Keeneland Photo

ARCI Calling for Oversight of Sales, Breeding

Sale company executives defend operations and integrity.

An Association of Racing Commissioners International committee put out a formal call Dec. 13 to require additional regulatory oversight of public auctions and breeding by either expanding the authority of state racing commissions or by creating an independent "suitable entity."

According to ARCI president Ed Martin, the call for oversight that alleged widespread use of drugs in sale yearlings and 2-year-olds and referenced a recent incident of money laundering at an Oklahoma Quarter Horse auction was intended to generate an industrywide discussion.

"We are not looking to create layers upon layers of regulations that they are already complying with," Martin said Dec. 14. "This was not intended to be adversarial discussion. There may be things (sale companies) are doing that would allay any concerns, and we might be able to offer some constructive suggestions they may be interested in doing." 

The call to action, however, did not come across as an invitation for open discussion.

"These significant portions of the racing industry are totally unregulated," ARCI chair Jeff Colliton stated in the ARCI press release about the breeding and sales industries. "If we care about our horses and the integrity of the sport, the racing industry can no longer turn a blind eye to the need to address this shortcoming." 

A Nov. 7 meeting of ARCI's Equine Welfare Committee prompted the call to potentially expand the jurisdiction of state racing commissions. During this meeting, committee members discussed concerns about a class of medication called bisphosphonates legally approved by the U.S. Food and Drug Administration to treat navicular disease in older horses, but anecdotally connected with use in some horses offered at auction. The medication is used in humans to treat bone loss caused by osteoporosis, but in horses also functions as a painkiller, according to veterinarians and FDA literature.

Using this medication in young horses is a concern because it disrupts the natural cycle of bone formation and breakdown, which allows bone to adjust to influences like training. Bisphosphonates disrupt the breaking down part of the cycle that typically is eliminating weak or diseased bone so it can be replaced by healthy bone tissue. 

The potential affect on young sale horses is that the disruption of normal bone development could cause serious problems down the road, such as a susceptibility to stress fractures that could in turn lead to a catastrophic breakdown. According to the ARCI, the British Horseracing Authority has banned the use of bisphosphonates in horses younger than 3 1/2 years old.

The ARCI Equine Welfare Committee members also were concerned about a high-profile federal investigation that uncovered a Mexican drug cartel laundering money through a Quarter Horse auction. 

"It is naive to think that this may be an isolated instance in an area of the sport that is unregulated," Martin stated in the ARCI release. "I know first-hand from my experience in New York that criminal activity can occur right under the nose of the most prominent people in racing."

"Since there is an industrywide discussion going on about the scope of how to regulate this sport, we feel these are legitimate issues to be discussed," Martin said in the follow-up conversation Dec. 14. "The genesis is the need we feel to address the jurisdictional limitations of the racing commissions. It is an issue that has been simmering for a long time."

The committee's call for independent oversight of sales brought the issue from a simmer to a boil. Executives with Keeneland and Fasig-Tipton were particularly displeased with the ARCI's broad characterization of auctions as unregulated.

"There is a massive section within the Kentucky revised statutes called the Uniform Commercial Code and that code oversees all the conduct for our business. There are appellate levels, there are negotiations, there are peer reviews, and there are committees that look at things that are out of balance," said Bob Elliston, Keeneland's vice president of racing and sales. "There is not only law, we have so many people involved in constantly reviewing concerns and making deliberations where there are differences of opinion about how a horse behaves or is doing within the context of a sale. There is tremendous oversight."

Both Elliston and Fasig-Tipton president Boyd Browning Jr. also pointed out each company's extensive conditions of sales that provide detailed policies for both buyers and sellers.

"Keeneland has been at the forefront of medication issues, transparency issues, and integrity issues related to commercial sales since the inception of our sales," Elliston said. "This is a completely unnecessary encroachment in a marketplace that has been operating at the highest level of confidence among those participating."

