Insecurity - Patrick Cummings Executive Director, Thoroughbred Idea Foundation
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Thoroughbred idea foundation Reports
Wagering
Insecurity
PUBL IS HE D: M AY 20 , 20 21
Patrick Cummings
Executive Director,
Thoroughbred Idea Foundation
ContentS
PART ONE
04 EXPECTATIONS
PART TWO
08 Intertwined
PART THREE
15 VOLPONI
PART FOUR
20 CONFIDENCE
PART FIVE
24 BINGO
PART SIX
29 PROOF
PART SEVEN
35 Z
PART EIGHT
38 DAMAGE
PART NINE
43 ALERTS
PART TEN
46 GREY
PART ELEVEN
51 Recommendations
PART TWELVE
61 PRAVDA
66 APPENDIX
Part one
EXPECTATIONS
Integrity is essential in horse racing to give all participants confidence.
Customer confidence is important for any business, but especially so
when people are investing their money.
Across the forthcoming installments of the “Wagering Insecurity”
series, several unsettling perspectives are offered. TIF spoke with nearly
50 long-time current and former industry executives, regulators and
officials from around the racing world, some for direct attribution and
others on background, who shared their unease with the status quo. A
common thread: the blame is shared.
Photo: Thoroughbred Idea Foundation
4 TIF REPORTS: WAGERING INSECURITY
The poor state of wagering systems Horse racing is competing for customers,
security and integrity measures is not the working to retain existing ones while trying
fault of any one individual, group, regulator to attract and develop new ones, like any
or corporation, it is how horse racing in business. Proper standards of integrity are
North America has evolved. necessary.
Wholesale improvements are needed. If Are racing’s customers, the bettors,
we lift our standards, confidence will build, properly protected at present?
participation will grow and racing’s future TIF believes the answer to that question
will be more secure. is “no.” The security of racing’s wagering
Participants across racing should have systems is not up to contemporary
some basic expectations met. standards. The oversight of racing from
Simply put, the competitions within stewards and regulators is not sufficient at
racing should be fair and honest. Horses present for customers to have confidence
should be free from any illegal performance in the legitimacy of results.
enhancement. Jockeys should expect Both perspectives are addressed
horses are sound, track surfaces are safe throughout the series.
and stewards enforce rules consistently. When American racing fails its bettors
Bettors should expect that jockeys give and stakeholders, it loses customers. In a
horses their best chance to win, betting world where sports betting is available to
information is accurate and that wagering almost half of the American population and
systems are secure and do not advantage typically just involves downloading a mobile
some customers over others. app, cheaper and better policed gambling
Are we meeting these expectations? opportunities are easily found.
This series delves into the integrity of Do participants in racing have confidence
North American horse racing, specifically as in the outcomes on the track and through
it relates to the $11 billion wagered through wagering? Right now? No. Could they? Yes,
the pari-mutuel system, and the uncounted or at least far more so than exists now.
billions wagered outside the purview of Confidence is good for business.
North American racing regulators.
who is betting what?
Racing’s business statistics are deliberately opaque. There is no central office that tracks
racing’s betting business and performance, a perpetual disservice to the sport’s stakeholders.
Basic metrics on wagering would be helpful for many stakeholders in the sport but getting
them is practically impossible.
This lack of clarity has become increasingly problematic because the business changed
fundamentally in the 1990s and the division of revenues from wagering did not keep pace. Handle
shifted from on-track to off-track as full-card simulcasting and internet-enabled advanced
deposit wagering (ADW) took hold. On-track betting revenues are often the most lucrative
5 TIF REPORTS: WAGERING INSECURITY
for purses under current agreements largest registered ADWs, show that handle
between bet-takers, tracks and horsemen. for the three largest ADWs in 2020 – TVG,
It has declined while the ADW business has TwinSpires and Xpressbet – was more than
grown in significance, with the pandemic- $6.2 billion. That includes all breeds and
related closures turbocharging that growth, greyhound betting through those ADWs,
accounting for an estimated $7 billion of not just U.S. Thoroughbred betting, though
U.S. Thoroughbred racing handle last year. Thoroughbred racing does generate the
Now, who is betting what, and through vast majority of total action.
which channels? NYRABets, a fourth major ADW which
When Equibase reported total wagering hubs some of its betting through Oregon,
on U.S. racing in the pandemic-impacted reported handle of $225 million, but that
2020 was $10.92 billion, down less than 1% isn’t the entire picture as much of its handle
from the previous year despite nearly ten comes from New York residents, which is
months of racing without live attendance, not included in Oregon figures. The New
that felt like a decent showing. York in-state numbers have not been made
But total handle figures at a nationwide public.
level, or even at the individual track level, What about the rest?
do not offer much insight to the health of
The Groups
the business. They tell us very little. It is the
composition of that handle which is a more
meaningful measure, but such details are
almost never available to anyone except the
host track where the race occurs. Some came from on-track money from
Citing total handle figures as a measure of January through early March when tracks
performance should be viewed skeptically, were open. A small amount came from
particularly by horsemen. tracks with live attendance after March.
Where does handle come from? How Some came from smaller ADWs hubbed
many individual customers are wagering? in North Dakota, where betting handle by
How many new customers have been ADW is not made public. Some came from
created, and how many are still betting? How Canadian customers.
many customers are betting substantial But much of it came from groups like
amounts over $10 million, $50 million, or Elite Turf Club, entities which TIF has called
over $100 million annually? What is the “high-volume betting shops” (HVBS) in our
effective takeout for customers of different previous white paper but are more formally
ADWs? How much are purses earning from known within the industry as secondary
different customer segments? pari-mutuel organizations (SPMOs). These
Without centralized reporting of these groups are the biggest customers by handle,
figures made available to all parties in the receive substantial rebates and have direct
sport, it is almost impossible to know. access to pari-mutuel pools.
Here is what we do know. In his 2016 book “The Perfect Bet,” author
Reports from the Oregon Racing Adam Kucharski called it “scientific betting.”
