new configuration. Cuomo and legislative leaders have not made decisions about their selections.
It is also uncertain when the new board composition will become effective. Legislation to permit the changes has not yet been introduced; the 2012 legislative session ends in June. The new board becomes a legal entity when a majority of the public members are appointed.
Cuomo said the board will revert back to private control in three years. He noted the “dramatic impact" decisions involving possible casino expansion will have on racing in New York.
“Racing is very important to the state of New York," he said of the $2.4 billion industry.
But Cuomo criticized the business model created to run the three Thoroughbred tracks, which he said has been “problematic from the birth” of NYRA in 1955. He checked off the number of legal and financial controversies that have plagued NYRA over the years.
During the three-year period, he said the new board will restructure how NYRA is run. He did not rule out various possibilities, including the possibility of closing Aqueduct, an idea his administration has tentatively explored over the years.
It is uncertain what effect, if any, the new board configuration will have on an investigation by the state Inspector General’s office into the takeout scandal that led to $8.5 million in overcharging on exotic bets. Cuomo said that investigation is ongoing.
"NYRA desperately needs a major overhaul," said state Comptroller Thomas DiNapoli, whose auditors uncovered the takeout overcharges. "Reorganizing the board is a step in the right direction."
State racing officials have said top NYRA officials knew the takeout rate was supposed to have expired 15 months before it was caught by auditors from the state comptroller’s office. The scandal already cost two top NYRA officials, including former president Charles Hayward, their jobs.
Officials said a nationwide search will begin to find a new chief executive officer and general counsel; NYRA had angered the Cuomo administration when it appointed replacements for Hayward and Patrick Kehoe, the racing group’s former general counsel. Cuomo said the hiring will be up to the future board.
Cuomo said the move is also being made to “restore the public trust” in NYRA.
“We cannot allow the industry to fall into disrepute," Assembly Speaker Sheldon Silver said.
“Governor, you have the full support of the NYRA board,” NYRA board member Charles Wait said.
Cuomo’s criticism of NYRA has intensified in recent weeks. The current NYRA board was not enthusiastic earlier this year with a plan by Cuomo to place a massive convention center on the grounds of Aqueduct as part of a casino expansion plan by Genting, the operator of the video lottery terminal casino at the track.
The rash of equine deaths at Aqueduct this winter drew new scrutiny for NYRA and grew worse when the takeout scandal erupted. NYRA officials insisted they made an honest mistake in not lowering takeout levels by one percentage point to 25% on exotic wagers. But the New York State Racing and Wagering Board, accusing NYRA officials of stonewalling its investigation, preliminarily said at least two top officials-- Hayward and Kehoe--allegedly knew of the error.