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Updated on 09/15/2011 2:14PM
Cloak and dagger in Jockeys' Guild
Pat Day had heard enough. It was time, he said, for "everyone to put their cards on the table."
So Day, the Hall of Fame rider and president of the Jockeys' Guild, called an emergency meeting of the Guild's nine-member executive committee for April 2 at the group's offices in Lexington, Ky. On the agenda were allegations of mismanagement by John Giovanni, the Guild's national manager for the past 14 years, and the cancellation of an insurance policy providing health benefits for the families of Guild members.
"I told them all, 'I want you to bring any concerns, any questions you may have in any shape or form. Lay it all on the table,' " Day, 48, said in a recent interview. "And I said I wanted to do it in the offices in Lexington. That way if anyone had a question about finances, we had all the records right there, we could just pull the file."
A day later, the jockeys dispersed, having given Giovanni a unanimous vote of confidence after a closed-door session. As the riders traveled to their homes, few realized that it would be the last moment of peace for the Guild as they knew it.
Just six weeks later, after a teleconference call on June 15, the Guild's entire staff was fired, and its administration was unexpectedly handed to a California consulting firm, Matrix Capital Associates, whose chief executive officer, L Wayne Gertmenian, had personal ties to Chris McCarron, 48, one of the Guild's executive committee members. A few days after the firings, Day resigned not only as president, but also as a Guild member. Four other jockeys - Jerry Bailey, Larry Melancon, Dean Kutz, and Tony Black - also resigned from the executive committee, although they remain Guild members.
Now, only four jockeys - McCarron, Robert Colton, Mike McCarthy, and Tomey Swan, the acting president - remain on the executive committee, which is responsible for setting policy and approving a budget. Giovanni, 57, has filed a lawsuit against the organization and its current leaders. The turmoil has left the operations of the Guild unsettled at a precarious time, and there is lingering bitterness among some members who say the new leaders spread fear among riders to get their way.
"They've lost a lot of credibility that was built up over a long time," said Bailey, 44, a former president of the Guild who guided the organization through bitter contract negotiations with tracks in 1994. "They've probably lost 20 years of credibility in just six months."
An organization in crisis
Formed in the early 1940's to represent Thoroughbred jockeys in North America, the Guild plays an important role for many riders, who as independent contractors cannot join a traditional union. With approximately 700 of the nation's 2000 licensed riders as members, it has been able to get racetracks to pay for accident insurance and provide funding for a program to care for permanently disabled riders. The Guild also gives jockeys an important voice on safety issues and in lobbying.
The Guild's new leaders acknowledge that the changes have damaged the organization's standing with some jockeys. "My number one concern now is the integrity of the organization, both the philosophical and the structural integrity," McCarron said. "I want that to remain intact. We need that to remain intact. This is an extremely important organization for riders. Without a voice that can be heard in the industry, there's no progress."
Because of Giovanni's lawsuit, which alleges that Giovanni was defamed by Gertmenian, McCarron, McCarthy, Colton, and Swan, Giovanni and some jockeys declined to comment for this article. However, through interviews with a dozen individuals involved in the case, a picture has emerged as to how and why the dispute developed, beginning with the Guild's annual meeting last December in Las Vegas.
At the meeting, McCarron, Colton, 44, and McCarthy, 38, were elected to their first terms on the executive committee, and Guild members were told that one of the Guild's most prized benefits, a health insurance policy for members' families, was getting too expensive to fund, with premiums in 2001 expected to increase by 20 percent.
Health benefits were probably the Guild's most valuable service. For $40 in membership dues and a $5 contribution per mount, each rider received coverage that most American workers have come to view as a right. The health insurance policy was worth approximately $7,000 a year to each member, over and above the insurance provided by the Guild to cover accidents at the track.
At the December meeting, McCarron, Colton, and McCarthy said they wanted to concentrate on decreasing the cost of the health insurance policy so that the Guild could continue to provide coverage. Other members of the executive committee remember being impressed.
"I felt like they would bring a significant amount of expertise and knowledge to the table," said Day, who was elected to a two-year term at the December meeting. "I believed there were some great things ahead for the Guild."