Commission, which serves as a hub for the “The techniques are now so effective –
6 TIF REPORTS: WAGERING INSECURITY
and the wins so consistent – that teams… of millions annually. Their total handle is
don’t celebrate when their predictions come unknown to the wider industry because it is
good.” commingled with ADW betting.
These groups participate at an institutional Bettors may not understand how the big
level. They bet big because that is what the HVBS/SPMO groups operate and exactly
math dictates. It is cold, calculated investing. what they are betting, but they can readily
Kucharski continues: observe their impact on the game.
“It’s not cheap to set up a scientific What horseplayer hasn’t watched as
betting syndicate. To gather the necessary a horse that is last into the gate at 23-1,
technology and expertise, not to mention breaks on top and is never headed, winning
hone the prediction method and place the at a much-reduced 11-1? Horses routinely
bets – costs most teams at least $1 million. enter the gate at 5-1, only to win at 5-2. Or in
Because betting strategies are expensive to the last flash of a mandatory payout when
run, teams in the United States often seek a bet of half a million dollars shows up in
out racetracks that offer favorable gambling the pool?
conditions.” These are discouraging experiences
According to court filings from 2017, The for the people who cash a bet in those
Stronach Group (now 1/ST) owns Elite Turf races and draws headshakes from many
Club. others. For more than two decades, these
Based on a variety of projections which incidents have plagued North American
TIF has updated to account for 2020 figures, racing’s customers without any meaningful
we estimate total betting from the HVBS/ attention or action from track operators.
SPMOs was likely between 33% and 40% Perhaps their most noteworthy response
of total U.S Thoroughbred handle, in the has been removing the odds from the
vicinity of $4 billion out of the total $10.92 screen in the final seconds of loading
billion. The reality could be higher or lower. through the first quarter-mile of a race so
In 2003, they represented approximately the drops are less visible. In many cases,
only 8% of total wagering. the big syndicates wagering hundreds of
These groups might not be growing, millions annually through HVBS/SPMOs
but rather they are representing a larger are the cause of such price crunches,
percentage of wagering as mainstream degrading the experience for everyone else.
horseplayers abandon racing, or shift The inability of regular horseplayers to
more of their action to legal sports betting have any idea what price they are getting
options. damages the product every day. Sports
The majority of play from the HVBS/ betting customers know exactly what their
SPMOs is not counted in the ADW figures. return will be if their bet wins. What was once
Customers like those at Elite, and it is only a a harmful feature of pari-mutuel wagering
few customers, place their bets directly into is now a huge competitive disadvantage.
the pools, bypassing an ADW intermediary. Sports betting is growing at an explosive
There are also smaller computerized rate with attractive betting offerings and
robotic wagering groups which DO process widespread distribution. Operators are
bets through ADWs, entities betting tens spending vast sums using bonuses and
7 TIF REPORTS: WAGERING INSECURITY
promotions to acquire customers and are wagering moves online where revenues are embracing modern betting technology. undivided. Decoupling racing from slot and That is not bad news for racing companies casino revenues will likely increase. While all in the racing wagering space, like TVG and stakeholders in racing should undoubtedly TwinSpires, whose parent companies run pursue every funding source possible, sports betting businesses, but it is bad the single greatest, sustainable source of for those who depend on purses for their revenue for racing on the continent remains livelihoods. actual wagering on racing. For the last 25 years, as betting shifted There are avenues for improvement, online, purses in many North American but any efforts to attract new wagering on jurisdictions have been bolstered by racing will fall flat if the North American subsidies from additional gaming, be it slot racing industry fails to embrace integrity machines, video lottery terminals (VLT), across the sport – within its wagering historical horse racing (HHR) machines or systems, betting platforms and the running others. That era in American racing is far of the races themselves. closer to sunset than sunrise as casino Part TWO INTERTWINED Corruption resides at the intersection of significant financial gain and loose regulation. Purses boosted by subsidies from slots and other non-racing wagering present a robust opportunity for illicit activity but the sport’s regulatory structure has not kept pace, either with other racing jurisdictions around the world or modern sports. Jack Anderson (above, right), a leading global expert on sports integrity, was the keynote speaker at the University of Arizona’s Global Symposium on Racing in 2018, presenting “Integrity in the World of Commercial Sport.” Director of Sports Law at the University of Melbourne, he advises the Asian Racing Federation’s Council on Anti-Illegal Betting and Related Financial Crime (ARFCAIB), whose work will also be referenced later in this series, and is a current member of both the World Athletics Disciplinary Tribunal 8 TIF REPORTS: WAGERING INSECURITY
and the International Tennis Federation’s Ethics
Commission, among other roles.
He spoke with TIF about the relationship between
doping and other illegal activity to affect the outcomes
of sporting events.
“Effective doping control is of course a vital element
of the integrity objectives of a sport such as racing but it
should not be the sole integrity concern and should not
be seen in isolation.
“Doping in a sport such as racing is often intertwined
with gambling interests, which in turn may be
symptomatic of wider illicit or even criminal involvement
in the sport.
“Studies commissioned by racing regulators in Great
Britain and Australia noted an immediate concern with
levels of criminality in the sport, attracted to the money Jack Anderson
Photo: Alex Evers
9 TIF REPORTS: WAGERING INSECURITY
and image laundering opportunities presented by the sport’s long association with gambling.”
Anderson told TIF that doping and gambling often go together, and the presence of doping
in a racing culture can be symptomatic of other issues.
“The prevalence of doping in a racing jurisdiction may also be reflective of weaknesses in that
racing organization’s race day operations such as:
• stewarding and standards of veterinarian oversight,
• Lack of capacity in intelligence gathering on and knowledge of industry participants
• vulnerabilities in the licensing and registration of industry participants, and
• the ability of the racing organization or jurisdiction to punish misconduct by industry
participants.”
There should be little need to explain the perception of doping in North America’s racing
culture. While the sport is regulated, public confidence in the ability of regulators and their
laboratories to catch cheaters is low.
Have any doubt?
How long did Jorge Navarro and Jason Servis win at unusually high rates never to be
discovered by North American racing’s laboratory and regulatory structure but instead to be
uncovered by a federal investigation?
