Firm recommends outside monitor

ALBANY, N.Y. - Giuliani Partners, the consulting firm hired to address the security of the country's electronic wagering network in the wake of last year's pick six scandal, plans to recommend that the racing industry establish an outside organization to monitor the network, an official with the company said Tuesday.

The official, Michael Hess, said that Giuliani Partners had nearly completed a review of the network and had found that the industry has failed to keep up with technological developments, leading to security loopholes that were exploited in the Breeders' Cup pick six scandal.

The monitoring organization would be modeled along the lines of similar companies that watch over stock exchanges, Hess said. Its job would be to audit the network, analyze wagering patterns, detect suspicious bets, and recommend best standards and practices.

"You need a central authority to oversee technology and security, and that central authority should set the standards for your security and technology," Hess said during a presentation at the Saratoga Institute on Racing and Wagering Law conference. The conference was organized by the Government of Law Center of Albany Law School.

Hess did not estimate how much it would cost to establish a monitoring organization, nor did he provide cost estimates for a number of other recommendations that Giuliani Partners plans to make. The costs could become a contentious issue for an industry that is largely operating on thin margins.

Three major companies - Amtote, Autotote, and United Tote - process nearly all the bets made in the United States. The companies are hired by individual racetracks, which typically pay them a quarter to a half of a percent of each bet. Traditionally, racetracks and the tote companies have sparred over whose responsibility it is to pay for security and new technology.

Giuliani Partners was hired on behalf of the racing industry by the National Thoroughbred Racing Association and The Jockey Club, among other organizations, in November 2002 at a reported cost of $1 million. The hiring came less than two months after the Breeders' Cup pick six scandal, intended to help restore public confidence in the betting network. The company is headed by Rudolph Giuliani, the former mayor of New York City, who is scheduled to present the formal and complete list of recommendations on Aug. 17 at the Jockey Club Round Table Conference on Racing in Saratoga Springs.

Giuliani Partners, along with a security consulting unit of Ernst and Young, has spent the past 10 months working with totalizator companies and task forces set up by the racing industry to determine how racing's wagering system was compromised in the pick six scandal.

Hess said that Giuliani Partners would have a number of other recommendations, some "for the long term, some for the short term." He said racing has so far done a good job in tightening the security of the wagering network, and he complimented the various organizations in racing that have cooperated during the pick six investigation and the ongoing audits. But, he said, "there's a lot of work that still needs to be done."

Hess said that racing's totalizator systems - the wagering network that last year processed just more than $15 billion in wagers - had become "antiquated." He said that racing failed to implement proper controls over simulcasting hubs in remote sites and that racing associations and totalizator companies have refused to share ways in which the industry could improve security.

In reference to the pick six scandal, Hess said that all tote companies needed to employ additional restrictions on who has access to wagering data. The pick six scandal was masterminded by an employee of racing's largest totalizator company, Autotote, who used his access to the wagering network to alter pick six and pick four tickets after some races had already been completed. He also made counterfeits of unredeemed winning tickets.

"Too many people still have access," Hess said. "It's too loose at this point."

Hess said it appears that the pick six and pick four wagers that were compromised last year were isolated instances. Along with the racing task forces, Giuliani Partners has reviewed nearly every pick six and pick four wager in 2002 that had a payoff of more than $10,000, and not one has indicated foul play.

"Overall, it's a great picture," Hess said. "This was not a widespread thing."