Over the next two months, Colton, McCarthy, and McCarron began looking into the Guild's finances, Guild employees said. In fact, in January, Colton and McCarthy, who are based in Delaware, traveled to the Guild's Lexington office to examine expense reports and budgets.
Day said Colton called him before traveling to Lexington, raising the issue of possible mismanagement. "He wanted to ask me if it was all right if he went there and checked out the books," Day said. "I told him that was fine, and I said, 'Bobby, if you find something, I want to know about it.' "
At the end of December, the big news hit. Premiums for the health insurance policy would increase 43 percent in 2001, the Guild's insurance company, Union Labor Life said, not 20 percent as anticipated. As a result, premiums for each rider's coverage would increase from $4,900 a year to $7,000. The Guild was facing a deficit of $1.4 million if it bought the coverage, at a time when the organization's income, part of which is provided by investments in stocks and bonds, was already feeling the strain of the market decline, Bailey said. The jockeys met again in Florida in February, and the executive committee voted unanimously to cancel the coverage, effective April 1.
Union Labor Life refused to comment on why the premiums had skyrocketed. But several people said the rise was tied to a dramatic increase in claims over the previous year, which some jockeys believed was an indication of fraud. Rumors gathered strength that Giovanni or other Guild officials were responsible, several jockeys said.
"That's when I really started hearing the rumors," said Mickey Solomone, a former Guild regional manager. "Before, you heard maybe a couple of guys talking about it, but after the Florida meetings, you started hearing it everywhere you went."
Bailey, Solomone, and Day all said that talk about mismanagement was being fueled by McCarron, Colton, and McCarthy, who were sometimes being accompanied on trips to racetracks by Gertmenian. Citing the lawsuit, McCarron, Colton, McCarthy, and Gertmenian declined to comment about those trips.
"So while this is going on, unbeknownst to me or John Giovanni or anybody else, Chris McCarron, Mike McCarthy, Robbie Colton, Tomey Swan, and Wayne Gertmenian, either collectively or in combinations, were systematically going to racetracks around the country spreading fear about something sinister going on by management," Bailey said. "Keep in mind that this was all innuendo. Nothing was ever proved, even though Pat kept calling all these meetings asking people to back up what they were saying. But that's what all the riders were being told by those guys."
In particular, Day and Bailey both said that Gertmenian and McCarron spoke to jockeys at Belmont Park in New York in the days leading up to the June 9 Belmont Stakes, speaking with two or three riders at a time in a separate room in the jockeys' quarters. At that time, Gertmenian told Day and Bailey that the cancellation of the health insurance was a "disgrace," according to Bailey.
"He was talking to me as if the world was ending," Bailey said. "He kept saying the Guild had mismanaged all the funds, and that we should have a lot more respect, and that we shouldn't have lost our insurance."
The rumors were also getting back to Giovanni, who told Guild members that he was becoming increasingly frustrated by the allegations. On June 14, Giovanni, who had been involved with the Guild since joining as a rider in 1961, wrote a brief press release that said he did not intend to stay on as National Manager after his two-year contract was up at the end of 2002.
The next day, McCarron, Colton, and McCarthy called an emergency meeting. The executive committee held a teleconference call that night. McCarron called for the termination of all employees of the Guild, including Giovanni, committee members said, and he told members that they could be held personally liable for any criminal or fraudulent acts committed by any Guild employees unless the employees were immediately fired. McCarron said that Matrix Capital Associates was ready to come on board to lead the Guild.
The jockeys voted to accept McCarron's recommendations. "The executive committee was of the assumption that the action being proposed was necessary," Day said. "We were all in agreement that it needed to take place."
Following the conference call, McCarron faxed a seven-point document to other executive committee members, asking for signatures. Additionally, a separate document was being prepared that told Guild employees that they were fired effective immediately and would not be allowed back into their offices.
At his farm in Kentucky the next day, Day began contemplating what happened the previous night, and he began to feel uneasy about the contention that executive committee members could be held liable for criminal acts by Guild employees. He placed a phone call to the Guild's legal counsel, Tom Kennedy, in New York, seeking advice. Kennedy told Day that executive committee members could be held liable for misdeeds by Guild officials only if the executive committee knew about the mismanagement.
