Updated on 09/16/2011 8:52AM

Tim Smith: Crisis Management 101

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"Acknowledge the problem. Take the issue seriously. Implement concrete steps. Look at both short-term and long-term improvements. Communicate what you're doing." - Tim Smith, NTRA commissioner, on how to restore confidence in the betting system

Tim Smith is approaching his fifth anniversary as the commissioner of the National Thoroughbred Racing Association, the sport's first league office. At no time during his tenure has Smith been busier than in the past seven weeks, during which the Breeders' Cup pick six scandal has consumed the industry.

Through it all, even longtime critics have acknowledged that Smith and the NTRA acted quickly and decisively. The NTRA called for an investigation into the Breeders' Cup pick six one day after the event, held on Oct. 26 at Arlington Park; then formed a task force to study betting security; hired a consulting firm headed by former New York mayor Rudolph Giuliani to investigate past wagers; and scrambled to address concerns about the integrity of the parimutuel betting network.

Smith took time last week during the Symposium on Racing in Tucson, Ariz., with Daily Racing Form reporter Matt Hegarty to discuss the pick six scandal, the NTRA's future, and his own plans.

Daily Racing Form: There was grumbling from some racetrack officials when you were hired that you were an outsider who didn't understand the business. Do you consider yourself an insider now?

Smith: The last thing the industry or our members need is for me to be an insider. On the other hand, the NTRA needs lots of industry experience and inside knowledge to function, so we've always had a blend of outside and inside expertise. The NTRA's combination with the Breeders' Cup is a good example of strengthening both organizations with this kind of inside-outside combination.

How long do you see yourself staying at the NTRA?

I said when I took the job that I was committed to staying as long as it took for the NTRA to be established as a viable, effective national office for the sport and industry. A lot of progress has been made: the combination with the Breeders' Cup, the acquisition of Winner Communications' racing assets to form NTRA Productions, the increase in national television exposure and national sponsors, and the significantly increased capabilities in Washington.

A lot remains to be done, however, whether I remain commissioner or not. The NTRA structure itself needs to be strengthened continually. So, to directly answer your question, at least another year or two, perhaps longer. Ultimately, of course, it's up to the NTRA board. In any event, I would like us to begin thinking about succession planning, which any organization should do.

What was your personal reaction when NYRA officials began alerting the NTRA and Breeders' Cup that they had serious concerns about the Breeders' Cup pick six ticket?

My personal reaction at first was confusion, then concern and anger, then gratitude for those who caught it, then disgust, then frustration. The frustration came in knowing that the possible fraud would detract publicly from an overwhelmingly positive day - record handle, sell-out crowd, great racing, improved TV ratings.

Then we all had to shift quickly to another mode: Establish the facts, cooperate with the authorities, start looking for ways to assure that it can't happen again. You can't simply get angry, but the fact is that 99.9 percent of the industry and players that are honest and play by the rules were victims that day.

How can bettor confidence be restored? How do you convince casual fans who thought the game was on the level?

The answer is really out of Crisis Management 101. Acknowledge the problem. Take the issue seriously. Implement concrete steps to address any issues and concerns. Look at both short-term and long-term improvements to the relevant procedures and systems. Communicate what you're doing.

If you do these things, several good things can happen. Customer confidence can be earned and, more importantly, wagering-system integrity can be improved for the future.

Both casual and frequent players will be more, not less, attracted to parimutuel wagering on horse racing if we handle this situation correctly. It is an opportunity, although perhaps disguised as a crisis or problem.

Do you believe that the industry has the commitment and the resources to adopt a foolproof wagering system?

If you change "foolproof" to "first-rate," the answer is yes. No electronic commerce system, according to the experts, is completely foolproof. The best-practices goal, the same experts say, is to minimize the opportunities for fraud, enhance the chances of detection, and continually test your procedures, personnel, and systems.

Not every improvement that is being made currently, or being studied for the future, will necessarily involve huge capital or costs or technology infrastructure changes. To the extent that some additional investment will be needed, however, the resources exist. As for commitment, just look at the NTRA Wagering Integrity Alliance. It was formed, with several millions of dollars in advance pledges, in a matter of days. There is as much unity and industry resolve on this issue as any since the NTRA was formed.

Why should the industry believe that hiring Rudolph Giuliani's firm is an effective way to address the issues, other than attaching a big name to the investigation?

Giuliani and his firm are a very good fit for the current situation. They have expertise in systems security, internal and government investigations, and crisis management. Mayor Giuliani himself also stood for integrity, independence, and competence. He'll add real value in the coming months in a variety of ways. I'd ask any skeptics in the industry to wait and judge the results. Overall, we've received overwhelmingly positive reaction to his involvement, including specific comments from TV networks, sponsor and government officials, and fans. Our board and staff is very comfortable with this decision.

How will tracks and tote companies be compelled to comply with any recommendations the NTRA and Giuliani's firm make?

The tracks really aren't an issue. They are participating fully in designing the minimum standards for tote and simulcast wagering security. I think the tote and account-wagering operators, which are also cooperating, will be persuaded by their customers to comply rather than be compelled. If it comes to that, however, I'm confident the tracks simply won't allow non-compliers to have access to their wagering pools.

Aside from addressing the pick six scandal, what will be the NTRA's goals in the next year?

The specific 2003 goals for each area, like marketing, television, legislation, and so forth, are being developed now with our staff and key consultants. The perennial goals are to increase the popularity of horse racing and to improve economic conditions in the industry. We see some special promotional opportunities next year, like "Seabiscuit" [the release of the movie based on the best-selling book] and the 20th running of the Breeders' Cup. National sponsorships and NTRA purchasing should to continue to grow. Continued handle and purse growth are always a top priority.

How will effort expended on the pick six issues affect those goals?

The Wagering Integrity Alliance initiative is an additional priority, but is being separately funded and shouldn't detract from our work in other areas. We certainly don't plan on reducing our efforts in marketing, promotion, legislation, and so forth in 2003. That would be a big mistake.

How have current and potential sponsors so far reacted to their association with the sport, considering the pick six scandal?

Both existing and prospective sponsors have been understanding and supportive. They fully understood that there is zero question about the races themselves, that the pick six allegations involve human misconduct and attempted theft, which can happen in any business. They appreciate the industry's aggressive stance on listening to customers and committing to any necessary improvement. They actually have been terrific, and it's been very gratifying.

A year from now, what do you want to see done, ideally, as the industry's response to the pick six scandal?

I said earlier that we shouldn't set the bar at perfection or a 100 percent guarantee of no future breaches in system security. We can and should expect to be state-of-the-art in wagering security procedures and systems. I believe that more realistic standards can be attained within a year - and need to be.