The recommendation, which will be formally announced here on Sunday morning at The Jockey Club Round Table Conference, is unanimously endorsed by the NTRA's board, according to two board members. The board is composed of representatives of racetracks, horsemen's groups, and industry organizations, including The Jockey Club.

Though the recommendation will not offer details about who should be responsible for creating the security organization, NTRA board members said the plan will strongly suggest that the NTRA is in an ideal position to take on the task, perhaps with technological help from The Jockey Club, the longstanding industry group whose role has expanded over the last 10 years into data processing and the development of new technologies for racetracks and breeders.

The proposal will be one of a number of security recommendations that will be announced at the Round Table, following an eight-month industry-wide inquiry to search for holes in the betting network. The industry launched the effort after three former fraternity brothers - including an employee of Autotote, one of the companies that processes wagers - was able to rig several pick four and pick six wagers last year, including the lone winning Breeders' Cup pick six ticket that would have paid out more than $3 million. The three were eventually caught and sentenced to prison terms ranging from one to three years.

The NTRA, along with The Jockey Club, hired Giuliani Partners, a consulting company set up by former New York City mayor Rudolph Giuliani, and another consulting company, Ernst and Young, to conduct audits of the wagering system and issue recommendations.

The NTRA set up three working groups to conduct separate analyses, and the recommendations made on Sunday will be a consolidation of reports submitted by the various organizations. Giuliani will deliver the keynote address at the conference.

The basic idea of the security organization, racing officials who have participated in the working groups said, will be to create an independent group that will set minimum security standards for the wagering network and ensure compliance by racetracks, wagering outlets, and tote companies through ongoing audits and fines. At the same time, state regulators will be pressed to adopt a model rule based on the minimum standards. The model rule would be used to prevent wagering outlets that do not meet the requirements from betting on races in the state, the officials said.

Beyond the political conflicts over who will control the new security group, it faces several hurdles, officials said. Before the group can develop the technology to monitor the wagering network, the industry's three major totalizator companies would need to make significant improvements to their systems, an expensive undertaking. Racing officials also worry that the new group would have no actual enforcement power and that one noncompliant wagering outlet - the proverbial weak security link - could compromise the entire system. Racing officials have already said that the most significant hurdle will be the cooperation and commitment from the tote companies, which have been operating on thin economic margins for the past decade. The NTRA does not now have an estimate for how much the upgrades of the totalizator systems will cost, and the NTRA has had only minimal discussions regarding who will pay for the work.

The three totalizator companies - AmTote, Autotote, and United Tote - process nearly all of the racing industry's North American wagers. The companies, which contract with individual racetracks, derive the vast majority of their revenues from a small percentage of handle on each bet, typically one-quarter to one-half of one percent. Autotote is the largest of the three, with two-thirds of the market.

Totalizator companies have always had an uneasy alliance with the racing industry. Critics of the companies claim they have failed to invest enough money in research and development, and those critics were bolstered several years ago when a report commissioned by The Jockey Club criticized the companies for having antiquated technology. But tote companies are generally supported by racetracks, principally because the tracks believe that competition among the three companies keeps costs down. John Corckran, the president of AmTote, said that his company has cooperated fully with Giuliani Partners, Ernst and Young, and the task forces. He said the company supports the idea of a national security organization, but he also raised concerns about the encroachment of the office on the tote company's existing security controls and the cost of complying with the recommendations."

There are some solutions that may sound efficient and fine in a vacuum, but when you take a look at the costs and everything else, it may not be something that can be done,"Corckran said. "Cost is always an issue."

Several people involved in the working groups said that the tote companies had registered objections to the idea of complying with the minimum security standards during the development of the recommendations. The objections were based on the belief that the tote companies themselves are better qualified to set minimum standards, the officials said.

John Walzak, the chief operating officer of the Ontario Harness Horsemen's Association and a member of one of the task forces, said that he believes the totalizator companies will ultimately comply with the recommendations. He also said the racing industry bears some of the responsibility for the ineffectiveness of the software because of its reluctance to pay the companies higher fees."I would say that the chances of the tote companies complying with the recommendations are 100 percent," Walzak said. "If they don't, they aren't competitive anymore. They would lose their competitive positions. That's the reality of it right now."

Other members of the working groups were more critical of the tote companies. One member said the tote companies are "in a state of denial" about the sophistication of the technology underlying their systems, pointing out that some tote companies are using 9,600-baud modems to transmit data, a transmission rate that is ancient in the age of high-speed Internet access. The member said the companies had still not admitted that their systems were vulnerable and had resisted some changes.

