05/01/2012 4:46PM

Suspensions leave NYRA's upper management in limbo

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Only six months ago, the future of the New York Racing Association seemed bright. Revenues from the operation of a casino at Aqueduct promised to put an end to the association’s stubborn financial problems and boost purses to levels that would solidify New York’s position as the best racing circuit in the U.S.

But despite that success, a handful of other developments have darkened NYRA’s prospects, including the suspension on Monday of Charles Hayward, the association’s president since 2004, and Patrick Kehoe, NYRA’s legal counsel since 2002.

Both officials were named in a report by the New York State Racing and Wagering Board that challenged claims that association officials were not aware that they had applied the wrong takeout rate to wagers for a period of 15 months in 2010 and 2011. The report was issued on Monday morning, and by late on Monday afternoon, NYRA’s board had issued the suspensions.

The suspensions have led to disarray at NYRA. Officials on Tuesday said they would not comment on the association’s plans beyond a statement released by the board on Monday night that NYRA would cooperate with the state’s inquiry. Steven Duncker, the association’s chairman, did not return phone calls.

With the suspensions in place, the highest-ranking management official at NYRA is Ellen McClain, the company’s chief operating officer. Although she has a strong reputation at NYRA and among state regulators for her financial expertise, she was a newcomer to the racing industry when she was hired as NYRA’s chief financial officer in 2009.

The release of the report came after a troubling winter for the association despite double-digit gains in handle. Most prominently, 23 horses broke down at Aqueduct, leading Governor Andrew Cuomo to call for the formation of a task force to investigate the deaths and drawing unforgiving attention from the media.

After the release of the report Monday, Cuomo said that he has asked the state’s inspector general to investigate the accusations in the report and whether any state laws might have been broken during the 15-month period when the association’s takeout rate for some exotic wagers was at 26 percent while the law limited the rate to 25 percent.

The inspector general’s office reported Tuesday that the agency could not confirm or deny whether it had started an investigation. The agency cannot by itself pursue criminal charges, but it can forward findings of an investigation to state or federal prosecutors.

The state racing board’s report could lead to a review by the New York Racing Franchise Oversight Board of NYRA’s fitness to retain the franchise to operate Aqueduct, Belmont, and Saratoga. When the board was formed in 2008, it was given broad powers to oversee NYRA’s operations, including the ability to recommend to the state legislature that the association’s franchise be revoked. A decision to review NYRA’s fitness as the franchise holder could be further politicized, given the revenues that NYRA and its horsemen receive from the Aqueduct casino and the potential for Belmont as a future casino location.

In the meantime, Hayward’s supporters said on Tuesday that they felt that he had not acted wrongfully but had misinterpreted the law and then failed to fully explain his decision to keep the takeout at 26 percent when the error was discovered by outside auditors.

“I just feel bad for him,” said a horseman who spoke on the condition of anonymity because of the sensitivity of the subject. “He’s really well liked by the trainers, and everyone knows him as a good guy. I hope he gets through this, but it doesn’t look good.”

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