AG's Report Suggests NYRA Unfit to Operate Franchise

State officials should consider removing the New York Racing Association as operator of Aqueduct, Belmont Park, and Saratoga racetracks for ignoring and covering up an empire overrun with employee corruption that includes cheating of its customers, New York Attorney General Eliot Spitzer has charged.

In a 64-page report following a three-year inquiry into NYRA's operations, the attorney general criticized the NYRA board of trustees and said that at the very least NYRA president Terry Meyocks should be ousted for weak responses to wrongdoing, running up a soaring personal expense account, and overseeing a management team that "has failed and cannot be relied upon to restore the public trust."

A copy of the report was obtained by The Blood-Horse.

The report detailed widespread abuses at NYRA's tracks by its employees, from illegal betting and money laundering to tax fraud, loan sharking, and cheating bettors out of their winnings. All the while, NYRA management took a "see-no-evil'' approach to the problems, the report said. It said NYRA's board of trustees must consider how the abuses could go unchecked for the past decade and "consider how its own conduct, structure and procedures contributed to the failure of oversight."

The Spitzer inquiry said some other entity, whether it be a state agency or a whole new model, be brought in to run the three tracks. "The current structure has not, does not and will not work,'' the report said.

It said NYRA has been a corporation "that is, at best, indifferent to corruption.''

"Insistent that no one understands racing but they, NYRA's top officers have resisted reform, misled regulators and, when forced to address glaring deficiencies--including criminal conduct--adopted only weak measures," the report said. It described racetracks where employee corruption was a daily occurrence, affecting customers, NYRA and, ultimately, the state, which shares in NYRA's revenues. It characterized the atmosphere at NYRA as overrun with a "culture of criminality."

The report held Meyocks out for some of its harshest criticism, saying that for years he failed to take action to solve abuses and even criminal behavior that had been pointed out to him by auditors and investigators. It raised questions about Meyocks' expense account, noting the NYRA chief, who has a $375,000 annual salary, over a three-year period charged $140,000 on his NYRA credit card that included entertaining family members and running up bills on such things as $250 bottles of wine at plush restaurants. It said Meyocks has been unable to produce back-up documents for $13,800 in dining expenses.

The report did not specifically call for any further indictments of NYRA employees, though it did not rule it out. There have been plenty of those in the past couple years involving mutuel tellers running elaborate money-laundering operations and tax fraud. Nor did the report cover a whole range of other areas NYRA has had questions about, including its contracting procedures and financial dealings with its Capital Investment Fund. Sources said Spitzer and other state and federal agencies are still looking into those, and other, areas. The report also was silent on the horse racing operations at the tracks.

The inquiry described routine ways in which tellers cheated unsuspecting customers out of their winnings, including "dropping the customer,'' the "slow hand,'' and other techniques in which a teller could, with either the help of their electronic betting machine or sleight of hand, pay back a bettor less in winnings than they were owed.

It said NYRA employees overran weak internal controls to profit for themselves on uncashed tickets and even steered money to themselves by shortchanging regular customers in rebates in NYRA's "mystery voucher'' promotion. It said NYRA management ignored tellers betting on races, a violation of state law. "If the mutual clerks did not bet, we would not have a handle,'' one manager told an outside consultant.

The report called NYRA's internal auditors "toothless'' and incapable or unwilling to resolve fiscal irregularities. It said NYRA's own security department engaged in conduct that "may rise to the level of criminality.''

It said NYRA in 1996 replaced investigators who were all retired New York City detectives with security staff largely inexperienced in handling the abuses at the racetracks. It said NYRA security staff was unable to say what happened with drugs they routinely confiscated at tracks, and lacked an awareness of organized crime figures on the grounds at tracks.

The report said undercover investigators observed NYRA's security members "making wagers at betting windows and patrolling with betting slips protruding from their pockets.'' It also characterized a security team that was abusive and threatening to part-time, seasonal betting clerks, many of whom were retirees, teachers and college students, if their cash boxes turned up short. But they turned a blind eye to year-round tellers who, the report said, were the source of the tracks' real problems.

All the while, current and former NYRA employees told Spitzer's investigators of a startling lack of oversight within NYRA's betting office, a unit that handles about $3 billion a year in bets. It said tellers used cashbox money to place bets for themselves; run high-interest, loan-sharking operations; one even used a customer's gold watch for collateral.

The report said NYRA, unlike virtually any business, let years of abuse continue by not having tellers count their cash receipts at the end of the day, a system open to theft and, as it turned out in several instances, employees cheating the state and federal government on their income taxes. Teller cash boxes would be routinely $10,000 short at the end of the day.

The abuses have, in recent years, led to arrests, including the NYRA tellers convicted of laundering, for a 5% kickback, more than $300,000 for an undercover policeman posing as a cocaine dealer. The report said what few checks and balances there are at NYRA are easily bypassed by front-line tellers trying to cheat. It said, for instance, that hundreds of clerks are monitored by only six "bay supervisors'' who spend as much, or more, time dealing with customer issues than oversight of tellers. When bay supervisors would approach teller bay areas, tellers would yell out "shark in the bay'' or "willet in the bay'' to alert others.

Even the parking lot attendants were called into question for keeping parking lot fees and, in the case of one undercover investigator driving in a BMW, charging more for expensive cars at Saratoga. The report said NYRA changed its parking procedures at Saratoga upon being told of the abuses, but did nothing at Belmont or Aqueduct.

The abuses, despite indictments of employees and warnings by investigators, were casually dismissed by NYRA, which Spitzer's report called "insular, opaque and unaccountable.'' It noted, for instance, that NYRA ignored for several years a request by the Internal Revenue Service that NYRA install cameras at certain betting windows.

Over the years, the report said, NYRA management had a typical response to problems brought to their attention: "First to delay, then to mislead, and, when faced with the inevitability of the truth emerging, to take steps to minimize embarrassment." It said internal documents showed "nervousness that its effort to hide the teller tax-evasion scheme would be revealed.''

The report said a new NYRA chief must be brought in "with experience beyond the tight-knit world of horse racing'' to make widespread changes in personnel and management practices.