The tote companies also fear that the creation of the security arm will allow the racing industry to mimic the operation of a totalizator system, which, several years down the line, could lead the industry into the idea of creating its own wagering network. The Jockey Club was a strong proponent of an industry-owned wagering network after the release of its report critical of tote technology, and the NTRA considered the idea before dropping it under pressure from tracks.

Alan Foreman, the chairman of the National Thoroughbred Horsemen's Association and a board member of the NTRA, said that the consideration of an industry-owned tote company would be "inevitable" if the security organization was successful. "It's too early to say that we can do that, because we're not there yet," Foreman said. "But we're looking at it."

According to some officials, the NTRA is concerned that the racing industry will have to pull together and possibly block some wagering outlets from commingled pools if the outlets do not comply with minimum security standards - a concern that is illustrated by the circumstances of the Breeders' Cup pick six scandal. The totalizator-company employee who masterminded the Breeders' Cup fraud, Chris Harn, placed the manipulated wagers through a telephone account at Catskill Off-Track Betting Company because he knew that the OTB company did not use a recordingsystem to monitor how touch-tone wagers were placed. The vast majority of wagering outlets with similar account-wagering operations used the recording system at the time.

Racetracks have been reluctant in the past to shut off wagering outlets, especially if the outlets have customers who are heavy players. For example, many racetracks officials who are critical of the controversial practice of rebating nevertheless sell their signals to rebate shops because the handle from the players provides a substantial source of revenue.

To eliminate the possibility that a weak link is let into the system by a track desperate for revenue, the NTRA is hoping that state regulators support the recommendations and approve rules on minimum-security requirements. If that is the case, a state racing commission could refuse to approve an out-of-state simulcast site that does not comply with minimum requirements.

An NTRA board member said this week that representatives from the three largest racing companies - Churchill Downs, Magna Entertainment, and the New York Racing Association - have already agreed to restrict their simulcast networks to sites that comply with minimum-security requirements. Representatives from those tracks declined to discuss the recommendations last week, deferring to the NTRA's Sunday announcement.

Officials of The Jockey Club also declined to discuss the recommendations, but most industry officials said that The Jockey Club would be the best candidate to design the system to monitor the totalizator network. Alan Marzelli, the chairman of The Jockey Club, would not comment specifically on the NTRA's recommendations, nor would he comment specifically on the development of an industry totalizator company. But Marzelli said that The Jockey Club is viewing security effort as an "opportunity for the entire racing industry." "It's evident to anyone who has watched the process that we've had a lot of cooperation from a lot of quarters of the industry, and that we've already had a lot of opportunity to make things better," Marzelli said. "But as you'll see Sunday, there's a lot more to do. And I think you'll see that we have $15 billion reasons to attain what is going to be recommended."

Racing runs in his blood, from his grandmother, Mrs. Henry Carnegie Phipps and the powerful Wheatley Stable, to his father, the late Ogden Phipps, to his own stable today.

At a time of great change and challenge in the industry, he has pushed The Jockey Club well beyond its mandate to maintain the stud book. The Jockey Club co-founded and co-owns Equibase, the sport's official chartkeeper, and it has helped finance a variety of projects, including the consortium that is seeking uniform medication rules for racing's varied jurisdictions. More recently, The Jockey Club paid part of a $1 million price tag to hire Giuliani Partners and Ernst and Young to conduct a security audit of racing's electronic wagering network in the wake of the Breeders' Cup pick six scandal, a subject that will dominate the industry's Round Table discussions on Sunday in Saratoga Springs, N.Y.

In a recent interview in Saratoga with Matt Hegarty of Daily Racing Form, Phipps, who will turn 63 next month, spoke about about a broad range of racing topics. He declined to discuss the recent troubles encountered by NYRA, which was the subject of a critical report by the New York attorney general and which could face federal indictments in connection with the convictions of 19 mutuel clerks.

Daily Racing Form: In general, what would you say the state of the industry is right now? Is it better or worse than it was 20 or 30 years ago?

Phipps: Better or worse than 20 or 30 years ago? I think it's better than it was 15 years ago. I think the industry is on the ascension, in terms of the interest in horse racing. Even before Seabiscuit, even before Funny Cide, I think the numbers show that, I think the polls show that, I think we have more people interested in horse racing because of television. I think the extra advertising and the TV time has contributed greatly. So I think it's definitely better than, say, the early 1990's, and certainly better than the early 70's.

Q: What were the reasons for the decline over those years?

A: I think the OTB situation certainly hurt, in New York, because instead of people getting out to the track to cheer and root and think and enjoy the day, they were now in a sterile setting that didn't really bring the sport of horse racing to them. I think they were bettors, instead of lovers of the game. Now we have a new group of people who are coming to the racetrack that aren't just bettors. They are here for the "one-day vacation." They like the ambience, they like the experience of racing. The evidence of that interest doesn't show up very quickly. That shows up over a period of time. If you have minor gains like we have had, in terms of interest and awareness across the country, which we have had over the past three years, that will do a lot for us in the long run.

