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The New York Racing Association put two officials on administrative leave Monday after a report issued earlier in the day by the New York State Racing and Wagering Board challenged claims by the association it was unaware late last year that it had been incorrectly applying a higher takeout rate to its trifecta and superfecta bets.
The report called into question a statement by Charles Hayward, the NYRA president, that the association had made an “inadvertent error” when it applied the wrong takeout rate to the wagers over a period of 15 months. The report cited several e-mail exchanges involving Hayward that indicate he was at least aware that a law raising the takeout from 25 to 26 percent on the wagers in 2008 had sunset on Sept. 15, 2010, although the e-mails do not make clear whether Hayward was also aware that the sunset of the law required NYRA to reduce the rate to 25 percent.
After the report was released Monday, Governor Andrew Cuomo said that the state’s Inspector General had been asked to conduct a probe into whether NYRA and its officials violated any state laws. Robert Megna, Cuomo’s budget director, who is also chairman of a state oversight board with broad powers over NYRA, called the allegations in the report “deeply troubling.”
NYRA chairman Steven Duncker said in a statement late Monday afternoon that Hayward and Patrick Kehoe, the association’s general counsel, had been placed on administrative leave without pay, pending further review.
“NYRA takes the matters identified by the Franchise Oversight Board and the New York State Racing and Wagering Board extremely seriously,\" said Duncker. “NYRA will take all appropriate steps and actions to cooperate with the state’s inquiries and insure the integrity of our operations.”
The incident stems from a discovery late last year by the state’s comptroller’s office that NYRA had been incorrectly applying the takeout rate to trifecta and superfecta bets since the law raising takeouts on all wagers by one point expired 15 months earlier. When the law expired, NYRA did not lower any of its takeout rates. The association was not in violation of the law under the new takeout rules with one exception, the rate for trifectas and superfectas, where the maximum rate fell to 25 percent.
The report cites two e-mail exchanges. In the first, a racing fan e-mailed Hayward on Sept. 28, 2010 – two weeks after the takeout increase expired – to ask him whether the law had indeed expired.
“Would you mind letting me know if it has or hasn’t, and if it hasn’t, why?” the letter asked. Hayward responded by saying that he would forward the mail to the association’s general counsel,
In the second, Steven Crist, the publisher emeritus of the Daily Racing Form , forwarded on Aug. 1, 2011, a letter from a reader that noted the law providing for the higher takeout rate had sunset and that NYRA’s trifecta and superfecta rate “is currently outside the parameters of the law.” The letter went on to say, “If NYRA wanted to lower takeout all they have to do is make to [sic] request to NYSRWB.”
Hayward replied to Crist that the reader was correct and that NYRA was considering how to proceed on the matter. Hayward also said that he wanted to keep the discussion with Crist confidential.
Hayward is the former president and chief executive officer of Daily Racing Form.
Asked about the e-mail exchange, Crist said, “Then as now, I personally believe NYRA was not aware it was deliberately applying an incorrect rate.”
