More to Equation Than Just Wagering Integrity

by Tom LaMarra and Tom Precious

With a $1-million contribution to kick-start a new Wagering Integrity Alliance, the National Thoroughbred Racing Association and Breeders' Cup have embarked on a review of pari-mutuel wagering policies and tote systems. But it's not without some twists and turns.

Giuliani Partners, headed by former New York City mayor Rudolph Giuliani, was hired to manage and oversee the review of electronic wagering systems, reportedly at a cost of no less than $1 million. But there's more to the equation, officials said.

Mass media attention brought on by the Breeders' Cup Ultra Pick 6 probe has put horse racing in an unfavorable light, which created a need to obtain the services of a "third-party heavy-hitter," in the words of one official.

Giuliani Partners is allied with the accounting firm Ernst & Young, which had already been hired by the NTRA to assist with the review of pari-mutuel wagering. Among other clients of the company, formed last year when Giuliani left public office, are Nextel, the wireless company, which wants to improve emergency communications technology, and Mexico City, whose police department is attempting to reduce crime.

Giuliani is a longtime handicapper and racing fan. He also is said to be grateful to the horse racing industry for keeping the Breeders' Cup World Thoroughbred Championships at Belmont Park in New York just weeks after the Sept. 11, 2001 terrorist attacks on the World Trade Center.

NTRA commissioner Tim Smith said Giuliani's company was hired primarily because of its expertise in security issues.

"Part of our need, after the facts are an independent, respected voice to say these are the issues, these are the solutions, and I endorse them," Smith said of the reasoning behind the hiring of Giuliani Partners. "Once the review process is complete, or further along, he will be a good position, given his independence and reputation, to keep the issues in proper perspective."

That a former Autotote employee has admitted to altering tickets after races have been run has generated unwanted publicity. In New York, a legislator already is poised to introduce a bill that makes tampering with wagers a felony. In Washington, D.C., the pari-mutuel industry for years has sought to protect itself in the wake of efforts to ban Internet wagering.

Smith said Giuliani wasn't hired to deal with legislators, but he could be an "important adviser and counselor to us on any legislative issues that come up in relation to (the pari-mutuel review process)."

The NTRA board of directors voted Nov. 19 in New York to hire Giuliani. The vote was unanimous, officials said, though Terry Meyocks, president of the New York Racing Association, abstained.

Executives within NYRA were said, according to sources, to be upset the NTRA turned to Giuliani. In 1998, New York City fire marshals popped in for a surprise inspection of Aqueduct during a bitter dispute over simulcasting between NYRA and New York City Off-Track Betting Corp.

The battle peaked last year when Giuliani tapped Frank Stronach's Magna Entertainment to purchase NYCOTB, a deal that eventually collapsed but not before NYRA chairman Barry Schwartz unleashed a verbal bashing of Giuliani and his top lieutenant in the deal, Michael Hess.

Schwartz called the award by Giuliani to Magna "stupid," and accused Hess of not keeping his word during the bidding process. Hess is now a partner in Giuliani's firm and will be among the point people assigned to the NTRA contract.

When asked what he thought of Giuliani's retainer with the NTRA, Schwartz said: "No comment."

Schwartz did say said the racing industry should recognize it acted only after NYRA officials first noticed something out of the ordinary in Breeders' Cup Ultra Pick 6 wagers placed through Catskill Off-Track Betting Corp. The officials were NYRA executives Jim Gallagher and Bill Nader.

"They were the first to find this out," Schwartz said. "They notified the mutuel department at Arlington and called the state. They notified all the authorities."

Officials close to the situation said Giuliani's past history with NYRA generated very little friction when it came time to vote. Though NYRA is not among a list of "founding members" of the Wagering Integrity Alliance, according to a list released by the NTRA, it has the option to participate in funding the endeavor, at least through a cooperative advertising reimbursement.

A dues-paying racetrack entitled to $100,000 in co-op advertising for 2003, for example, would get $67,000 under a one-year change in the formula. The remaining $33,000 would go toward the Wagering Integrity Alliance.

The NTRA and Breeders' Cup have chipped in $1 million, and at least another $1 million has been pledged in total by the "founding members." Tote companies are expected to contribute depending on market share, officials said.

"The response has been tremendous," Smith said.

The alliance figures to be around for a while. One of its founding members is The Jockey Club, which has advocated an upgrade of tote technology and plans to be involved in the process as the industry moves forward. In 2000, IBM Global Services negotiated with the NTRA on a deal that would have involved a centralized tote system and improved technology.

NTRA board member Alan Foreman, chief executive officer of the Thoroughbred Horsemen's Association, said the pari-mutuel review process could take "six months to a year," and that there are some changes that can be made quickly. The big challenge, he said, is tackling the relationship between the racing industry and the tote companies.

"It was put before us two years ago, and we ducked the issue for whatever reason," Foreman said. "I don't think we can duck the issue now."