Q: With your various positions in the racing industry right now, what do you see as your primary role in the leadership or stewardship of the sport?

A: As chairman of The Jockey Club, that's my role. Other than that, I'm an owner and a breeder and a lover of racing. But as chairman of The Jockey Club, I think the integrity issues are paramount to successful horseracing in the long run.

Q: What are you focusing on right now in your breeding program? Are there certain races you are trying to win?

A: The Grade 1 races are the ones you want to win. Those are important to me. I have an affinity for the fillies. We are not big buyers at sales; we are breeders of our own horses, and therefore our fillies have to produce on the track or we don't have the ability to win in the future. So our fillies are the most important thing that we have. They are our foundations, for my children, and for the future.

Q: Most of your Breeders' Cup starters, or at least the majority of your starters, have been 2-year-olds. Why have you had success with those horses?

A: I really don't know, because I don't think we run as many 2-year-olds as a lot of others do. We've run two 2-year-olds this year, and by the end of the [Saratoga] meet, we'll have run two or three more.

Q: But you've only had four starters in Triple Crown races, and none since 1989, when Awe Inspiring ran in the Derby and the Belmont. What explains that absence?

A: We run our horses when we think they are right. If they don't happen to be right on the first Saturday in May, that doesn't bother us. Maybe Sept. 1 is the right day. The horse tells us.

Q: Why do you think the modern Thoroughbred is making far fewer starts than his counterpart of 30 years ago?

A: I believe drugs have had a lot to do with it. I sincerely believe that. I believe it has weakened the entire gene pool. I don't have any scientific basis for that; I'm not a scientist. But I firmly believe that our gene pool is being weakened by the intrusion of horses that in the old days would not have been worthy to be bred to, and therefore the drug situation is crippling the entire industry.

Q: Do you make decisions on which stallions you go to based on their history?

A: I do. It's one of the thoughts I have, absolutely. I do not like to breed to a horse that I know has had physical or other problems that have been covered up by the use of medication.

Q: What are the main culprits out there, as far as medications go?

A: I'm not an expert on drugs. But I believe that your clenbuterols, your acepromazines, your banamines, some of your steroids, I think they all contribute. I think Lasix contributes to it also.

Q: So if the medication consortium would come out tomorrow, or in a few weeks, or a few months, and say that the policy should be hay, oats, and water, what would your reaction be?

A: I'd love it. I'd love it. I don't see how they can do that, but I think there is a common ground between hay, oats, and water and the Kentucky rules. I mean, I have to ask you, I just don't understand why 2-year-olds, first-time starters racing in April, why every horse in the race is on Lasix? That just doesn't make sense to me.

Q: There's a perception that some trainers are using drugs that fall beneath the radar of what the industry can catch. Do you think there's validity to that perception?

A: I certainly am suspicious of it, but I certainly don't have any proof that that is going on. But be it baseball, be it football, be it the Olympics, there are always going to be things that people can't test. There are going to be people that are one step ahead of the chemist. So I'm suspicious. But I don't know factually that that is happening.

Q: Let's move on to some Jockey Club issues. The Jockey Club has expanded into a lot of different areas in the past decade. The Jockey Club formed Equibase, supported the founding of the NTRA, and is invo lved in the medication consortium. Why?

A: Our primary goal is to maintain the stud book, and to maintain the stud book, that means you have to maintain the integrity of the stud book. That is job one. But we can branch out from that, and once we do, then we have a lot of other things we can do to help the industry. We've looked at things in the Round Table. We've looked at medication - a long time before it became popular. Today, not a whole lot of people disagree with The Jockey Club on medication. And we believe very strongly in the NTRA, so we believe that we can be helpful in trying to get things started and getting discussions started, and we intend to do that, on lots of issues.

Q: The Jockey Club has also been mentioned, peripherally, as a vehicle to the establishment of a national betting hub. Is that a viable option?

A: That's something we are not striving to do something on, but we are certainly willing, ready, and able to help anyone with the technology to do that. We ha ve, I think, the best technical people in the industry in Kentucky. They have been helpful to racetracks, farms, owners, trainers, and have provided a lot of tools that those people have needed. We are ready to help the industry.

Q: Considering the Breeders' Cup pick six scandal, is that important to the Jockey Club, the idea of an industry-owned wagering network?

A: You mean to own a tote company?

Q: Right. Sure.

