12/19/2008 12:00AM

Breaches of trust imperil a sport

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NEW YORK - Two deeply troubling incidents last week certified the bitter fact that racing not only has no immunity to economic downturns, but also that its institutions are susceptible to the kinds of full-blown meltdowns that leave customers fleeced and powerless.

The abrupt bankruptcy filing by Hinsdale Park in New Hampshire last Monday, and the brief decision by Breeders' Cup Ltd. to suspend its entire stakes-supplement program for 2009, disenfranchised racing's two largest groups of stakeholders: horseplayers, who had funded Hinsdale betting accounts with their own cash, and owner-breeders, who had nominated thousands of their foals to fund a program that was cancelled overnight. Both groups were simply told: Sorry, we're keeping your money - but without the "sorry" part.

I was at Horsemen's Park in Omaha, Neb. Dec. 13 when the Breeders' Cup story broke and heard about it from a small-scale Nebraska breeder whose reaction summarized the outrage of thousands of breeders nationwide who have been loyally nominating their foals to the Cup program for years. He said he nominates solely so that his horses will be eligible to earn some of the roughly $5 million that is added to the purses of 100 or so stakes races around the country each year, not because he realistically expects his modestly bred horses to be among the 150 or so who compete for $25.5 million in purses on the two big Cup days.

Enough people like that Nebraska breeder voiced their outrage that the Breeders' Cup changed course five days later and reinstated the program for 2009, though explicitly failed to guarantee it for 2010. That latter proviso undid much of the goodwill the Cup might have achieved from its about-face, since those same breeders have already sent in their payments for foals of 2008, who will not begin racing until 2010.

What the Cup should have said was that while nothing in life is certain, it is committed to the stakes-supplement program and will reduce it in an emergency only in the same proportion it would reduce purses for Cup Day races. To do otherwise is to break a contract with the nation's breeders, who for 25 years now have funded Breeders' Cup races with the explicit understanding that some of the money would be disbursed beyond a handful of year-end races for elite horses.

The guess here is that the stakes program is safe going forward, and that the real damage to the Cup will be raising widespread concerns about how the organization is being run and how major decisions there seem to be made without the buy-in or even awareness of some of its board members and trustees.

The Hinsdale bankruptcy, alas, is not reversible, though the opinion that its account customers are at the very back of creditors' line could change, perhaps ultimately through the courts. Seizing these customers' funds, and telling them they'll be lucky to get 25 cents on the dollar some day, is a fundamental violation of the legalized-gambling contract between citizens and government, one that should send a chill through anyone who bets on horses.

Liquidating these bettors' accounts is like telling a guy who won the state lottery that he's not getting paid because the gas station where he bought his ticket subsequently decided to go out of business. Account wagering is legal in New Hampshire, supposedly under the protection of a state racing commission, whose most basic priority is to ensure that citizens are not robbed in the process of racing and wagering. These customers' betting accounts were the equivalent of state-sanctioned safety-deposit boxes, and if they were emptied someone should be filing criminal charges against the looters.

In this columnist's personal opinion, these bettors should be given their deposit funds back long before the state gets its slice of betting proceeds and long before vendors (including Daily Racing Form, which Hinsdale owes about $11,000 for unpaid newspapers) are given a settlement. Businesses budget and insure for uncollectible debt. Horseplayers cannot, and unlike businesses are assured by the state that they will be paid their rightful proceeds. A single incident like the Hinsdale collapse undermines the integrity of the entire parimutuel system.

Every entity that offers account wagering, and every state that supposedly regulates it, should be writing legislation right now to segregate and protect customer deposits. They also should be issuing reassurances to customers, who otherwise could not be blamed for emptying their accounts at the close of business each day. If the public can not be confident its deposits are safe and its winning bets will be paid, you will have no betting, no game, and no racing.