05/27/2010 12:00AM

Industry up to its neck in paper


LEXINGTON - Boyd Browning, the chief executive officer of the Fasig-Tipton sales company, shares an opinion with virtually everyone else who works in an administrative office in the Thoroughbred industry.

"It's pretty archaic to walk into the sales office and see 1,500 foal papers stacked there waiting to be filed," Browning said. "You want to say, 'Hey, I thought this was 2010.' "

Of course, it is 2010, a time when companies in every industry have attempted to eliminate paper files and migrate their information to centralized electronic databases. But the Thoroughbred industry - unlike the Standardbred and Quarter Horse industries - continues to require owners of horses to keep and maintain stacks of stapled or clipped papers to prove a horse's identity, enter horses in races, verify markings, maintain vaccination and other health records, and track a horse's ownership despite many duplicate records in existing databases.

Critics have voiced displeasure with the system, arguing that the Thoroughbred racing industry has fallen out-of-step with its peers such as the United States Trotting Association and American Quarter Horse Association, trade organizations that adopted an electronic system to maintain horse records years ago. And while most officials, from racing secretaries to the administrators of state breeding award programs, have said they would prefer to work with electronic files, the adoption of a centralized electronic system has not been adopted because of resistance by some organizations to assume the legal responsibility of verifying that a horse's ownership is accurately maintained.

Not surprisingly, most supporters have sought help from the Jockey Club - the official registrar of Thoroughbred horses in the U.S., Canada, and Puerto Rico - because of the large number of data services it provides to racetracks and other organizations, either through its own operations or its subsidiaries. But the Jockey Club has cited advice from its legal counsel that it cannot be responsible for verifying the ownership of a horse, and the organization has steadfastly refused to create or maintain the database many contend would most easily make an electronic system possible.

"Ownership information is not fundamental to our charter of properly identifying a horse and verifying its pedigree," said Matt Iuliano, the Jockey Club's executive director. "Ownership is a private-property matter. We don't want to increase our risk of getting entangled in those issues. We want the courts to resolve those issues."

Nevertheless, the Jockey Club, through its racing-operations subsidiary and an interactive registry, maintains an electronic database that includes most of the information pertinent to owning and racing a horse. It has provided regulators and stewards with access to the database to verify that a horse is eligible to race if questions arise about foal papers or owners, who must be licensed to participate in racing. But the system falls well short of being paperless, leading to frustration, particularly in racing offices.

P.J. Campo, the racing secretary for the New York Racing Association, said he "can't think of one plausible reason" why an electronic system has not been adopted. With few exceptions, owners who want to race at New York Racing Association tracks must have the foal papers on file in order to enter. But to maintain records on the local horse population, Campo's staff updates the papers and electronic files to determine eligibility and preference in races, and to verify whether a horse has the proper vaccination and travel papers. That's because a horse shipping from a NYRA track will need all that information in paper form to be eligible to race at another track.

"This is so outdated, what we do now," Campo said. "My staff does the same thing twice, over and over. It's crazy."

The United States Trotting Association went to a paperless system in 2001, according to its executive vice president, Mike Tanner. The system includes data on race records, eligibility for statebred awards programs, information pertaining to the stewards' lists maintained by racetracks, vaccinations, and ownership records, among other data.

Joe Gorajec, the executive director of the Indiana Horse Racing Commission, said the USTA database has become invaluable to regulators because of the ease with which horse records can be verified to determine eligibility to race or earn statebred awards.

"We use the USTA database continuously throughout the race meets, and that's something that's just not available on the Thoroughbred side," Gorajec said.

Both of Indiana's racetracks, Hoosier Park and Indiana Downs, run Standardbred and Thoroughbred meets.

Like the American Quarter Horse Association, the USTA is a member-based organization; the Jockey Club is not. The AQHA and USTA assess dues from members and require compliance with their rules. Those rules include a requirement that any transfer of ownership in a horse of 5 percent or more must be reported to the association at the time of the transaction.

