Guild Says Investigation Reveals $2.1M Diverted During Gertmenian Tenure

An internal investigation conducted by new Jockeys' Guild leadership reveals nearly $2.1 million was spent using funds that were earmarked for other purposes during former Guild president Dr. Wayne Gertmenian's tenure, according to a Guild press release issued Thursday.

Guild interim national manager Darrell Haire said most of the Guild's accounts were nearly depleted when new management took over Nov. 15.

The preliminary investigation looked into the financial condition of the organization during the last two years of the tenure of Gertmenian and his management company Matrix Capital Associates.

"The investigation reveals an apparent pattern of increasing fiscal neglect extending for at least the past 18 months," said Haire. "While at this time it cannot be determined with certainty exactly where the money went, it is generally believed that the money was inappropriately used to fund the organization's daily operations and for paying health insurance claims," the release stated.

Under Gertmenian's management, jockeys who contributed an amount of money in excess of their dues and assessments had those monies held in the general operating account of the Guild. In the years prior to Gertmenian's management, those monies were treated as individual savings accounts. As of Nov. 15, this overpayment of mount fees on behalf of all jockeys who contributed was $442,000.

When the new management took over it was determined that there were not enough assets in the Guild's general operating account to meet this responsibility to its members. "As our union gets back on its feet, we will have to set aside funds to restore the riders' money," Haire said. "It was a shock to all of us and to the board members that these funds had been depleted," Haire said.

The Guild has a self-funded health plan, called the Health Benefit Reserve Account, which also showed signs of depletion. The account's purpose is to hold funds for two and a half months of expected health claims, so that adequate funds for payment will be available. As of Oct. 30, the account's balance was $6,029, down from more than $860,000 in April 2004.

In addition to a decline in amounts paid to the Guild by the racing industry, another reason for the dramatic drop in the Health Benefit Reserve Account appears to be the failure of prior management to collect insurance premiums owed by some of the membership, Haire said. Uncollected monies presently total more than $1.1 million. According to Haire, it appears that prior management may have allowed certain selected riders to remain covered by the health plan and not have to pay premiums.

"While I have great sympathy for riders who find themselves in a difficult place financially, it was totally irresponsible to allow premiums to go uncollected," Haire said.

The internal investigation also discovered that past management left a large number of unpaid bills--some of which are six months old, Haire said. These bills range from medical claims for permanently disabled jockeys to rent and utilities. Disabled riders' claims were handled by staff in a timely manner, yet findings show they remained unpaid for months after being turned over for payment to the organization's management.

"The exact number of unpaid bills and total amount owed will take time to verify," Haire said. "The Guild's interim leadership anticipates negotiating with vendors and providers to arrange payment options," he added.

Additionally, according to Haire, the internal review found that bank statements for the Guild's general operations had apparently not been reconciled since July 2005. Furthermore, several of the organization's other internal accounts had not been reconciled for seven to 10 months.

Haire reported the internal review also found that there were no Investment Account transactions recorded since June 2005, but the account has been nearly depleted as well. Moreover, no health claims transactions had been uploaded to the accounting system since July 2005.

As previously reported, a total of $217,000 in unauthorized checks was written Nov. 15, the day of the emergency meeting of the organization's senate. The Guild's new leadership was able to obtain a temporary restraining order stopping payment on four checks totaling $104,000 made out to Gertmenian's management company, Matrix Capital Associates, said Haire. Two other checks totaling about $113,000 cleared the bank, and these checks were made out to Gertmenian for approximately $69,000 and to Albert Fiss for $44,000, he said.

According to Haire, the internal investigation revealed that the checks appear to be
signed by Fiss and Gevork Asatryan, the Guild's former financial controller and chief financial officer.

The issuance of the checks was a direct violation of financial controls put in place in early November by the board of directors which required written approval by Guild treasurer Jeff Johnston of checks over $200. The only exception was for checks that were written to disabled jockeys.

The Guild plans to hire an independent accounting firm to conduct a formal audit, the release stated. Also, disability checks are being issued to disabled riders and the health plan is fully paying its claims now.

The investigations by the FBI and the police department in Monrovia, Calif. are also continuing and have the full cooperation of the interim Guild leadership, said John Velazquez, chairman of the interim board of directors. The Guild expects to file a civil lawsuit against Gertmenian and possibly others in an attempt to recover unauthorized expenditures, he added.

Finally, the Guild is initiating talks within the industry to improve the Guild's funding arrangements. It is not anticipated that any decisions will be made concerning the Guild's future plans until those talks progress further.