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Glare on sport's dark corners
LEXINGTON, Ky. - For the past several years, the racing industry has wrestled with two prominent issues: the use of performance-enhancing drugs and the growth of rebate shops. Committees and conferences have discussed the issues time and again, but progress on any definite plan of action has been slow to come.
On Thursday night, however, the racing industry received a rude awakening when a federal indictment of 17 people - including the New York trainer Greg Martin and several alleged associates of the Gambino crime family - put both issues under an unforgiving spotlight. Industry officials said Friday that the indictment will force the sport to take concrete steps to curb the use of banned drugs and more properly monitor the betting outlets that have access to the industry's commingled parimutuel pools.
The indictment, brought by the U.S. attorney for the Southern District of New York, says that the "Uvari Group" - the term used for the conspirators, based on the last names of several of the indicted people - set up accounts with offshore bookmakers in which the identities of the actual bettors were not known, and placed more than $200 million in wagers from 2000 to 2005. The group, according to the indictment, then used the laundered proceeds, which included rebates on their bets, to claim false tax refunds.
Included in the indictment is the allegation that the group bet on a horse trained by Martin with the understanding that the horse had been given a banned performance-enhancing substance - in this case, a milkshake, which is a cocktail of sodium bicarbonate, sugar, and electrolytes that is typically pumped into a horse's stomach using a hose snaked down its nasal passages. Milkshakes are thought to allow horses to stave off fatigue by preventing the buildup of toxic substances in muscle tissues, and have been thought to be the source of recent widespread form reversals in U.S. racing.
Although the indictment focuses on banking transactions and telephone calls that violate the Federal Wire Act and money-laundering statutes, the case underscores the racing industry's preoccupation with performance-enhancing drugs and offshore betting shops. The case is expected to expand to other states, including California and Florida.
In the past five years, form reversals at racetracks across the U.S. have frustrated horseplayers and generated suspicion toward certain trainers. As for offshore betting shops, although the operations have been frequently criticized for their secretive practices, only one, Racing Services Inc. in North Dakota - which was named in the indictment - had been linked to any alleged criminal activity.
If the substance administered to the horse trained by Martin - A One Rocket - was indeed a milkshake, then most bettors' suspicions will have been confirmed, along with those of many trainers. Martin has denied administering the horse any illegal substance.
won the race in question - the first race at Aqueduct on Dec. 18, 2003 - by 10 lengths, improving by 28 Beyer Speed Figure points just five days after an earlier win in a lower claiming race. The performance seems to demonstrate convincingly that milkshakes can have a dramatic impact on a horse's form. In fact, A One Rocket's performance that day mirrors the performances of perhaps hundreds of horses at U.S. racetracks over the past several years.
With scant evidence to back them up, bettors have been grumbling about form reversals, especially in cases of the so-called "supertrainers." These trainers have emerged recently to post winning and in-the-money percentages that far exceed any historical precedents. Some of these trainers have been able to hit the high percentages with low-level claiming horses. Many of these horses, in their first or second starts off a claim, suddenly run faster and for longer than at any other time in their careers.
Dr. Scot Waterman, the chairman of the Racing Medication and Testing Consortium, an industrywide group seeking to standardize drug rules and penalties among racing jurisdictions, said that the milkshake allegation certainly gives bettors a reason for pause. But he also said that existing studies do not support the contention that milkshakes can account for such dramatic effects, and for that reason, he suspects that milkshakes are only part of the problem.
"I'm not convinced that an alkalizing agent accounts wholly for these form reversals, based on the research, and so I ask myself the question, 'Is that all there is?' " Waterman said Friday, using the scientific term for how a milkshake works. "We don't know for sure if that was all that was administered to the horse. To draw a straight line from just a milkshake to the horse's performance is not all that easy."
Efforts to combat milkshakes have proceeded in fits and starts over the past six years. In 1999, Kentucky and Louisiana became the last racing jurisdictions to adopt rules banning milkshakes after several trainers alleged that the use of the concoctions was widespread. But as talk of the use of the blood-doping drug erythropoietin gained momentum beginning in 2001, milkshakes quietly fell off the map.
In the past six months, however, the milkshake issue has re-emerged. Beginning with the summer Del Mar meet, all the major tracks in Southern California began testing horses for excessive carbon dioxide levels before races. The tests, which are used extensively in the harness industry, are considered the best way to determine whether a milkshake has been administered to a horse. Gulfstream Park announced this year that it would also conduct prerace tests for milkshakes.
