Despite Concern, Horsemen OK Hub Licensing Deal

Despite the opinion of its general counsel that the action could be "fraught with legal risk," the National Horsemen's Benevolent and Protective Association board of directors voted July 16 to endorse a licensing agreement with a group that plans to operate a wagering hub for the benefit of horsemen in North America.

The International Horsemen's Wagering Assurance Group, two principals in which are former National HBPA officials, is laying the groundwork for a hub that would accept horse-race wagers internationally and domestically. The hub would be located in Curacao, though the group has applied to operate a second hub in North Dakota.

The National HBPA, through the licensing agreement, would receive an undisclosed percentage of handle in exchange for its endorsement. IHWAG, however, would have to cut deals with individual HBPA affiliates to take bets from their states.

IHWAG is headed by former National HBPA president John Roark of Texas, former National HBPA vice president Tom Metzen of Minnesota, and Tom Metzen Jr., who has assisted the National HBPA on insurance issues. The men are in the process of negotiating with racetracks and horsemen for support and product.

A special National HBPA subcommittee recommended approval, but not after another review following a July 15 National HBPA executive committee meeting at which affiliate representatives said they were surprised to learn IHWAG planned to take bets from within the United States. In addition, there were liability issues ultimately addressed in the July 16 approval motion.

The National HBPA won't be held liable in the case of legal action against IHWAG, officials said.

Still, general counsel Doug McSwain expressed concerns about the move by the National HBPA in light of growing concerns about interstate simulcasts and account wagering in general. The U.S. Department of Justice contends that, under the federal Wire Act of 1961, interstate simulcasts aren't permitted; the horse racing industry believes a 2000 amendment to the Interstate Horseracing Act of 1978 addresses that by allowing account wagering in states that expressly permit it.

"I can't say you're headed on a crash course with what's proposed here, but I see legal questions that four or five years ago were very remote," McSwain told the National HBPA board of directors. "I see a cranking up of legal enforcement by the Justice Department, and it's something we need to be careful of."

McSwain noted other account wagering services are doing business "with a vengeance" even in states that don't expressly permit the practice. He said if the IHWAG hub became successful, it could become a target, and that even a "de facto" relationship with IHWAG could impact the National HBPA despite the liability clause in its agreement.

McSwain suggested larger account wagering companies could become targets if the Justice Department wants to make an example out of them.

Meanwhile, Peter Eckabert, another attorney who provides services to the National HBPA, said he didn't see the need for concern. He said the National HBPA is lending IHWAG its name and logo, and noted IHWAG, in its calls for transparency, would be properly licensed.

"I don't see how in the world you could have a conspiracy," Eckabert said.

The vote to endorse IHWAG wasn't unanimous, though most affiliates with representatives present at the meeting in Minneapolis voted in favor of it.

"I didn't think this would be such a sensitive issue," Metzen Jr. said. "We wanted harmony with everybody. It's very surprising, to be honest. It just kept getting weirder and weirder and weirder, and very political."

There is no timetable for a startup of the IHWAH hub, though Roark after the meeting said he's in discussions with racetracks and horsemen's groups.

"We're trying to get support," Roark said. "We'll be offering the same financial incentives to other major horsemen's groups. We wanted to get (the National HBPA endorsement) done first."

"I think it's a great move for all of us," said Metzen Sr., who helped develop the hub plan as a way to provide a revenue stream for the National HBPA, which operates on a very tight budget. "I think it's really going to be a win-win deal for everyone."

In other business, Pennsylvania's Joe Santanna, who took over as president when Roark resigned in April, was elected president of the National HBPA for two years through July 2008. Robin Richards of Virginia was elected first vice president; she would step in as president should Santanna not be able to fulfill the duties.

The board of directors also accepted the defection of the Pennsylvania Thoroughbred Horsemen's Association from the National HBPA effective June 30. The group represents horsemen at Philadelphia Park.

No reason was made public at the meeting though officials earlier said the Pennsylvania THA had notified the National HBPA that it needed funds to help combat potential changes to horsemen's revenue splits for slot machines in the state. The Pennsylvania THA has paid the National HBPA $30,000 a year in dues.

Several years ago, Philly Park horsemen resigned from the Thoroughbred Horsemen's Association, which represents horsemen in Delaware, Illinois, Maryland, New Jersey, and New York.

The National HBPA also approved a structure that provides for a lump-sum payment for continued membership in the National Thoroughbred Racing Association through 2007, with an option to renew in 2008. Under the plan, all affiliates would contribute to the total $860,000 a year in dues.