EXAMPLES OF RACE FIXING, ETC.
Relatively few organized conspiracies race’s outcome.
have been uncovered in American racing In October 2005, jockey Roberto Perez
over the past 20 years. was suspended for seven years after
Those that have been uncovered were placing superfecta bets on a race he rode
mostly, though not entirely, the product and where his mount finished out of the
of state or federal law enforcement work, first four placings.
spurred into probing racing from other Jockey Ricardo Valdes was one of seven
investigations rather than industry initiatives. jockeys barred by Tampa Bay Downs in
Whether it is trainers and veterinarians December 2006, and was later indicted by
illegally doping or jockeys manipulating the federal government in May 2009. He
races, TIF found only occasional instances pleaded guilty to one count of attempt and
of individuals identified and punished for conspiracy to commit mail fraud, with 18
attempting to profit via legal wagering other counts dropped, and was sentenced
channels over this period. to just more than one year in prison, with
In January 2005, 17 individuals including three years of supervised release, in April
trainer Gregory Martin were indicted on a 2015. Two co-conspirators served longer
host of counts including illegal gambling, jail terms as their criminal activities moved
conspiracy and money laundering. The plot beyond horse racing and into influencing
involved the “milkshaking” of at least one collegiate sport events.
horse at Aqueduct in an attempt to fix the In July 2015, three jockeys were arrested
10 TIF REPORTS: WAGERING INSECURITY
at Evangeline Downs in Louisiana after yielding these indictments, though the
being accused of manipulating a race at the majority of the cases have yet to be tried as
track a month earlier, and being caught with of April 2021.
illegal electrical devices known as “buzzers.” Federal involvement also led to the
Texas stewards, and local courts, caught conviction of veterinarian and trainer
up with jockey Roman Chapa for a well- Alfredo Lichoa when he was sentenced in
documented incident at Sam Houston February 2021 to three months in prison for
Race Park a few months earlier regarding his role in a money laundering scam that
buzzer use in January 2015, handing the involved a Florida-based horse owner and
journeyman a five-year suspension and dirty money from Brazilian politics.
$100,000 fine. He has since returned to As the site of these more recent incidents,
riding. it is notable that Florida no longer has a
Stewards at Canterbury Park in Minnesota racing commission. The sport is regulated
suspended jockey Denny Velazquez for one by an amalgamation of house (racetrack
year after finding a buzzer in his possession operator) rules and some state oversight
in July 2020. on testing and licensing.
Gulfstream Park has dealt with a few The indictments from these cases
incidents that raised eyebrows, drew revealed no details regarding wagering on
bettor complaints, and did yield some the horses or races involved. If racetracks or
suspensions. Ray Paulick outlined those other groups have investigated suspicious
in a January 2020 article which included wagering, the public is unaware of any
a series of incidents, strange superfecta outcomes. The lack of transparency, of
payouts and more. any public discourse on these matters, is
Florida racing is highly de-regulated, with itself disconcerting. An opaque integrity
individual tracks often controlling nearly all infrastructure is like having no integrity
measures of oversight. infrastructure.
Paulick wrote:
“The track is under no obligation to
notify the wagering public who is banned or
suspended, for what reason, for how long, or
whether or not a suspension (made public or
MASOCHISTIC
not) has been reduced in time… Jack Anderson’s remarks connecting
“It is not the most transparent way of doping, wagering and other concerns are
doing business and does not instill a great worthy of reiteration:
deal of confidence in the wagering public.” “Doping in a sport such as racing is often
The indictments that scooped Jorge intertwined with gambling interests, which
Navarro and Jason Servis, among others, in turn may be symptomatic of wider illicit or
were made public thanks to the eventual even criminal involvement in the sport...
involvement of the U.S. criminal justice “The prevalence of doping in a racing
system. Notably, private investigations jurisdiction may also be reflective of
sponsored by The Jockey Club, among weaknesses in that racing organization’s
other groups, were seemingly crucial to race day operations.”
11 TIF REPORTS: WAGERING INSECURITYThe 2014 case of Masochistic offers Video of the race is damning for Berrio.
insight to how doping and wagering can be Masochistic was under a stranglehold the
intertwined. entire race, and Berrio never once asks the
Masochistic debuted at Santa Anita on horse for an effort, cruising under the line in
March 15, 2014 in a maiden race restricted fifth as the 8-1 fourth betting choice.
to California-bred horses and the stewards’ On April 26, 2014, stewards held a hearing
minutes, published by the California Horse and reported that Masochistic tested
Racing Board, explain the rest. positive for the sedative acepromazine and
“Jockey OMAR BERRIO…was in the office disqualified the horse from his fifth-place
to review the ninth race from yesterday’s effort.
card. At issue was his lack of effort on Seven days later, on May 3, Masochistic
his mount, MASOCHISTIC, trained by A. appeared in an open maiden race at Churchill
C. AVILA. There was no discussion of the Downs. The race was not just a class hike
pertinent facts as a formal hearing will be from state-bred maidens to open maidens,
set in the near future. The Board of Stewards but was the third race on the biggest day of
was concerned that Mr. Berrio prevented his the year – Kentucky Derby day.
horse from giving his best race. The horse It was fairly unusual for a horse trained
was examined and tested post-race, and the by Avila to race in Kentucky.
