03/24/2011 5:44PM

Louisiana HBPA case of fraud, conspiracy divides horsemen

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If Hamlet were recast in modern America, is there any doubt where it would be set? Over the last six years in Louisiana, a Shakespearean performance full of intrigue, betrayal, greed, and family rivalries has played out within the Horsemen’s Benevolent and Protective Association (HBPA), the non-profit group recognized by law as the voice of the more than 5,000 owners and trainers who race at the state’s four racetracks.

This storyline is as familiar to Louisianans as Mardi Gras. The populist governor Earl Long once said that his constituents “don’t want good government, they want good entertainment.” But if there is any entertainment here it could only be dark comedy.

Last November, the U.S. Attorney’s office of the Eastern District of Louisiana charged Sean Alfortish, the president of the HBPA, and Mona Romero, its executive director, with 29 counts of conspiracy to commit mail fraud, identity fraud, wire fraud, healthcare fraud, and witness tampering. The investigation took more than two years.

Alfortish, 43, and Romero, 52, pleaded not guilty and are free on bail. The board of the HBPA forced them to resign, and their trial is scheduled for September. If they are convicted on all 29 counts, Alfortish and Romero face maximum penalties of 280 years in jail and $7.25 million in fines.

Even for a game well acquainted with tomfoolery, this was sensational. Prosecutors say that beginning in March 2005, when Alfortish won election and then chose Romero as executive director, they siphoned off hundreds of thousands of dollars from the HBPA and its medical benefits trust for cash and salaries, parties and vacations, cars and entertainment, evening gowns and diamond cufflinks, and even a settlement in a sexual harassment suit.

That isn’t all. The indictment charges that after horsemen from around the country donated almost $800,000 for Hurricanes Katrina and Rita relief, Alfortish and Romero seized control of the funds and spent some on themselves and gave more to undeserving friends.

And, as a minority of elected members of the HBPA’s 10-person board asked more and more questions about the finances of the association, Alfortish and Romero, prosecutors say, conspired with three subordinates to rig the March 2008 election, replacing those members with their preferred candidates.

The last bottle of champagne was barely opened on election night before suspicions arose that fraudulent postal ballots had been cast. Three board members who were not reelected requested a temporary restraining order to prohibit the HBPA from destroying ballots. Investigators from the U.S. Postal Service criminal division were soon on the case. Judging by the indictment, the election was the knob that opened the door into a large room of thievery.

“It was a crooked election,” said Don Stemmans, a gruff old horseman who recently picked up a spot on the board. “It was very, very crooked.”

These weren’t a few bad apples. Some of the biggest names in Louisiana racing are central characters in this still-unfolding drama. Popular among many horsemen, Alfortish raced his horses in New Orleans and was well connected as a lawyer and magistrate.

Romero wed into one of the first families of Cajun Country racing. Her husband, Gerald Romero, is a trainer and has sat on the HBPA board since 2005. Mona Romero’s sister-in-law Cindy “Cricket” Romero was also indicted. The HBPA’s farm and field director, she pleaded guilty in December to a single count of conspiring to commit identity fraud in connection with the election. (She will be sentenced this month.) Cricket Romero is married to Hall of Fame jockey Randy Romero.

MORE: Indictment against Alfortish and Romero

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Richard Westling, the lawyer who represents Alfortish, declined to comment specifically for this article but said a motion had been filed March 14 to dismiss the indictment. That motion says that “the government’s indictment somewhat haphazardly lays out a succession of factual and legal claims . . . notable more for its appeal to public titillation than for its contribution to an understanding of the legal charges.” Westling said the court will hear the motion next week. Romero’s lawyer declined to comment.

Cricket Romero is cooperating with the government. As part of her guilty plea she signed a document affirming that she helped Alfortish, Mona Romero, and their employees Tammy Broussard and Carol Ruth Winfree fix the election. Winfree is another sister-in-law of Mona Romero. She has not been charged in the alleged conspiracy.

According to the indictment, Mona Romero and Broussard handpicked the names of horsemen who lived out of state and had raced in Louisiana once, making them eligible but highly unlikely to vote in the election, and forged ballots using their Social Security numbers. Mona and Cricket Romero and Winfree then flew around the country to mail the ballots with the appropriate postmarks.

Broussard stopped short of mailing hundreds of ballots and turned them over to the feds, according to her attorney, Vinny Mosca. He said she was fired for helping investigators.