"Sometimes, these things go in cycles," Waterman said, referring to milkshakes. "Something that is in favor gets targeted, then it comes back into favor as the priorities get shifted to the next thing."
It is unclear whether it is only a coincidence that racetracks in both California and Florida announced the new measures last year. The investigation leading to the indictment has taken place over the past two years, federal officials said, and more arrests are likely in those states.
Some trainers said that while the indictment was a black eye to the industry, they welcomed the scrutiny on race-day medication practices.
"It's a sad day for racing," said trainer Mark Hennig, at Gulfstream Park on Friday. "But for us, there's been enough talk about all this behind the scenes, and at some point, the field has got be leveled."
"I just hope they get to the bottom of it," said trainer Shug McGaughey, also at Gulfstream Park. "And the only way they are going to do that is to have this kind of adverse publicity."
The allegation that organized crime has been using offshore betting shops to place wagers into U.S. commingled pools may have an even more damaging immediate impact on racing, which has increasingly come to rely on offshore shops for large bets that come into U.S. pools.
Bets from offshore locations, including rebate shops, were estimated to total $1.2 billion in 2003, or approximately 8 percent of the $15 billion handle that year. Although estimates for 2004 are not reliable, handle from these locations was expected to grow to at least 10 percent of the national total.
Officials for rebate shops have said they provide a service to the racing industry by allowing price-sensitive bettors to wager at a lower takeout. The shops have steadfastly declined to name their customers, and, consequently, speculation about the operations has intensified. Contributing to the uncertainty is the persistence of late odds changes at many racetracks, a phenomenon that has been blamed in part on the ability of the shops to pour thousands of computer-generated bets into the pools just before a race starts.
"We've expressed for years now that not enough is known about rebate shops and who they are doing business with, and the indictment seems to confirm our worst fears," said Chris Scherf, the executive director of the Thoroughbred Racing Associations, a racetrack trade group, on Friday.
The indictment names four rebate shops: Euro Off-Track, based in the Isle of Man; the Tonkawa Indian tribe, which runs a betting service off a reservation in Oklahoma; Racing Services, which is now defunct after being indicted in 2003 on charges of running an illegal gambling operation and money laundering; and International Racing Group, based in Curacao. None of these shops was charged with a crime.
The indictment also states that a Connecticut company called International Players Association, whose principals included two of the people indicted, Jonathan Broome and Richard Hart, acted as an intermediary for the Uvari group, by handling wire transfers from the rebate shops and then distributing the money to the anonymous bettors.
The Uvari group, according the indictment, was headed by Gerald Uvari, whose partners included his brother Cesare Uvari and Gerald Uvari's son Anthony. All three were described as associates of the Gambino organized crime family.
The indictment makes it clear that rebates were a principal component of the Uvari Group's activity. Rebates to many high-wagering customers can reach as high as 17 percent of a high-takeout bet, according to racing officials. The awards typically average 10 percent of a bettor's handle.
"For each bet placed by a customer of the Uvari Group at an off-site facility, the Uvari Group typically received from the off-site facility a percentage of the bet known as a commission or rebate, regardless of whether the customer won or lost the bet," the indictment states.
Paul Berube, the president of the Thoroughbred Racing and Protective Bureau, which assisted the federal government in the investigation, said that the racing industry has refused to acknowledge warning signs that offshore betting shops may be operating extra-legally, despite cautionary words from a number of officials.
"This is not a new message," Berube said. "In fact, it's a very old message. None of this is happening with outlets that have somehow muscled into the parimutuel pools without anyone's knowledge. This is all happening contractually. The racing industry has to know who these people are, how they are conducting business, with whom they are conducting business, the characters of those people, and their background. Instead, it's been, 'Okay, here's a contract, sign here.' "
Rebate shops have frequently countered complaints about their operations with the argument that they provided new handle to the racing industry that was allowing the sport to grow. The shops had a point: Handle ballooned throughout the time that the shops were growing in the late 1990's and early 2000's.
In addition, racing officials have looked to the rising handle figures and wondered whether the widespread suspicions of bettors about supertrainers was actually having any effect on the sport's business. If so many players were so concerned, why was handle still going up?
On Wednesday, the National Thoroughbred Racing Association and Equibase released its year-end handle statistics for 2004. According to the figures, handle fell in 2004 for the first time since 1993, after several years of marginal growth.
- additional reporting by Mike Welsch