CHRB investigators were directed to look In the 10 years prior to this race, Avila
into the matter.” trainees made nearly 1,400 starts and
Photo: Alex Evers
Masochistic
12 TIF REPORTS: WAGERING INSECURITYonly six of those came in Kentucky, all in Masochistic’s rider that day, Omar Berrio, graded stakes races. Two of the six starts who is being investigated by the California came on Kentucky Derby Day in 2005, Horse Racing Board for lack of effort in the when Oceanus finished ninth in the Grade March 15 race… 2 Churchill Downs Handicap at 60-1 and “Despite the disqualification and the rider Santa Candida was eighth at 24-1 in the investigation in California, Masochistic was Grade 1 Humana Distaff Handicap. allowed to be entered at Churchill in the May Omar Berrio rode both. 3 maiden race. Horse racing is regulated Masochistic’s maiden race was the only from state to state. horse Avila was saddling at Churchill on May “Bonnie believes the May 3 race won by 3rd and he legged-up that day’s eventual Masochistic should be investigated closely, Derby winning jockey, Victor Espinoza. particularly wagering associated with the The race jumped at 11:33 A.M. Eastern race, because Churchill may have been used time, with total intra and inter-race wagering to carry out a betting coup. The thinking is pools of more than $3.7 million. Masochistic that with larger than usual purses on Derby went straight to the lead and never looked day, large wagers would not catch as much back, winning by 14 lengths. Despite the attention and the larger pools would help shift from state-bred maidens to open ensure higher odds. maidens, Masochistic was dispatched a “Kentucky Horse Racing Commissioner solid 2-1 favorite. Dr. J. David Richardson said because the Some 10 days later, the late Ned Bonnie, horse ran legitimately in Kentucky and then a Kentucky Horse Racing Commission any concerns about his effort occurred in member, thought a betting coup was California, it was up to the CHRB to conduct perpetrated on Derby Day. the investigation. Frank Angst from the Bloodhorse details “We’re not in California, and we’re not in the rest: Kansas,’ Richardson said to Bonnie… “Bonnie, who consistently reminds other “Kentucky Horse Racing Commission commissioners that the betting windows supervisor of pari-mutuel wagering Greg can provide a bigger prize than a purse for Lamb said Kentucky has previously worked nefarious horsemen, said the state needs to with other regulators and has provided bring in outside help to investigate events wagering information as needed. After the surrounding the maiden win of Masochistic… meeting, Lamb provided a spreadsheet that “While that race may have been run showed $3,741,395.97 was wagered on the squarely, Bonnie believes the betting public May 3 race at Churchill. was duped by a program line that didn’t “The most money wagered on the third provide the whole story with its “fifth by 4 1/4 race May 3 at Churchill was the $545,292.50 lengths” in Masochistic’s March 15 debut at sent in on-track. The other four outlets with Santa Anita Park. more than $100,000 wagered were advance- “Importantly, the comment line noted a deposit wagering outlets TwinSpires.com, disqualification but there was no room for TVG.com, XpressBet.com, and Churchill the reason for the DQ—a failed drug test. Downs-owned Isle of Man-based rebate It did not note a follow-up investigation of shop Velocity Wagering.” 13 TIF REPORTS: WAGERING INSECURITY
Nearly a year after Masochistic’s sedated for a banned steroid and was disqualified. debut, the California Horse Racing Board As the back-and-forth at the Kentucky suspended Avila for 60 days and fined him Horse Racing Commission exhibited, state- $10,000, the maximum allowed under the by-state finger-pointing is of no benefit for rules of the state. Berrio’s ride in the race the bettors, who surely took the brunt of is never referenced again in any other the incident on both days. While horsemen CHRB report, and in March 2021, a CHRB have recourse as purses are re-distributed spokesperson confirmed to TIF that no following positive tests, bettors have none. complaint was ever filed against him for In this case there was active, visible the ride. oversight. There were meaningful Masochistic went on to become a Grade investigations. But due to a variety of 1 winner for a different trainer and was factors, those measures failed. Instead, the center of controversy after the 2016 it showed the inherent impracticality of Breeders’ Cup Sprint, a race where he relying on state regulation of what has finished a close second, but tested positive become a national business. Photo: Breeders’ Cup Limited © 14 TIF REPORTS: WAGERING INSECURITY
Part THREE
VOLPONI
The major North American tracks, which Analysis and Security Platform (WASP).
are now vertically integrated companies According to its website, the TRPB
controlling most of the major ADWs, tote says: “this platform currently provides
companies, other service providers and each Thoroughbred Racing Associations’
even some of the high-volume betting shops member track officials with a robust integrity
like Elite Turf Club, have had little incentive toolset for distributed betting networks. A
to upgrade the oversight of wagering on the variety of reports and modules are included
more than 30,000 annual Thoroughbred which assist users with timely examination
races on the continent. of wagering detail.”
The one entity which does offer some This description suggests the tracks are
wagering security apparatus – the mostly responsible for monitoring WASP
Thoroughbred Racing Protective Bureau themselves.
(TRPB) – is a wholly-owned subsidiary When TIF questioned a TRPB official in
of the tracks themselves, through the mid-2020 about a curiously low superfecta
Thoroughbred Racing Associations of payoff, it was affirmed that the organization
North America (TRA), a consortium of does not respond to individual questions
racetracks. about incidents, but only those raised by
Despite several attempts from TIF, the member tracks. If we wanted more insight,
TRPB’s Executive Vice President Curtis we would have to contact the track directly.
Linnell declined to answer questions for The burden of dealing with a customer
this series. inquiry is on the racetrack.
What was once a robust organization, North American racing does not have
even called horse racing’s own “little FBI,” is independent oversight of betting or
now a shell of itself, focused primarily on wagering systems. The lone protection
the microchipping of horses. comes from a small office wholly-owned
The headline of a 1960 piece in Sports by the tracks, which gives them tools to
Illustrated may offer that generation’s monitor their own races.
perspective of where racing stood relative This was not the plan when many in
to security and integrity measures: and out of racing recognized the need for
“The Best-Policed Sport of All.” radically improved wagering oversight in
Today, the TRPB does offer its member the early 2000s.
tracks a tool known as the Wagering
15 TIF REPORTS: WAGERING INSECURITYFIX SIX GROUND
single winners of the first four races with all
horses used in the last two legs. The delays
in ticket data transmission enabled Harn to
ZERO FOR
change the four singles to the winners of
the first four races. It was later uncovered
the $12 base play was a mistake. Before the
RESET perpetrators were caught, the total winnings
would have exceeded $3.1 million – but
Breeders’ Cup officials froze the payouts
In the years before and since, tote security after astute horseplayers cried foul.