As for issues related to money laundering, Browning said the Internal Revenue Service regularly audits internal rules regarding who is extended credit and all transactions.

"With regard to cash transactions, our government has a well-defined set of rules and regulations. The IRS does come in on a regular basis and reviews our transactions to make sure we are in compliance, and we are. I'd be surprised if any sale company wasn't," Browning said. He also noted that the cartel's activity apparently had been exposed because it did try laundering money through a horse auction.

Regarding the use of bisphosphonate, neither Elliston or Browning said they were aware of concerns raised by the American Association of Equine Practitioners or research commissioned by the Grayson-Jockey Club Foundation or the Racing Medication and Testing Consortium that urge any change in medication policies.

"We participate in the Racing Medication and Testing Consortium and have always been appreciative of that process of credible research into what is or isn't a problem," Elliston said. "To the extent that credible scientific evidence exists, we look at those things and then amend our policies."

When asked why auctions would be characterized as "totally unregulated," Martin backed off that claim.

"We are not questioning how the auctions are conducted," Martin said. "We want to start a dialogue about how to protect our horses from legal but potentially inappropriate uses of some medications. There are obviously concerns."

Marc Guilfoil, executive director of the Kentucky Horse Racing Commission, is a member of the ARCI Equine Welfare Committee but was unable to participate in the committee's discussion in November due to an emergency. Rick Baedeker, executive director of the California Horse Racing Board, is also a committee member who could not attend the meeting because of the wildlife crisis in his state. Neither one of them participated in the committee vote calling for independent oversight of breeding and sales.

Guilfoil noted that the issue had been identified for discussion only on the meeting's agenda. If he had participated in the vote, he would have voted against it.

"I can tell you the Kentucky Horse Racing Commission has no appetite to regulate sales," he said. "We feel the sale companies do a remarkable job at what they do. We are charged with regulating horse racing in Kentucky and there is nothing in the statutes that even remotely mentions regulating sales."

Both Elliston and Browning said the ARCI would have been more effective in addressing concerns had it involved sale company representatives long before making its call for reform.

"This appears to be arbitrary and out of step with the state regulatory body in the state with the largest commercial marketplace for Thoroughbred horses in the world," Elliston said. "That's a problem."

"Our model rules committees are public, and they are listed on our website. There was no attempt to exclude anybody," Martin said about soliciting feedback from the sale companies earlier. "We didn't adopt any rules, we just voiced a concern. They will certainly be invited to any discussions moving forward. With all due respect, we have had people propose all kinds of things involving the regulators and the regulators have never been invited to be part of those discussions."

Martin was referring, at least in part, to the proposed federal Horseracing Integrity Act of 2017 (H.R. 2651 and also known as the Barr-Tonko bill), which would create a single entity to set and manage drug testing rules and enforcement protocols for the entire country. The goal is to replace the existing network of state programs with a uniform program that would be operated by the U.S. Anti-Doping Agency.

Martin is supportive of current efforts to have state racing commissions adopt all four components of the National Uniform Medication Program (NUMP) that includes thresholds and withdrawal guidelines for controlled therapeutic medications and prohibited substances, a requirement for third-party administration of furosemide (Lasix) on race day, accreditation of all equine testing labs, and penalty guidelines for multiple medication violations. As of now, no states have adopted all four components. Twenty-nine states have adopted a laboratory accreditation requirement, while five states have adopted three of the four components, 13 have adopted two of the four, and 13 have only adopted one. Florida and Iowa have not adopted any.

"We respectively disagree with those who believe Barr-Tonko is the be-all, end-all to solve our problems," Martin said. "When you look at the World Anti-Doping Agency drug testing results ... our experts tell us there is nothing they are detecting in human sports that we don't have the ability to detect in horse racing, and do detect. Their percentages are comparable to ours.

"We are having this big debate about how this industry should be regulated, so we feel we need to address the jurisdictional issues, such as these," he said. "We are very open about how to do this. Our issue is that it is independent and publicly accountable."