Report: Wagering mistake cost bettors millions at New York race tracks
SARATOGA SPRINGS, N.Y. -- A state report released this week says New York Racing Association and former state racing officials are to blame for a wagering mistake that cost the betting public more than $7 million.
From September 2010 to December 2011, NYRA overcharged bettors an extra 1 percent on takeout - the amount of wagering money kept by racetracks and off-track betting sites - on some exotic wagers.
The mistake led to the termination of former NYRA President and CEO Charles Hayward in May 2012 and former NYRA General Counsel Patrick Kehoe, state Inspector General Catherine Scott's office said.
"Patrons of New York's gaming industry must feel secure and trust that those operating horse racing in our state are doing so competently and within the parameters of the law," Scott said in a statement. "What occurred undermined that trust because NYRA took earnings away from bettors that were rightfully theirs."
The report says NYRA has complied with a series of seven corrective measures to make sure such incidents aren't repeated.
A law requiring a reduction in takeout expired in September 2010 and Kehoe's legal team failed to notate it, the report says.
"Kehoe and Hayward missed several opportunities to catch the takeout error: by execusable inattention to the legislation and dereliction of their duties," Scott's office said. "Specifically, emails ... reveal that Kehoe had ample opportunity to uncover NYRA's exocit wager takeout overcharge, but simply failed to do so."
Kehoe could not immediately be reached for comment.
The report also says Hayward was informed, via e-mail, by a member of the media about the incorrect takeout rate and did not immediately ask Kehoe to review the law. Instead, Hayward responded that "NYRA could not request a reduction in the takeout rate at that time," Scott's office said. "Hayward was, at best, careless in his reading of this email."
Hayward, in a statement, said, "The inspector general's report at long last confirms what I said two years ago - that the incorrect takeout rate was the result of simple human error, in unintentional oversight by many people including NYRA's board, audit committee and management, several outside auditors and multiple state agencies including the (former) New York State Racing and Wagering Board."
Once NYRA became aware of the problem, it refunded bettors that could be identified and reduced the mandatory takeout rate to give winning bettors more money, Hayward said.
Scott's office said NYRA was only able to repay $611,604 of the more than $1.1 million in extra money it received. Other racetracks and off-track wagering sites received more than $6.2 million.
Hayward, who has a home in Saratoga Springs, is now publisher of Thoroughbred Racing Commentary (www.thoroughbredracing.com). A spokesman said he is not taking any legal action against NYRA or the state over his dismissal. Hayward's salary was approximately $450,000 when he was let go.
Five months after his termination, a new 17-member NYRA Reorganization Board was created with 12 state appointees in the majority. Chairman Dr. David Skorton, in a statement, said Monday, "The new Re-Organization Board's Audit and Compliance Committee is led by New York State's first Inspector General, Joseph Spinelli, and that committee has instituted new internal audit policies, procedures and controls."
He also said that new NYRA President and CEO Chris Kay has hired "a new executive team, including a new General Counsel, a new Chief Compliance Officer and other key executives with no connection to these events cited by the inspector general. ... The new management team has already instituted sweeping changes that coincide with the inspector general's recommendations."
To view the inspector general's 122-page report, log on to ig.ny.gov.
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