has been a looming concern for racing after It was later revealed Harn, along with
the “Fix Six” scandal was exposed in the conspirators and college buddies Glen
aftermath of the 2002 Breeders’ Cup. DaSilva and Derrick Davis, executed the
Natalie Voss, Editor-in-chief of Paulick fraud just weeks before the Breeders’ Cup
Report, offers a full review of the incident. to test their processes, landing a pick four
In brief, Autotote employee Christopher at Balmoral Park for over $1,800 and then
Harn, who had knowledge of the bet more than $105,000 in a pick six at Belmont
processing function of the pick six and Park a few days later.
access to the system, altered tickets to Steven Crist, former New York Racing
guarantee a win after the first four legs of Association executive, as well as a former
the Breeders’ Cup pick six, which had a pool publisher of the Daily Racing Form, noted
of more than $4.5 million that year. Specific in the Fix Six aftermath that one long-time
pick six ticket details were only transmitted pari-mutuel operations expert recalled a
to the host site after the first four legs of spate of incidents similar to the Fix Six had
the bet to limit the burden of too much been uncovered years earlier, but whatever
transaction information going through the the weaknesses that enabled them then
tote system. had been addressed, though without much
While processing power in many other public awareness.
technological uses has improved since Crist wrote just after the incident:
then, racing’s tote systems have not evolved
at the same speed.
The full plot was uncovered easily in the
days after the race. The longshot outcomes It sure seems that
of the sequence, capped by Volponi’s
improbable 43-1 Classic win, helped expose
the loophole has
the fraudulent play as the only winning been reopened, and
ticket, played through a Catskill OTB outlet
in New York and was entered as a lone, $12- now every customer
base bet, the equivalent of six individual $2
tickets.
is understandably
The winning combination had the four nervous, too.
16 TIF REPORTS: WAGERING INSECURITYFEIGNED
“Well, over the next 48 hours, the OTBs
and tote companies were just lying, and
eventually it was all exposed.
CONCERN
Horseplayers’ justifiable anger around It was such a perfect
the lack of security at the time was further
stoked as OTB and tote executives originally
illustration of how
defended the outcome, suggesting there wagering had just
had been no impropriety.
Crist wrote:
totally gotten past the
“Breeders’ Cup and the National
Thoroughbred Racing Association acted
racing establishment.
with commendable speed and clarity, Just weeks after the incident, a survey of
freezing the payout and demanding an 300 horseplayers conducted by Hollywood
investigation by the New York State Racing Park, reported at a November 2002
and Wagering Board. Officials of Catskill California Horse Racing Board meeting,
OTB and the totalizator companies AmTote showed 68% of the surveyed believe “it was
and Autotote immediately tried to make the likely that fraudulent bets could be made
story go away, defending the winning ticket after the start of the race” while overall, 69%
as an authentic stroke of good fortune while “express a lack of confidence in the tote
insisting their systems are impenetrable. system.”
“Their lack of even feigned concern It will be notable later in this series
about the situation or respect for a serious that in that same California meeting,
investigation only raised more flags.“Then commissioners asked Autotote president
three days after Brooks Pierce, the president Brooks Pierce if he had “any evidence
of Autotote, said that the winning ticket was whatsoever in California or anywhere else
legitimate and actually ‘good for racing,’ that anybody is able to bet” after the start
Autotote announced it had fired a ‘rogue of a race.
software engineer’ who ‘had the ability to Pierce confirmed he had none.
alter the ticket.’ Harn was fired by Autotote days after
Reached in March 2021, Crist reflected the fraud was eventually discovered. A
on the ridiculous reactions from those who Washington Post article captured the
originally were defending the results as remarks of Lorne Weil, then chairman
legitimate. and chief executive of Autotote’s parent
“Once the longshots came in, you just company Scientific Games, the same day
knew the bet wasn’t going to be hit. So, of Harn’s ousting.
when the details of the winning tickets were “Weil…had praised his company’s
released, anyone who knew anything about ‘detection system.’…
betting races knew something was off. ‘The good news, if there is any, is our
17 TIF REPORTS: WAGERING INSECURITYdetection system worked the way it should changed, making it harder to police. About
have,’ Weil said in a conference call. ‘No 85 percent of the $14.5 billion in bets on
money was paid or changed hands.’” thoroughbred races last year [2001] were
“During the call, Weil said Autotote’s made somewhere other than where the
detection system would have red flagged races were run…
the alleged alterations to [the Fix Six] bet “A major heist involving the computers
even if they had not raised suspicions.” that store and sort the wagers seemed, well,
Weil’s praise for Autotote’s own inevitable...
monitoring, however, was premature. “That’s one reason the protective bureau
His remarks came before it was known has been spending more time studying the
Harn and his conspirators had changed industry’s interlocking computer networks
tickets in a similar fashion earlier the same and the ‘tote’ companies that run them.
month without detection at both Balmoral “The agency convened a meeting a few
and Belmont, netting over $107,000. years ago to give the totes - who aren’t
Weil and Brooks Pierce are still working members of the Thoroughbred Racing
together through British-based Inspired Associations - a list of ‘points of vulnerability,’
Entertainment. including the forgery of betting tickets,
a time-honored scam also linked to the
Breeders’ Cup scandal.
A PERIOD OF “They all acknowledged the problem, but
said it was too expensive to fix,’ Berube said
of the tote companies.
TRANSITION In 2021, Berube clarified to TIF that the
“too expensive to fix” adjustment was:
“…centered on a flaw in outs book
Where was the TRPB? Was anyone procedures [the process of clearing
monitoring the pools or these risks? previously uncashed winning tickets after
In 2002, the TRPB was in a period of a period of time, normally months] that had
transition. been exploited by insiders to cash before
The Baltimore Sun’s Jon Morgan profiled those winning bets reverted to the state.”
then TRPB President Paul Berube less than The Fix Six scammers, led by Harn, were
two months after the Fix Six. He offered involved, along with others, in the uncashed
insight that the control over wagering tickets scheme too.
security was not what it once was, a The tote companies had avoided
function of the growth of the internet and stringent monitoring. This remains the
simulcasting. norm. Most businesses prefer saving the
“Berube, president of the Thoroughbred cost of extra oversight. But that does not
Racing Protective Bureau, has watched mean that businesses should dictate their
as the sport burst in a few decades from own oversight requirements, or that what
the confines of racetracks to the nearly amounts to self-regulation is akin to an
ungovernable realm of cyberspace… acceptable standard of regulation.