"And we didn't know of anything that was going on," Day said. "Because nothing was going on. There was never any mismanagement. There were never any misappropriations."
Meanwhile, Bailey said he began asking McCarron and others to provide him with references for Matrix and Dr. Gertmenian. But no one answered his calls, Bailey said.
For his part, McCarron began distributing a letter dated June 19 urging jockeys to stay in the Guild, despite the upheaval in its ranks.
"Together, with your support and participation, we can restore health benefits for all families and, eventually, create a pension plan," McCarron wrote, asking members to share the letter and post it in jockeys' rooms at racetracks. "Please join with me and the rest of the board in pursuing the Guild's dream. Now is the time to stop cursing the darkness and light a candle."
Day, however, could not let the matter rest. He called for another meeting on June 20, inviting the executive committee members together to discuss what he said were "issues related to the fired employees." That night, Bailey, Kutz, Melancon, and Black joined Day on a teleconference call. But the Guild needed six members for a quorum, and McCarron, McCarthy, Colton, and Swan failed to show up.
The next morning, Day resigned, refusing in interviews to answer any questions about the resignation except to say that he had "strong, distinct philosophical differences" with the existing management.
"I didn't want to hamper their efforts to be successful," Day said recently. "I'm still for the riders. I still want them to have a voice. I still want them to have benefits. I still want them to get all the things that the Guild is there for. All of the reasons for supporting the Guild haven't changed. And I hope and I pray that the new management team will be able to provide what they are promising."
Bailey, who led the Guild through bitter contractual negotiations with racetracks in 1995, resigned as well. One by one, Kutz, Melancon, and Black followed in the weeks ahead.
"I don't think Giovanni ever had their support," Bailey said, referring to McCarron, Colton, and McCarthy. "Their agenda was always to replace him, from the outset. They had no other plan. John and the rest of the employees just had their legs cut out from underneath them."
An uncertain future
It is unclear at this point what impact the controversy will have on the Guild's long-term objectives. For now, the Guild is working diligently to restore the health insurance policy, according to Gertmenian, who declined to answer questions about the management changes, citing the lawsuit. But he said that the Guild is having trouble securing another policy because insurance providers were reluctant to cover a group that had canceled an earlier policy.
"You're dealing with a group of men and women who do not have health insurance," Gertmenian said. "That is the only issue. The other issues are not critical. They are just the normal issues of doing business."
Gertmenian continues to enjoy solid support from McCarron and Matrix employees, who are by and large volunteers, according to Jacqueline Gaston, a Matrix employee who is acting as the Guild's spokeswoman.
Gaston said she studied under Gertmenian at Pepperdine, where he is a professor of economics. She said that Matrix is not a traditional management consulting firm in that Gertmenian chooses work "based on the causes that we think are worthy."
According to the Pepperdine website, Gertmenian served in the Carter and Ford administrations as a foreign emissary for the Secretary of Commerce and a detente negotiator in Moscow for the National Security Council.
McCarron said he first met Gertmenian in 1995 through his daughter, Erin, who is a good friend of Gertmenian's daughter.
"He impressed me as a man of tremendous moral values," McCarron said. "On top of his wonderful qualifications, his staff is comprised of people with MBA's, CPA's, Ph.D.'s, law degrees, and some in a combination of those. They are very qualified, well-educated people. Dr. G. teaches value-based management skills. He requires all his students to read the Bible."
McCarron said he regretted how the management changes were implemented, but he staunchly defended them. "There's so much room for improvement with regard to the benefits this organization should provide its members - for example, health insurance," McCarron said.
For now, jockeys do not appear to be abandoning the Guild, according to horsemen's bookkeepers at several racetracks, who are responsible for keeping such records. McCarron said he hoped that Guild members would give the new management a chance to succeed. The best way they can do that, McCarron said, is to remain Guild members.
"The members of our staff are working diligently to resolve the problems," he said. "They have been there less than four months. It's kind of like me, in the middle of a race riding along at the half-mile pole and not really knowing how much horse I have. We do see a light at the end of the tunnel. It's just going to take a lot of patience and understanding to reach that light."