“Third-world dictators could learn a lot from the HBPA about rigging elections,” wrote Times-Picayune columnist James Gill after the indictment came out.

As Romero and Alfortish await trial, there is no shortage of suspense within the HBPA and Louisiana racing circles. Rumors about more indictments linger in the air like jazz notes in the French Quarter. And ballots for a new election have already been sent out, due back by the end of March.

The new election could well decide the future of the organization, which controls the simulcast signals, advocates for horsemen, and provides a variety of services, such as medical benefits. A court order last month prohibited Alfortish from contacting any member of the board and from participating in the election – a contest between those who supported Alfortish and Romero and those who clamored for transparency and now feel vindicated. The first group is largely the same as the current board and includes Larry Robideaux, who is the interim president, Carrol Castille, Don Hargroder, Gerald Romero, and Sam David Jr. The latter two are not seeking reelection. Sam Breaux usually offered the only dissenting vote during Alfortish’s second term.

On the side pushing for greater transparency are Arthur Morrell, Tom Abbott, Stemmans, and Stanley Seelig, a fiery owner who began asking questions around the time the federal investigation began. He is running for president against Castille and Sturges Ducoing, a trustee of the medical benefits trust. “The same group that got us into trouble still has control over the board,” Seelig said.

Like Morrell, Abbott raised questions about Alfortish and Romero during their first term. “We were branded as troublemakers,” he said. “But we were right on everything.”

What hangs in the balance is whether an accounting of the last six years comes about and whether the finances and reputation of the organization can be rebuilt.

By law, the HBPA receives a 6 percent cut of annual purses – now $100 million – of which 4  percent goes to its medical benefits trust and another 1 percent each to its worker’s compensation program and pension fund.

Prosecutors say that as a result of Alfortish and Romero siphoning funds from the medical trust to the HBPA’s general operating budget, the HBPA owed the trust $823,285 as of June 30, 2010, which it would not pay back. The trust, in response, has delayed claims payments to beneficiaries and healthcare providers and reduced medical and hospital benefits, such as excluding coverage to children, according to prosecutors. Pharmacies are reluctant to fill prescriptions for HBPA members, said trainer and former president Oran Trahan. And in some cases providers have had to wait five to six months for payment, Seelig said.

Robideaux, a longtime trainer, challenged the claim that the HBPA owes the trust money. “Financially, we’re in good shape,” he said.

Not so, asserted Stemmans. “The medical money is very much depleted,” he said. “I can’t imagine anyone on the board thinking otherwise.”

In the past, the HBPA would earn revenue for its operating budget from interest accrued on the millions in purses it holds in the horsemen’s bookkeeper account. But as federal interest rates neared 0 percent, that source of revenue disappeared. In response, the HBPA recently increased its pony lead fees – the per start service fee – from $10 to $16.

Are rank-and-file horsemen up in arms over paying for these shortfalls? No, or at least not yet, Stemmans said. Most trainers are either unaware or uninterested in these problems as long as slot machines keep purses high. Plus, Alfortish spearheaded a worker’s compensation program that alleviated trainers’ costs and remains arguably the best in the country.

Because of that success, “there are still trainers and owners who will swear by Sean Alfortish,” said Morrell, who is the clerk of Criminal District Court in New Orleans. Owners, not trainers, he said, have suffered the most. They pay the higher pony lead fees, and the additional 2 percent of purse money that Alfortish requested from the Legislature to pay for the worker’s compensation and pension programs comes out of their pockets.

In the age of Madoff, subprime mortgages, and collateralized debt obligations that were ticking time bombs, the indictment proffers theft and fraud of an old-school sort. But the question asked of banks and investment companies in the financial crisis is the same here: Where was the board during all of this?

Following the March 2008 election, “Alfortish could’ve held up a white envelope and said it was red, and he would’ve got a nine-to-one vote,” Seelig said.

Seelig filed a suit in state court at the beginning of 2010 to gain access to ballots from the 2008 election. His ongoing suit alleges that the board, besides Breaux, failed to perform its fiduciary duty during Alfortish’s second term.

Asked about wrongdoing, several board members said they did not see any.

“I don’t know that anything was done wrong,” Sam David said.

“All that has really been done is funds were used from other parts of the association to fund the main company because of the lack of cash flow” due to rock-bottom interest rates, Don Hargroder said. He added: “We have not seen the proof of large amounts of theft.”