“Berube acknowledges the business has The industry was well-aware of the
18 TIF REPORTS: WAGERING INSECURITYvulnerabilities which led to the Fix Six. had only nine full-time agents assigned
Steve Crist’s allusion to previous loopholes to 13 thoroughbred tracks - though they
–insecurities – from well before the Fix Six help coordinate security with the other 30
were known to the TRPB. member tracks.
The Morgan article continues: “The role of the protective bureau has been
“As recently as September [2002, a ‘minimized,’ [now Thoroughbred Horsemen’s
month before the Fix Six], Berube had a Association chief executive Alan] Foreman
conversation with someone regarding the said. ‘The nature of the industry and business
possibility of hackers altering bets after a have changed and a number of tracks have
race had been run - especially on bets that found it more cost-effective to do that work
require the gambler to predict in advance the themselves.”
outcome of several races. Not surprisingly, cost savings did not
“The reason: Data on such bets are stored equate to better protections.
in computers until after most of the races
have been run and then are ‘scanned’ and
forwarded to a central hub.”
Berube’s 2021 clarification to this portion
of Morgan’s 2002 story is noteworthy.
DEGRADATION
“My September 2002 meeting was at Paul Berube affirmed the degradation of
the TRA’s annual simulcasting conference, the role of the TRPB over these years in his
and was with a well-placed tote company 2021 conversation with TIF.
representative who was asked, by me, what “It was an erosion, over time, and it came
it would take to ‘create’ winning pick six down to commitment and the perception of
tickets after the entire sequence of races.” need.
The tote representative told Berube all it “Changes in ownership of racetracks
would take is a program and a programmer from privately-held [tracks] to corporate
– less than two months before that actually conglomerates brought about different
happened on the sport’s biggest stage. thinking on security measures. Lost in
But for years, the TRPB’s functions were the ownership changes was first-hand
being trimmed back, with rising costs for knowledge and appreciation of the TRPB’s
placing TRPB agents at tracks cited as the history. The expansion of simulcasting
reasoning. Morgan’s article captured the added to the changes that have occurred.
transition: “Even though 90% of all wagering dollars
“Tracks complained about the cost come from off-track, that has not and will
of the protective bureau, and in 1995 never change the fact that the races being
the Thoroughbred Racing Association wagered upon still occur at a hardscape
restructured. Each member track was facility and where essential participants
allowed to either pay to have [a TRPB] agent are located. In short, racing still needs
on site or to provide its own security in a investigative eyeballs on the actual race
cooperative arrangement… event even though less money is being
“Many tracks opted out, and, as of the wagered at the live venue.”
end of last year, the protective bureau So how will racing integrity oversight
19 TIF REPORTS: WAGERING INSECURITYexist going forward? integrity. Incidents or suspicious findings
Berube notes that any effort must be a are almost never publicized, if they were
nationwide one. triggered at all.
“Today, there is no national unity, but in the In 2021, Steve Crist scoffed at the TRPB
heyday of the TRPB, that was our strength. arrangements, both at the time of the Fix
So many investigations went across a wide Six and now.
span of states. Today, I don’t know how you “The TRPB was like some warm blanket
would do it without some uniform group.” the industry would toss on these things in
Around the time of the Fix Six scandal, some attempt to reassure horseplayers
Berube notes that the TRPB was looking that they were looking into it. But there was
to hire a knowledgeable resource for the almost no sort of visibility or presence on
TRPB in pari-mutuel operations and was any modern wagering incident.”
recommended to consider Curtis Linnell, Massive improvements were needed
now Executive Vice President of the in wagering security as racing became
organization some 19 years later. an increasingly off-track, online betting
“Best hire I ever made,” Berube told TIF. business. The Breeders’ Cup Fix Six proved
But as corporate control of American the need to just about everyone.
tracks concentrated even further, the In its aftermath, the industry started
TRPB’s influence and its role as an agent talking, planning and spending – millions –
of the TRA, a consortium of those same to build a modern oversight arm. It was a
tracks, waned as it relates to wagering total failure.
Part FOUR
CONFIDENCE
The Breeders’ Cup Fix Six rocked North American racing.
In response, the National Thoroughbred Racing Association (NTRA) launched the Wagering
Integrity Alliance and a separate entity, the Wagering Technology Working Group (WTWG).
In August 2003, a report published by the WTWG, in concert with the NTRA’s security
consultants, recommended three “primary measures”:
• Create the National Office of Wagering Security,
• Establish uniform, minimum security standards for wagering systems,
• Enhance the technology infrastructure of wagering systems to enable additional cyber-
security measures.
The report was released in advance of that year’s annual Jockey Club Round Table (full transcript).
20 TIF REPORTS: WAGERING INSECURITYJim Quinn was the horseplayer unacceptably lengthy intervals after the representative in the WTWG that assembled horses have left the starting gates, would be the report and highlighted the interests of eliminated, or effectively mitigated. horseplayers emerging from the Fix Six: “Three, the players demanded to know, “In regard to reform, what did the players what is the scope of the problem, or how want? Three things, primarily: long has this been going on?” “One, the transmission of all wagering Greg Avioli, then chief operating officer data from the simulcast outlets and hubs to of the NTRA, recognized the need for a the commingled pools should be state of the national response: art, that is, as good as it gets. “A national office is our best means “Two, as soon as possible, technology for detecting and responding to potential upgrades must be implemented, so that security threats across multiple jurisdictions the late mergers of simulcast pools that or tote systems.” cause the suspicious drops in the odds for Roger Licht, then chairman of the 21 TIF REPORTS: WAGERING INSECURITY
ORGANIZED
California Horse Racing Board, offered a
regulatory perspective:
“Perception is often more important than
reality. The perception is that people are
betting after the commencement of a race.
