Anne M. Eberhardt

Fallout Expected From NY Takeout Blunder

Racetrack operator charged more than allowed percentage of takeout.

Bettors in North America were overcharged more than $7 million by the New York Racing Association over the past 15 months in higher-than-allowed pari-mutuel takeout rates on exotic wagers, an embarrassing mistake certain to add to NYRA’s woeful relations with state officials.

The error, caught by state Comptroller Thomas DiNapoli in an ongoing audit of a state breeders’ fund account, involved a period of more than a year when NYRA was charging a 26% takeout rate instead of the legally permitted 25% level.

The takeout blunder, which missed the eyes of New York State Racing and Wagering Board officials and a financial oversight panel, raised new problems for NYRA with Gov. Andrew Cuomo’s administration, which has shown little patience for the racing corporation that runs Aqueduct, Belmont Park, and Saratoga.

NYRA several years ago was permitted by the state to charge a 26% takeout rate on some wagers, but that level was to drop to 25% more than a year ago. NYRA, in a public apology meant to appease regulators and bettors, said it would immediately drop the takeout rate to 24%.

Robert Megna, chairman of the state government’s NYRA oversight board, said in a Dec. 21 letter to NYRA president Charles Hayward that bettors had been “improperly” charged a higher-than-allowed takeout level since Sept. 15, 2010.

“Fairness to bettors demands that this action cannot be allowed to stand," Megna wrote. He said that whether the overcharge was due to “malfeasance or inadvertence,” immediate action must be taken “to repair the damage" caused by NYRA.

In a pointed jab at NYRA’s payroll, Megna criticized NYRA’s claims that pay hikes given to its management “rings hollow in light of NYRA’s failure to manage a most basic accounting task.”

The franchise oversight chairman, who is also Cuomo’s top fiscal adviser, said bettors that use advance deposit wagering systems must be immediately reimbursed for the NYRA mistake. He agreed with a decision by NYRA earlier in the day to lower the takeout rate from the 25% allowed by law to 24%.

Megna also backed a plan to impose a financial penalty on NYRA. Megna also said, interestingly, that he would be “remiss” if he did not also express his “deep disappointment in the failure of the racing and wagering board to adequately discharge its regulatory responsibilities” to catch the accounting error by NYRA.

The matter poses problems, state sources said, for NYRA and the racing board’s leadership, which was not appointed by the current Cuomo administration since it took office nearly a year ago. Given Megna’s unusual public rebuke, it remains uncertain whether NYSRWB chairman John Sabini can hold onto his post under the weight of the new NYRA controversy.

NYRA officials called the mistake “unintentional” and announced a cut in the takeout rate on trifecta, superfecta, Grand Slam, Pick 3, Pick 4, and Pick 6 wagers from 26% to 24%. The higher levels were approved by state officials in 2008 when NYRA was granted a new franchise agreement to operate the three tracks.

The takeout rates was supposed to be reduced by NYRA 15 months ago, but the lower rates for bettors did not, as planned by law, occur. NYRA blamed the mistake on the “complexity” of the state’s takeout provisions.