Updated on 05/01/2012 6:48PM

NYRA puts two officials on leave after state issues report on takeout errors

Email

The New York Racing Association suspended its president and its general counsel without pay Monday after the release of a state report challenging claims by the association that it was unaware late last year that it had been incorrectly applying a higher takeout rate to its trifecta and superfecta bets. 

Charles Hayward, the president and chief executive officer of the association since 2004, and Patrick Kehoe, the general counsel since 2002, were placed on administrative leave “pending further review,” NYRA chairman Steven Duncker said in a statement. Hayward and Kehoe were the two highest-ranking officials at NYRA named in the report, which was released approximately four months after the takeout error came to light during an audit of a breeding fund by the state comptroller.

The decision by NYRA underscores the seriousness with which the allegations in the report are being viewed. Earlier on Monday, New York governor Andrew Cuomo said that the state’s inspector general had been asked to investigate whether NYRA and its officials violated any state laws. In addition, Robert Megna, Cuomo’s budget director, said in a letter to NYRA that the allegations in the report were “deeply troubling.” Megna is also chairman of a state oversight board with broad powers over NYRA, including the power to recommend that the association’s franchise to operate Aqueduct, Belmont Park, and Saratoga be revoked.

“NYRA takes the matters identified by the Franchise Oversight Board and the New York State Racing and Wagering Board extremely seriously,” Duncker said  in a statement. “NYRA will take all appropriate steps and actions to cooperate with the state’s inquiries and insure the integrity of our operations.”

Duncker said that NYRA will issue a response to Megna's letter and the allegations in the report by May 4.

The report called into question a statement by Hayward that the association had made an “inadvertent error” when it applied the wrong takeout rate to trifecta and superfecta wagers over a period of 15 months. The report cited several e-mail exchanges involving Hayward that indicate he was at least aware that a law raising the takeout from 25 to 26 percent on the wagers in 2008 had sunset on Sept. 15, 2010, although the e-mails do not make clear whether Hayward was also aware that the sunset of the law required NYRA to reduce the takeout rate on the two specific bet types to 25 percent.

The law temporarily raised the takeout rate on all bets at New York tracks by 1 percent. When the law expired, NYRA's takeout rules were in compliance with one exception, the rate for trifectas and superfectas, where the maximum rate fell to 25 percent.

The report cites two e-mail exchanges. In the first, a racing fan e-mailed Hayward on Sept. 28, 2010, to ask him whether the law had indeed expired.

“Would you mind letting me know if it has or hasn’t, and if it hasn’t, why?” the letter asked. Hayward responded by saying that he would forward the mail to Kehoe.

The report said that no e-mails from Hayward to Kehoe regarding the subject of the reader’s query could be found, but it noted that “NYRA has asserted legal privilege on communications with its legal department.”

In the second, Steven Crist, the publisher emeritus of the Daily Racing Form, forwarded on Aug. 1, 2011, a letter from a reader that noted the law providing for the higher takeout rate had sunset and that NYRA’s trifecta and superfecta rate “is currently outside the parameters of the law.” The letter went on to say, “If NYRA wanted to lower takeout all they have to do is make to [sic] request to NYSRWB.”

Hayward replied to Crist that the reader was correct and that NYRA was considering how to proceed on the matter. Hayward also said that he wanted to keep their discussion confidential, and Crist agreed.

Asked about the e-mail exchange, Crist said, “Then as now, I personally believe NYRA was not aware it was applying an incorrect rate.”

[STEVEN CRIST: My statement on the NYRA takeout issue]