“From what we have learned to date, that
OVERSIGHT
is not reality, but unless we upgrade our tote
systems, we’ll continue to have disgruntled
horseplayers who feel that the odds on the
FAILED SLOWLY
winner – especially when we bet on him – Financial reports from the time show
are dropping after the commencement of a the NTRA spent almost $3 million on
race. consultative work to form and launch the
“Let’s change that perception – as fast as Wagering Integrity Alliance and a national
we can.” office after the Fix Six through 2003.
Rudolph Giuliani, the former New York Sharon O’Bryan, the initial Alliance
City mayor hired as an NTRA consultant director hired by the NTRA, turned-down the
through his firm Giuliani Partners, said: post one week before she was supposed to
“The idea of a wagering security office is start. An interim director, Isidore Sobkowski,
very, very important. was hired a month later. But the project
“The only way in which you can assure languished and NTRA annual reports
yourselves and assure the public that there’s from this period serve as reminders of the
a standard of integrity necessary for people to shifting interests of the time.
continue to invest in this sport in all different The Wagering Integrity Aliance became
ways is to centralize the data and to have an the National Office of Wagering Security
office that focuses on accomplishing that but was soon rebranded as the Office of
mission and then making certain with tests Racing Integrity (ORI). In its 2005 year-end
along the way that integrity is maintained.” publication, the NTRA indicated the ORI
Horseplayers in 2021 will be nodding would be functional by the end of 2006.
their heads in agreement with all of these In December 2005, Craig Fravel, then in
takes relative to betting on racing in North the midst of a 20-year leadership role with
America 18 years after they were first Del Mar, highlighted the tough position of
shared. That should serve as a significant track operators being the only responsible
indictment. entity for wagering integrity, with help from
Given the state of affairs at the time, the the shrinking TRPB.
move to create the national office was met After outlining a suspicious wagering
with optimism. outcome raised by a customer which he
Horse racing’s wagering business was investigated with TRPB help, Fravel told
changing. Bettors’ perception was poor. The an audience of industry professionals at
Fix Six scandal undermined confidence and the University of Arizona’s symposium that
discredited whatever controls the industry self-oversight was not enough.
thought it had in place. “I think to allow customers to have
It did not go as planned. sufficient levels of confidence in us, we
22 TIF REPORTS: WAGERING INSECURITYhave to demonstrate that not only are we spending fell to just $28,531 in 2006 and
capable of reviewing things, but that there is $125,040 in 2007, about $1.8 million less
a sufficiently independent and authoritative than projected spending announced 18
organization out there that can be the months earlier.
ultimate arbiter of those kind of decisions. The NTRA reported the ORI mission
“And to a degree track management was to take “a lead role in the Wagering
does have a vested interest in making sure Transmission Protocol project to improve
that, [not only are we] at least portraying the technological infrastructure of the pari-
the game as on the up and up, but we are a mutuel wagering system.”
little suspect simply because we are maybe By 2008, ORI was gone and the hope
overly confident at times, and I think the of independent oversight of wagering was
Breeders’ Cup Pick-6 scandal was a classic fading.
case of that. In December 2008, three executives
“I had said for years that, upon from different spheres of the business
representations by various tote companies, addressed the topic of wagering security in
there’s no way anybody could get in and Arizona. All three abandoned their work in
manipulate the mutuel pools. racing soon thereafter.
“Well, in 2002 we found out that
that was absolutely untrue and I had
been told for years that there was
no way that anybody could do past
posting and found out about six
months after that, that somebody
was past posting in New York.”
Self-oversight remains the
status quo and is insufficient for
the modern gambling marketplace
in 2021.
Despite the initial impetus to
promote wagering security, the
national initiative floundered.
After spending nearly $3 million
in its first two years, NTRA outlays
on wagering security initiatives
dropped to just $1.1 million across
2004 and 2005 combined. The
NTRA’s five-year strategic plan for
2006-2010, published in June 2005,
indicated the NTRA was budgeting
$1 million annually for each of
the next five years to support the
Photo: Alex Evers
Office of Racing Integrity. Instead,
Former Del Mar President Craig Fravel
23 TIF REPORTS: WAGERING INSECURITYPart FIVE Bingo The NTRA-led initiative to bring wagering integrity to North American racing had failed. Independent oversight was falling apart. The frustration was palpable in December 2008. The University of Arizona Racing Symposium (click here to read the full transcript) convened a panel to discuss the state of these initiatives. Paul Bowlinger, a long-time horseplayer, attorney, former regulator and then the executive vice president for the Association of Racing Commissioners International (ARCI) found it Shakespearian. 24 TIF REPORTS: WAGERING INSECURITY
“…The real genius of that soliloquy of “I owned a nightclub for a long time
Hamlet is not ‘to be or not to be,’ whether and I would not possibly think of ignoring
that is the question. He goes on to say, ‘To my actual customers. Racing is run as if
die, to sleep, perchance to dream, aye, there its betting customers don’t exist. I would
is the rub, for in that sleep what dreams may not walk into my club and not notice my
come?’ customers.
“Because what Hamlet is really quite “Instead, racing goes to its distributors
simply saying is, what we may discover is and asks them how they are doing. It’s a
scarier than what we already know.” remarkable way of doing business.”
Later in the session, Bowlinger highlighted Bowlinger left ARCI in 2010, returned to
that the complexities of the industry, private law practice and has been out of the
compounded by other issues, distracted racing business ever since.
the evolution of integrity measures. At the time of the 2008 Arizona
“…We no longer have to dream about Symposium, Bowlinger’s fellow panelist
what’s on the other side of an unmonitored Isidore Sobkowski had been out of the
pari-mutuel pool… NTRA’s Office of Racing Integrity for several
“The second part in that soliloquy is, years and was running his own company,
‘Whether tis nobler in mind to suffer the Advanced Monitoring Systems (AMS),
slings and arrows of outrageous fortune,’ described by Bowlinger in the session
and what has bothered me is that since as “specifically created to meet the pari-
2002, the Pick-6 scandal, it was the topic du mutuel industry’s need for cyber security of
jour, it was the topic du everything. wagering pools and wagering accounts.”
