09/03/2003 11:00PM

Schwartz's efforts help betting public

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SARATOGA SPRINGS, N.Y. - Few racetrack executives are so attuned to the interests of the betting public as Barry K. Schwartz, chairman of the New York Racing Association. Schwartz has championed the reduction of takeout from parimutuel wagers to put more money in horseplayers' pockets. He recognizes that the use of illegal drugs is corroding the game, and NYRA is trying to address the problem.

His intentions are so honorable that he hardly deserves the woes that have been heaped on him this summer. A front-page headline in The New York Times proclaimed, "Racetracks Teem With Corruption," reporting on a state probe of wrongdoing at NYRA. New York Attorney General Eliot Spitzer declared it was time to place "an entirely different structure to oversee racetracks in New York." The federal government is looking at the possibility of a criminal indictment against the organization.

Schwartz could hardly have envisioned inheriting these headaches when he took the top NYRA post. And there was a time when he could not have remotely imagined being part of the elite circle that governs New York racing.

Unlike many principals in the sport who come from blue-blooded backgrounds, Schwartz grew up in the north Bronx, the son of a Jewish grocer with a store in Harlem. "I came from a neighborhood where everybody was in action - cards, pool, horses," he recalled. "Yonkers Raceway was twenty minutes from my house. A friend of mine taught me to read the Daily Racing Form, and racing was something I grew up with."

It was in that neighborhood that he formed his lifelong friendship with Calvin Klein. The two men started their apparel business in 1968, with Schwartz the CEO. Calvin Klein Inc. became fabulously successful, and within a decade Schwartz was in position to indulge - and overindulge - his love of horses. Two years after buying his first racehorse, he owned 200.

He became a significant enough player in the sport to be elected to the NYRA board of trustees, and in 2000 he was asked to become its chairman.

Thereafter he and his partner sold their company for $400 million, and horse racing become Schwartz's full-time job.

"I took the job because I love racing," he said. "I have no financial needs, and I can do something for the pleasure of doing it." The assaults on NYRA surely haven't made the job pleasurable, and Schwartz said, "I didn't bargain for this, but I'm not going to back out now."

A few years ago, the attorney general's office conducted a sting operation at the tracks and found many mutuel clerks willing to engage in money-laundering operations. Probes of the clerks disclosed, too, that many finished the day short of the sum they were supposed to have in their money boxes. NYRA's policy was to deduct the missing amount from the clerks' paychecks. When the clerks filed their tax returns, they declared their income as the amount after the deductions. Sixteen eventually pleaded guilty to income-tax evasion. Now NYRA is under fire for letting the offenses happen. The organization wasn't supervising its clerks closely enough, but its inattention hardly seems worthy of a federal case.

Politics are surely involved in the "scandal." Democrats regularly take potshots at NYRA, whose board is dominated by Republicans - and Spitzer is a politically ambitious Democrat. Since New York legislation gave the tracks the franchise to operate slot machines in the state, other gambling interests may have a motive to discredit NYRA. Whatever the reason, Schwartz said, "It's been like a feeding frenzy. We're an easy target - a high-visibility company that's easy to attack."

Racing fans would surely prefer to see NYRA devote its energy to some of Schwartz's priorities. Schwartz is attuned to the interests of fans not only because of his youthful passion for betting but because of his association with a high-rolling gambler, Ernie Dahlman. Schwartz and Dahlman bought some Thoroughbreds jointly, and Schwartz used to take 10 percent of Dahlman's formidable pick-six investments. When New York raised its takeout several years ago, Dahlman left New York and moved to Las Vegas, but the two have remained friends and regularly discuss issues that affect bettors.

Schwartz understands that takeout - the percentage the track extracts from every gambling dollar - is the most important issue affecting players.

Lower takeout puts more money in their pockets and keeps them in action. Very low takeout might lure back players who have left to gamble with offshore operations that give them rebates. Last year Schwartz pushed through a reduction in win, place, and show takeout to 14 percent - lowest in the nation - and trimmed exactas from 20 to 17.5 percent. He wanted to get lower rates this year but was stymied by opposition from the state's politically powerful offtrack betting operations. "I would love to see the win-place-show takeout around 10 percent," Schwartz said. "I think it would be a huge, huge shot in the arm for the sport."

Schwartz and NYRA are always tackling the issue that frustrates gamblers more than any other: the widespread abuse of illegal drugs. As Schwartz observes certain trainers with seemingly mystical powers to improve horses, he harbors the same suspicions that horseplayers do. "It's a really big problem," he acknowledged. When the Thoroughbred Owners and Breeders Association decided to require extensive drug testing in graded stakes starting in 2004, Schwartz volunteered to apply the standards in all the stakes at Belmont Park this fall. NYRA puts guards in barns of horses in major stakes. Judging from the performance of some New York trainers, NYRA still has a lot of work ahead of it, but at least its leaders are confronting the sport's toughest problem.

Over the years, NYRA has been perceived as an organization whose nonprofit status let it grow complacent - charges that have been repeated in the scandal involving the mutuel clerks. In the past, NYRA also seemed a bastion of racing's Old Guard that cared about the interests of upper-crust owners and trainers but not the public. NYRA is being accused of many things these days, but in Schwartz's regime it can't reasonably be accused of complacency.

(c) 2003, The Washington Post