02/16/2006 1:00AM

Rules would try to fight bet fraud

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LEXINGTON, Ky. - The Association of Racing Commissioners International has begun soliciting feedback on a highly detailed document that outlines model rules to govern parimutuel wagering and provide for the security of the bet-processing network.

The 49-page document is the most comprehensive set of recommendations on parimutuel wagering rules ever to be issued by the RCI, an umbrella group for racing commissions. The document, which was prepared by the RCI's Wagering Systems and Security Committee, has been circulated to racing commissions and racing officials for feedback, the RCI said.

The model rules in the document would require detailed daily reports from bet-processing companies about every wagering transaction through the industry's national network, and would give regulators the ability to request additional reports about canceled bets, vouchers, betting logs, and activity reports for wagering terminals. They also provide highly detailed licensing requirements for any company that accepts parimutuel bets, including offshore rebate shops.

The RCI, which recently merged with a rival group, the North American Pari-Mutuel Regulators Association, has no power to enforce model rules. Nevertheless, many of its model rules are adopted by racing commissions across the country and enforced on the state level.

The racing industry has been wrestling with reform of the bet-processing network since late in 2002, when an employee of the bet-processing company Autotote manipulated a wager on the Breeders' Cup pick six. The employee, Chris Harn, and two co-conspirators pleaded guilty to fraud charges late that year. Autotote has since changed its name to Scientific Games Racing.

Though progress has been slow on establishing an Office of Wagering Security, proposed by the National Thoroughbred Racing Association, the RCI has taken the lead recently on several wagering-security initiatives under its president, Ed Martin, who was formerly the executive director of the New York State Racing and Wagering Board. Martin was hired to be president and chief executive of the RCI in March 2005.

The NTRA is now considering a partnership with the RCI on its security efforts, according to Greg Avioli, the NTRA's executive vice president. On Thursday afternoon, one day after the model rules were released, Martin, several other RCI officials, and an NTRA subcommittee on wagering security were scheduled to meet to discuss ways in which the RCI and NTRA efforts could be combined, Avioli said.

"We're going to sit down and figure out how we can merge our efforts," Avioli said. "Everything is on the table. We're looking for the best solution possible."

Martin has also been asked to give a presentation at the NTRA's board meeting in March about the RCI's efforts, Avioli said.

Martin was unavailable for comment on Thursday. Officials of bet-processing companies did not respond to requests for comment.

Last year, the RCI formed a partnership with ESI Integrity Inc., an electronic security company, to create hardware and software to monitor bet-processing networks for indications of fraud. The monitoring systems, which are expected to be up and running by the second quarter of 2006, would be made available to racetracks for a fee based on handle.

The creation of programs to monitor wagering transactions was a key component of a report issued in 2003 by Guiliani Partners, a consulting company commissioned by the NTRA to issue recommendations about wagering security in the wake of the Breeders' Cup scandal.

The adoption of the recommended rules issued by the RCI would likely force significant changes in how racing associations and totalizator companies conduct business. In addition to the vast number of daily reporting requirements, the rules would give racing commissions wider authority to collect and analyze wagering data in order to investigate suspicious betting patterns. The rules also call for detailed reports about any changes to betting software or hardware.

One rule in the report would prohibit any account-wagering company from providing customers with access to betting data or to the bet-processing network beyond what is available to customers located at the track where the race is taking place. That prohibition would likely have a significant impact on rebate shops, many of which have given their best customers special access to mutuel pools in order to facilitate computerized wagering programs that analyze betting patterns and pour hundreds of wagers into the network just seconds before the race begins.

In addition to the RCI and NTRA efforts, the Thoroughbred Racing Associations, a racetrack trade group, has begun focusing more of its efforts on security of the bet-processing network. Last week, the TRA board voted to increase its funding of the Thoroughbred Racing Protective Bureau, with much of the increase going toward its efforts to police the bet-processing network for fraud.