“Now granted, there have been other Sobkowski lamented the lack of
issues that have taken our time, medication accomplishments to that point.
issues, the tragic Eight Belles, Barbaro, the
steroid issues, they’ve all come into place
and they’ve diverted our attention and
rightfully so in many ways.
“But I think our betting public is fed up with
There’s a lot
taking the slings and arrows of outrageous
fortune.”
of talk about
When TIF reached him in February 2021,
Bowlinger’s recollection of the time was wagering
unchanged.
“The industry’s complete lack of interest
was so frustrating.
integrity but
“We met with everyone, tried to make it
work and we had all the numbers in place for
so far I think
it to work. All of the executives started out
by saying ‘yes, yes, yes,’ and when it came
precious little
down to executing, they ended up saying ‘no,
no, no.’
has been done.
25 TIF REPORTS: WAGERING INSECURITYWITHOUT
without controversy.
“The only aspect about testing of gaming
equipment that is controversial is if someone
CONTROVERSY
suggests that it is not needed…
“Automated bingo card devices in
church basements have more independent
Kevin Mullally provided an external monitoring than the tote systems.”
perspective. After 12 years with the Ironically, Mullally added, the primary
Missouri Gaming Commission, Mullally source of new money to the racing
was early in his career with Gaming business – subsidies via slot machines,
Laboratories International (GLI) as Director video lottery terminals and historical horse
of Government Relations and General racing (HHR) machines (slot machine-like
Counsel. He had recently served as Vice devices driven internally by race results) –
President of the North American Gaming are all substantially more controlled than
Regulators Association (NAGRA). Given his the billions going through the tote system.
broad experience in gaming regulation, he “Historical horse racing machines have
used his time at the 2008 panel to express similar levels of controls and oversight as
his bewilderment at how racing could be any casino or lottery-style machines. Tote
such an outlier regarding its regulation of systems that have been used in America
technology. lack the clear lines of accountability and
“This is my third consecutive conference. defined processes to independently validate
“I came here two years ago to learn a little the technology. Moreover, they lack proper
bit more about why the racing industry had safeguards to independently investigate
managed to be the only component of the a malfunction, or investigate attempts to
gaming industry that had not implemented compromise the system. The message has
any serious oversight to its technology.” always been, ‘we can do better.’”
TIF contacted Mullally in March 2021 Tote operators, not so much.
and his views were unchanged and now Mullally’s position from outside racing
augmented by the new forms of gaming was affirmed by one active racing executive
technology which have entered the market, whose role includes managing wagering,
each aligned to a set of technical standards but asked not to be named because of
that are independently tested under the ongoing relationships with tote companies.
authority of their regulators. Racing’s That executive told TIF in early 2021 that
controls fall farther behind. AmTote, which was reported to process
“If you were to put me on a panel today, about 80% of North America’s pari-mutuel
13 years later, I’d say the exact same thing. bets, has consistently disappointed his
“The only difference is that the tote track:
systems stand out even more given how “They have not met our expectations on
technology in the rest of the gaming industry tote processing innovations and it has long
has evolved. Testing is not only ubiquitous seemed like they are not receiving the cash
in every other sector of gaming but is also needed to evolve or innovate in racing. If
anything, they have given the impression
26 TIF REPORTS: WAGERING INSECURITYmost of their team was working on their “We are a vendor. We compete in a free
historical horse racing technology.” market and we’ve got a good system. I
That technology powers the slot-like understand TRA [Scherf’s employer, funded
devices used to subsidize racing in states by the consortium of track owners] has a
including Arkansas, Kentucky and Virginia. system as well, we’d love to go ahead and
compete against you, love to go ahead and
partner with you.
MONITORING “We’re looking for an industry solution
here, we’re not looking for any kind of unfair
monopoly or any kind of unfair advantage.”
Back in the 2008 panel, Bowlinger, Earlier in his main remarks, Sobkowski
Sobkowski and Mullally were all bearish on struck hard at the racing industry’s
the state of wagering integrity and did not overwhelming reluctance.
hold back. “I just want to say that the industry has
In the session’s Q&A period, Chris had some pretty significant push-back to the
Scherf, long-time Executive Director of things that we’re doing as a company.
the Thoroughbred Racing Associations “I’ve been told, for example, that our
of North America, the owner of the TRPB, system is too simplistic. I’ve been told that
publicly contested Sobkowski’s monitoring our system is too sophisticated. I’ve been
business, challenging the underlying told that our system works too well and we
technology and claiming it insufficient to don’t need it. I’ve been told that our system
meet industry needs. doesn’t work at all and why bother?
“I think it vastly overpromises.” “But what I’ve really been told over and
By this point, Scherf had almost two over is that someone has to pay for this and
decades of experience working with the tote the industry doesn’t want to pay for it.”
companies and noted that the technological
infrastructure that was required to institute
independent monitoring was not possible
given the rather sorry state of technology
on the part of the tote companies.
A DEAD RAT
Reached in March 2021, Scherf made it In 2009, the Indiana Horse Racing
clearer. Commission (IHRC) decided to move
“You haven’t had an adventure in life until forward with Sobkowski’s firm, AMS,
you’ve tried to get tote companies to do declaring itself the first state in America to
something in concert. I found quickly that institute real-time, independently monitored
when you get them all into a room, everyone pari-mutuel wagering.
was in favor of uniformity and the definition Joe Gorajec was Executive Director of the
of uniformity was everyone doing it ‘my’ IHRC for 25 years, and pulled no punches in
way.” 2021 when assessing the state of wagering
The Scherf challenge in 2008 was an integrity in America, suggesting little, if
engagement familiar to Sobkowski, who anything, has been done in the almost two
had heard the hemming and hawing before. decades that have gone by since the Fix Six
27 TIF REPORTS: WAGERING INSECURITYYou can also read