But the indictment, plus the accounts of dissident board members and concerned horsemen, tell a different story.

In early September 2008, an unofficial meeting with half of the board members was held at one of Hargroder’s car dealerships, in Lafayette, according to Broussard’s lawyer. Broussard, who by then was cooperating with the feds, came to the board members with her account of the March election. Her story corroborated what some people had already suspected.

About two weeks later, the HBPA held its regularly scheduled meeting. At one point the board went into executive session, along with Alfortish, Romero, and general counsel Jim Gelpi, to discuss sensitive information apart from the general body, according to P.J. Stakelum III, who is representing Seelig and several horsemen in their civil suit. The board members who had met with Broussard relayed her contention. A few indicated they believed her. Alfortish and Romero countered that she was lying.

Gelpi advised the board to schedule a special meeting as soon as possible to decide whether to commence its own investigation. The board declined. Instead, despite a bylaw that required bi-monthly board meetings, they didn’t meet again for nine months.

The election “did not come up again after that,” Hargroder said. He and fellow board members say they believed the best course was to allow the authorities to do their own investigation.

In response, the board decided to make an unusual change. Previously, the board would reimburse individual legal fees only after the person was cleared. But the board amended the bylaw regarding indemnity to cover all legal fees up front.

Over the next two years, HBPA documents show the association paid approximately $160,000 for criminal defense attorneys for Alfortish and Winfree and Mona, Cricket, and Gerald Romero. The board approved an additional $87,800 in legal fees for the association, even though only individual members were being investigated.

At the meeting in which Alfortish and others were asked to resign or were suspended, the board decided to quit paying their legal fees. It seems unlikely the fees will be recouped.

So what happened to an organization that had been a “whole lot more modest,” as Trahan, the soft-spoken former president, put it?

When Alfortish took office, his supporters believed as a lawyer he would open doors at the Legislature previously closed to horsemen. But board members were unaware of at least one part of his past. They would later learn that he had been in the middle of a highly publicized University of Florida agent scandal.

In May 2000, he pleaded guilty to a misdemeanor charge of attempting to conduct business without an agent’s license. Police said Alfortish used a runner to funnel cash and other inducements to two football players. As part of his plea agreement, a felony charge of illegal agent activity was dropped. The judge ordered Alfortish to leave the state.

Previously a seasonal field representative employed by the HBPA, Mona Romero campaigned for Alfortish, and he supported her appointment as executive director. She was confirmed by the board, but some members were unhappy. Gerald Romero had been elected to the board, and they considered it an unmistakable conflict of interest. “Sean more or less turned it into typical Louisiana politics,” Tom Abbott said.

In addition, slot machines at Louisiana racetracks were about to gift riches to horsemen. “An opportunity fell right in his lap,” Arthur Morrell said of Alfortish.

In the late summer of 2005, Hurricanes Katrina and Rita struck Louisiana. Fair Grounds and the HBPA’s corporate office suffered extensive wind and flood damage. According to a pending civil suit, Alfortish disregarded many of the HBPA’s corporate governance rules under the guise of taking emergency action.

That October, a tax-exempt charitable foundation was established. Alfortish and Mona Romero told the national HBPA that funds would be distributed properly after review by a screening committee, but instead they gave out funds at their sole discretion, the indictment says.

The charitable foundation paid $2,500 to Mona Romero although she hadn’t suffered damages from the hurricanes, $2,824 for a Bose surround system in Alfortish’s home, $7,000 for a college scholarship, and $2,500 for a bonus to an HBPA employee. (Alfortish denied wrongdoing in an interview with the Times-Picayune in 2009.)

In 2006, Alfortish set up a self-insurance plan for worker’s compensation, which some say reduced rates for trainers up to 75 percent. The Legislature granted Alfortish’s request to allocate 2 percent of overall purses – on top of its 4 percent cut – for the program. He set up the fund in the Cayman Islands.

In January 2007, with Morrell and his allies absent, the board in an executive session appointed Alfortish as the Director of Worker’s Compensation with an undetermined salary. Alfortish refused to disclose his salaries to board members who inquired. The president’s position is unpaid, but according to the indictment, Alfortish gave himself a salary of $116,000 as the Director of Worker’s Compensation and Director of Simulcasting.

The dissident members on the board continued to ask questions about the charitable foundation and other finances.

According to Morrell, Alfortish would say, “Morrell wants to know where this is coming from. Let’s put it to a vote.” The outcome was always the same − six to four, Morrell said.