The issue of ownership is especially thorny in the Thoroughbred industry because of the informality of many of the deals struck by investors, especially in the auction arena, according to some officials. In many of those deals, investors are not keen on having their share of the horse become public knowledge, and some of the agreements are nothing more than a handshake among long-standing friends or business partners. In addition, some deals are struck within hours of a horse going through the sales ring, when ownership of the horse transfers yet again. That could lead to difficulties in maintaining accurate records because of the speed at which the transfers would have to be reported, the officials said. It also touches on longstanding unresolved ethical issues in the auction industry like hidden ownership.

"There's a multitude of transactions that take place," Iuliano said. "There are option sales, private sales, partnerships where owners might not be diligent in reporting that information back to us."

Also, some owners of Thoroughbred horses might balk at a requirement to provide electronic records of horse sales as horses leave the racetrack, rather than just passing the foal papers along to the new owner. Though the majority of Thoroughbred horses enter the breeding industry or find homes with reliable caretakers, others do not. An electronic trail of ownership could link some owners to unsavory practices that they don't endorse or want publicized, such as slaughter.

Geoffrey Russell, the director of sales of Keeneland, the world's largest auction company, said Keeneland requires owners to be identified on the foal papers that are filed with the company before the sale. Like racing secretaries dealing with claimed horses, the sales company does not release the papers to the new owner until payment clears.

Keeneland does not independently verify that the ownership is accurate, Russell said. Asked if it should be incumbent on the racing industry to verify and enforce accurate owners' records, Russell said, "You're going to have to ask an attorney that."

"The world is a digital world at the moment," Russell said. "We will get to that point, but it doesn't seem like it's today, or tomorrow."

Despite the moves by the Standardbred and Quarter Horse industries to go to paperless records, their administrators acknowledge that they also do not verify that ownership is listed accurately. Owners of horses of racing age, they say, are compelled to provide accurate records because of statutory licensing obligations. Still, the administrators rely on the honor system.

"We believe what people tell us," said Janet Terhune, the registrar of the USTA.

That reliance has been cited by some officials who sympathize with the Jockey Club's position. One official who worked closely with the Jockey Club as it explored the idea of a paperless system said that a review the USTA and AQHA systems had concluded that the data could not be adequately verified, at least not in an enforceable way.

"I'm not saying any of it is wrong," the official said. "But a database is only as good as the data that goes into it."

Frustration with the reliance on paper records led the Kentucky Horse Racing Commission to explore alternatives. John Veitch, the state's chief steward, said the commission approached the Jockey Club late in 2008 to discuss a paperless system because of "upwards of 40 scratches" that year due to the lack of foal papers on file at state racetracks, usually as the result of clerical errors. The Jockey Club informed the Kentucky stewards that it had no desire to be legally responsible for verifying owners' records but set up a system giving stewards access to the database that lists current owners.

As a result, the commission has suspended requirements for foal papers to be on file in racing offices at Kentucky tracks as long as an owner can provide the records within a reasonable time after the race has been run and as long as the horse's identity can be verified using the Jockey Club's online system. Veitch said that no horses have had to be scratched because of missing foal papers since implementing the policy.

Veitch still believes that the Jockey Club should be embracing a paperless system due to the vast amount of data it has on file.

"They are the ones reporting all of that information from birth on," Veitch said. "I understand they have questions about being put in a position of legal responsibility. But we've always felt that the Jockey Club has the resources and equipment to do that."

As a result of the Jockey Club's reluctance to take on the project, the racing commission has asked the Association of Racing Commissioners International to explore the idea of creating an owner's database that could replace the paper records.

That effort is supported, at least in theory, by the Thoroughbred Owners and Breeders Association, a national trade organization, according to Dan Metzger, the executive director of the organization.

"It's embarrassing for this industry that we can't answer a simple question: How many people own racehorses?" Metzger said. "So there's a strong need for an owner's registry, but the question is, Who's going to do it?"

Metzger said information about owners should be limited to horses of racing age, with no records required before horses are sent to the racetrack or after their racing careers have ended.

"We take the angle of only requiring it when a horse hits the racetrack," Metzger said. "You get to a sticking point where people don't want to disclose ownership before a horse gets to the racetrack, and we can sympathize with that."