Behind the NYRA ‘takeout fiasco’: The email trail

I was having a conversation a few years ago with a horse owner who happened to be one of America's highest-paid CEOs. He was interested in looking at a document that was the subject of our discussion and I offered to email to him.

“No email,” he told me. “I don't even have an email address. That's how they always nail people. Their emails. Those things never go away.”

That conversation came to mind yesterday when I read reports on the failure by the New York Racing Association to comply with state law in 2010, when NYRA opted not to reduce takeout by 1% on certain exotic wagers.

According to the interim report by the New York State Racing and Wagering Board, internal emails at NYRA showed that some of its executives were well aware a law with a maximum takeout rate of 26% was about to sunset or expire, and that those 26% wagers would have to be recalculated at a 25% (or lower) charge beginning Sept. 15, 2010. Two weeks after the Sept. 15 sunset date, the report says, NYRA CEO Charles Hayward received an email from a “concerned” horseplayer that the 26% takeout rate had expired. Hayward told the horseplayer he was forwarding the email to Patrick Kehoe, general counsel to NYRA.

In the wake of those revelations, the NYRA board of trustees suspended both Hayward and Kehoe from their positions, pending further investigation.

Those pesky digital messages within NYRA's offices were not the only damaging emails cited in the NYSRWB report.

On Aug. 1, 2011, an email from a horseplayer forwarded by Daily Racing Form publisher Steven Crist to Hayward asked if NYRA was operating “outside the parameters of the law” by continuing to charge 26% on certain bets.

Hayward wrote back to Crist that “this gentleman is correct.”

But Hayward then went on to say in one of those emails that I'm sure he thought would never be seen by anyone else:

“Off the record, we have been working on this for some time. We originally had thought that we would announce this for Saratoga but political forces intervened. Since we are showing substantial losses in 2010 and 2011 and we have been smacked around by Cuomo (and he could check the SRWB from approving), we decided to wait. Also, the regional TOBs who collectively lost money in 2010 will scream like stuck pigs and that would provoke Skelos who is very tight with the guys who run Nassau OTB to introduce anti-NYRA legislation for the benefit of the OTBs. Finally, we are quietly working on a plan to open 10 or so restaurant/bars in the city and we did not want the politicos to block this effort.

“We have some internal debates on how much to lower each pool and how we would present this to our simo customers, the consumers and the politicos. I would appreciate it if you could keep these details confidential. I would also welcome a further discussion on this topic with you before the meet is over.”

Crist responded the same day: “Will keep it confidential and would love to discuss possible reduction schemes with you off the record whenever the time is right.”

Crist and Hayward are former business partners who in 1998 put together an investment group to buy Daily Racing Form. They sold it six years later for a tidy profit. Crist remained with the newspaper as publisher and columnist, and shortly after the Form was sold Hayward was named CEO of NYRA, where Crist was employed as an executive in the mid-1990s. The friendship between the two men has spawned a cozy relationship between the newspaper and the racing association it covers.

Five months after this exchange of emails between Crist and Hayward, when an audit uncovered the fact NYRA had been overcharging its customers, Crist wrote a column in the Dec. 30 Daily Racing Form that called NYRA's error a “colossal oops” and an “honest mistake.”

“You would think someone – anyone – would have had the expiration date circled on his calendar, but no one did,” Crist wrote of the sunset provision in the takeout statute. “…Everyone forgot about it until the breeding-fund auditors stumbled on it.”

Well, not everyone.

According to the NYSWRB report, Liz Bracken, NYRA's vice president of simulcasting, on Sept. 2, 2010, wrote an internal email notifying other NYRA managers that the “takeout legislation sunsets middle of September, but I have not heard that we intend to lower takeout.”

Crist, in that Dec. 30, 2011, column, said that the “worst part of the New York takeout fiasco” was that short-term remedies could pre-empt what he called “a more serious and overdue discussion about takeout reduction.”

I disagree. The worst part is the lapse in judgment by people who should know better – at both NYRA and the Daily Racing Form.

In Tuesday's Daily Racing Form, Crist issues a statement on the emails he sent to and received from Hayward. To read Crist's column, click here.