Near the end of 2007, Morrell and two other board members sued Alfortish and the association, saying they were denied access to financial records. The judge ultimately ruled in their favor. Morrell said he saw receipts for liquor and jewelry and a letter from American Express congratulating Alfortish on reaching the 300,000-point milestone.

Morrell and his allies couldn’t imagine the scope of what was going on, judging by the indictment. In addition to the charitable foundation claims and his salary, Alfortish received health insurance for himself and his family with premiums totaling $1,232 per month; use of HBPA credit cards for travel, entertainment, and gasoline for his Hummer; an OnStar navigation service and satellite radio service in his car; travel to Aruba and the Grand Caymans; and reimbursement of $25,000 he paid to settle a threatened sexual harassment claim lodged against him by an employee.

Mona Romero allegedly received a salary of $228,275 paid out of the medical benefits trust administrative account; health insurance for herself and her family totaling $1,330 per month; a 2007 GMC Acadia SUV leased for her use, plus gasoline and OnStar navigation and satellite radio; use of HBPA credit cards for travel and entertainment, paid out of the medical trust; travel for herself and her husband to Aruba and the Grand Caymans; and a Louis Vuitton handbag.

By law, up to 30 percent of the medical benefits trust can be used for genuine administrative expenses, but in cases where Alfortish and Romero could spend less than that, the indictment says, they diverted the surplus to pay for personal or HBPA expenses instead of expanding coverage with that money or saving it for future years. From 2006 to 2009, they spent more than $100,000 under the guise of these administrative costs − from attire and tickets for the inauguration of Gov. Bobby Jindal and a fundraiser for him in California, to a private investigator and hosting parties for politicians, lobbyists, and public officials.

But as Morrell and his allies turned up the pressure, a new election was around the corner. The election was a chance for Alfortish to change the by-laws, according to Morrell, but he would need to win a two-thirds majority.

Like a paint-by-number work of art, the indictment proceeds step by step on what happened next.

On March 13, 2008, Mona and Cricket Romero obtained leftover ballots for the election from the printer. Two days later, Mona Romero and Broussard met at Broussard’s home and marked hundreds of ballots for Alfortish as president and their preferred candidates for the board. On the ballot enclosure envelopes they wrote the Social Security numbers of out-of-state horsemen unlikely to vote, then inserted those into outer business reply envelopes addressed to the certified public accountants who would tally the votes.

Soon after, Mona Romero asked Cricket to make airline reservations for the two of them and Winfree. Two days later, Cricket flew to Cincinnati to Louisville to Atlanta and back to New Orleans. Winfree flew to Houston and back. The next day, Mona Romero flew to Dallas, and Winfree flew to Tampa. They mailed ballots from the airport and sometimes rented cars to mail them from nearby areas.

Some 1,200 ballots were returned in the election, according to P.J. Stakelum. He has seen the ballots and estimates that 25 to 35 percent of those cast were bogus. And Broussard never mailed the estimated few hundred she gave to the feds. Stakelum and the plaintiffs in his case hired a handwriting expert, who concluded that 90 percent of the suspect ballots were filled out by Mona Romero.

Shortly after the election, Broussard met with Morrell and two other board members who had been ousted. “This is why you lost,” she said as she showed them the ballots she had kept. They advised her to see a lawyer.

As the federal investigation began, Alfortish struck a defiant tone in public. He still attended the Fair Grounds, “strutting around and glad-handing, with the racecard sticking fashionably out of his back pocket,” James Gill wrote in the Times-Picayune last year.

But behind the scenes, family ties were stretched. On June 11, 2008, Alfortish told Cricket Romero not to speak with law enforcement agents conducting the investigation, the indictment says. That November, Mona Romero urged Winfree to “stick together” with her, Alfortish, and others and not to cooperate with authorities. Alfortish also gave a legal opinion to Winfree, whom he knew was represented by another attorney.

By August 2009 the HBPA had received four or five subpoenas and provided about 28 boxes of records as part of the federal investigation, according to minutes of a board meeting. Alfortish, Romero, and the board were also defending themselves in two civil suits.

As legal expenses grew and interest rates declined, the HBPA required additional revenue. Alfortish and Romero apparently saw the HBPA’s four entities as one large pool in which to move around money, even though by law their budgets are separate. The board obliged.

The indictment finally brought that to a screeching halt. But these next few months may only be the intermission after the first act.