A: I don't think a tote company needs to be owned [by the industry]. I think a tote company needs to be a supplier of products that does what this industry wants. I don't think that this industry, just speaking off the top of my head, needs to own a tote company. But the industry needs to know more about it. And it needs to know how to tell the tote companies what it wants. I can't say what Magna and Churchill want. I think they would need to put out an RFP [request for proposal] that says these are the deliverables we need, these are the things that we want, and somehow or another competition does a pretty good job of getting tha t done.

Q: Do you consider yourself a horseplayer?

A: Am I a bettor? I'm not a bettor. I might play a horse four or five times a year. And then I might play one of my horses where I think the odds are wrong. So I'm not a bettor, even though I think I bet a lot every day when my horses are running out there. [Laughs]

Q: Do you think it's important for the chairman of The Jockey Club to understand the concerns of the everyday bettor?

A: Absolutely. Nobody, nobody, walked these stands as much as I did when I was chairman of NYRA. I believe in knowing our customers. I believed in knowing the bettors and talking to the bettors, to figure out what products they wanted and what services they wanted. I think that's very important. But do I have to bet every race to do that? No.

Q: What do you think was the biggest impact of the Breeders' Cup pick six scandal?

A: I hope that the biggest impact is that the industry comes together to put in the safeguards that are recommended to protect the netw ork. And they will. Unfortunately, this was something thatwasn't just page one of the sports section. But I believe that the industry got together and that they are trying to work out the process. There is more coming.

Q: What do you think the industry needs to do to restore confidence in the parimutuel network?

A: I think I'm going to wait to hear what Mr. Giuliani has to say on the subject [on Sunday at the Round Table].

Q: There has been some criticism of the price tag that came with hiring Giuliani Partners and Ernst and Young. Why did the industry need to spend that much money?

A: I think that Giuliani has a terrific name. I think Ernst and Young have the credibility, and I think we needed to make sure that the right people got into the system and took a look around to see what the problems are and suggest the right solutions. I think it's going to be very helpful to the industry to have them involved.

Q: So part of the price tag was his name recognition, so people knew that racing was taking this seriously?

A: And the authority. The aut hority to see what the problems were and how to rectify them. When you have a problem in an industry - forget about horseracing, because there's been lots of times people are picked to solve something, take the shuttle disaster - there are people with unquestionable reputations, and this industry needed that.

Q: You mentioned that you have been a big supporter of the NTRA since its founding. Why did you think, and why do you still think, that racing needs something like the NTRA?

A: The industry needed that kind of an organization because it can do things much better than all the other people doing things separately. We have gotten more TV time, more sponsors, better marketing, and we've gotten things done better together than we ever did by ourselves.

Q: Do you think the NTRA has been responsible for laying the foundation for the resurgence you mentioned earlier?

A: I do. Very much so. You know, a salad doesn't just have lettuce. It's got oil and vinegar and whatever else you want on it. I don't think you can say this one promotion or thatone promotion is the reason why we are up. But I think if you put the whole thing together, a lot of things that the NTRA has done have blended together to become very helpful to the entire industry.

Q: Is the NTRA a more effective organization because of its merger with the Breeders' Cup?

A: It has more strength. The big problem with the NTRA is that it doesn't have the regulatory power, and it never will. But it does have, with the Breeders' Cup, more clout in terms of how to bring racing up to a big day, how to market the sport over a period of time to a culmination point. And I think the Breeders' Cup has a lot of power to make people do things. They control a lot of purse money, and they control the locations. And the Breeders' Cup hasn't given up the power to do those things in the amalgamation. They still have that prerogative.

Q: When the NTRA was founded, did you envision a merger? Was that part of the plan all along?

A: It was just a natural progression. People saw how it w ould work together. People were skeptical at first, but they saw how it would work. When I first started in this thing, the horsemen's organization [the NTRA's predecessor, the National Thoroughbred Association], I wasn't a big proponent of that. I honestly believed that if you just had a horsemen's organization, you wouldn't be able to get the tracks at the table. So I fought long and hard to get everybody a seat at the table, where everybody could sit together and listen to the problems. And it's a wonder to me how few arguments have been created and how many solutions have occurred - and now you've got people saying it's too democratic! I really had no problem with the concept of the NTA, I just didn't think it was going to be successful in the form that was created. The industry needed an organization. But it was important to the industry that everybody could have a seat at the table to try to work these things out, and that's why the NTRA has been so successful.

Q: Have you s een "Seabiscuit," and what did you think?

A: I thought it was one of the greatest pictures I've ever seen. It was terrific - the story, the way it was shot. It was beautiful.

Q: Last question: How are you handling the smoking ban in the Saratoga box seats?

A: I have had absolutely no problem. And that's because I found out that you can smoke in the paddock. But I didn't learn that until after the first week. Now I know.