NY Inspector General Investigating NYRA

New York State Inspector General's office has begun formal inquiries.

State investigators wasted little time launching a full-scale probe of the New York Racing Association, a day after it was revealed top NYRA officials may have known about and covered up efforts to keep a takeout decrease from kicking ina move that cost bettors more than $8 million.

The state Inspector General’s office began formal inquiriestalking to officials at NYRA and requesting documentson May 1 as part of a probe that lawmakers say could have civil and criminal implications for NYRA officials.

Several sources close to the investigation say the IG’s office, which has broad investigatory powers, is also seeking thousands of documents that state racing regulators claim NYRA declined to release during its probe of the matter.

The IG’s probe was requested by Robert Megna, chairman of a state panel that oversees NYRA’s finances and who was personally told at least once in public by top NYRA officials that they had no knowledge of the takeout overcharges.

With NYRA already under fire for an increase in equine deaths during its winter meet, and talk over the months about some state officials interested in closing down Aqueduct racetrack, the new scandal represents a potentially crippling blow to the current leadership at the nonprofit racing association. There was speculation at the Capitol that the Cuomo administration, no fan of NYRA, could seek to undo NYRA’s exclusive franchise to run Aqueduct Racetrack, Belmont Park, and Saratoga Race Course if the takeout troubles worsen. Megna’s oversight panel has the legal authority to assume NYRA’s operations.

NYRA officials, meanwhile, declined on May 1 to respond to a number of inquiries, including who will be appointed to take over the duties of NYRA President Charles Hayward and the group’s counsel, Patrick Kehoe. Both officials were suspended Monday, without pay, as the takeout probe expanded to the inspector general’s office.

NYRA Board Chairman C. Steven Duncker for a second day declined an interview request. Duncker is to report by May 4 to Megna, who is also Gov. Andrew Cuomo’s chief budget advisor, on steps the NYRA board is taking to address the takeout controversy.

Hayward had repeatedly denied any knowledge of the takeout problem. The state in 2008 permitted NYRA to increase its takeout on certain exotic bets to 26%with a sunset on that level due to take effect in September 2010. But NYRA continued charging the higher level, instead of the required 25% rate, until state auditors with state Comptroller Thomas DiNapoli’s office caught the mistake in December 2011. By then, more than $8 million in additional takeout costs had been imposed on bettors.

An interim report by the state Racing and Wagering Board released this week depicted Hayward, and potentially other NYRA executives, with knowledge that the takeout decrease was required under law.

Megna this week suggested racing licenses of NYRA officials, at least, could be at stake depending on the outcome of the investigation by the IG, which has subpoena power and the authority to refer wrongdoing cases to prosecutors.