01/25/2005 12:00AM

NYRA cuts 6 more sites


The New York Racing Association announced Tuesday that it will cut off six more simulcasting sites, bringing to 10 the number of sites the association has dropped since a federal indictment involving illegal gambling was issued two weeks ago.

The new cuts, which were announced by Charles Hayward, NYRA's chief executive officer, will take effect on Jan. 31. NYRA will not restore its signal to any of the 10 sites unless they comply with a strict code of disclosure requirements that is being developed, Hayward said.

The steps taken by NYRA are the strongest of any racetrack operator since the release of the indictment, which accuses an illegal gambling operation of betting more than $200 million through four simulcast shops that attract big players by offering rebates. Five shops were mentioned in the indictment, and NYRA cut the signal to four of them last week. The fifth shop has gone out of business.

Hayward said the association made the most recent decision because of concerns over the transparency of the shops and their business practices, not because of a philosophical objection to rebating. None of the shops has been charged with a crime.

"The lack of knowledge we have about their ownership and their customers is leaving us wide open to charges that we are facilitating illegal activity," Hayward said.

The shops that NYRA plans to cut off include Racing and Gaming Services, based in St. Kitts; Lakes Region Greyhound Park in New Hampshire; Coeur d'Alene Casino, an American Indian operation in Idaho; Excelsior Casino in Aruba; and two Australian operations, Capital Sports Ltd. and Darwin All Sports. Two officials of Lakes Region, Richard Hart and Jonathan Broome, were named in the indictment as principals in a company that recruited bettors for a rebate shop based in the Isle of Man.

Hayward said that those sites, along with the four shops NYRA had previously cut off, represented the sources of the vast majority of offshore wagers on NYRA's signal.

NYRA took in about $300 million from rebate shops in 2004, or 12 percent of its $2.6 billion in handle.

NYRA is operating under a federal monitor as part of a deferred prosecution agreement to avoid tax fraud charges stemming from cash policies in its mutuel department. Since the monitor was installed in early 2004, the association has been extraordinarily sensitive to any connection to impropriety.

Even before the gambling-ring indictment, according to Hayward and other racing officials outside NYRA, the monitoring firm, Getnick and Getnick, had asked questions regarding the racing industry's practice of accepting bets from offshore locations. Coincidentally, the monitoring firm was meeting with NYRA officials about offshore sites at the time the indictment was released on Jan. 13, Hayward said.

The indictment, which charged 17 people on 88 counts of running an illegal gambling operation, wire fraud, and money laundering, among other charges, alleged that the principals brokered bets on horse racing through offshore account-wagering operations. The wagers, according to the indictment, were frequently placed by bettors who had not supplied identifying information to the locations.

The rebate shops named in the indictment have been cut off by other racetracks, including Turfway Park, The Meadowlands, and Oaklawn Park. Some tracks, however, have not taken any action, including the two most popular winter racetracks, Gulfstream and Santa Anita, which are both owned by Magna Entertainment, the country's largest racetrack operator.

Although Oaklawn, Woodbine, and Tampa Bay Downs have shut off selected rebate shops over the issues of high-volume computer-assisted wagering and unusually high win rates, no racing company has ever cut off offshore locations to the extent that NYRA is planning.

NYRA's disclosure requirements for rebate shops will be modeled after recommendations made by the Thoroughbred Racing and Protective Bureau in a report released in April 2003, Hayward said. The report recommends that offshore sites and American Indian account-wagering operations comply with seven pages of detailed requirements.

The requirements include the identification of all owners and stockholders, disclosure of precise details of the site's business plan and its reporting requirements to the IRS and regulatory agencies, and a description of the services that the operation offers to its players, according to a copy of the report.

Rebate shops have objected to disclosing details about the companies' rebate programs and customer services. The shops contend that racetracks will use the details to market their own rebate programs.

"Their concern is for the protection of their bettors, because who's to say that the next rebate shop is not going to be opened by Magna or Churchill or any of the others?" said John Sullivan, the general counsel for several rebate shops named in the indictment. "They are potential competitors."