By Ellen Rugeley
Former New York Racing Association (NYRA) president and CEO Charles Hayward and Patrick Kehoe, the association’s former general counsel and senior vice president, were fired recently, five days after a state report challenged NYRA’s claims that it was unaware it had applied an incorrect takeout rate to its trifecta and superfecta bets over a 15-month period.
When notified of the overage in December, NYRA claimed it had made an “inadvertent error” and called it a “mistake.”
In a statement released earlier this month, NYRA chairman Steven Duncker said the pair were terminated because they “failed to perform their duties at a level required by the board.”
A preliminary report by the state Racing and Wagering Board found that the NYRA knowingly withheld $8.5 million in winnings owed to bettors. The report also contains emails that regulators say prove Hayward tried to cover up the fact that the NYRA was overcharging gamblers for over 15 months on various exotic wagers. State Comptroller Tom DiNapoli inadvertently caught the error while auditing the New York Breeders Fund.
However, Steven Crist, the other participant in the email chain that forms the centerpiece of the allegations made against Hayward, posted on the DRF website, claiming that at the time of the correspondence neither he nor Hayward understood that NYRA was overcharging by applying an incorrect rate on certain exotic bets. Crist added, “I find it completely implausible that he would deliberately overcharge bettors for more than a year and think it would never have been discovered.”
During the 15 month period, which ran from September 15, 2010 through December 21, 2011, the NYRA was charging bettors an extra percentage point, 26 percent rather than 25 percent, on certain exotics wagers, collecting $8.6 million on what is known as the “takeout rate,” or the amount of a bettor’s winnings kept by the NYRA.
Attorney Comes to Hayward’s Defense
After Hayward and Kehoe were suspended on April 30, Eric Corngold, Hayward’s attorney, wrote to Duncker asking that the NYRA not take any action until conducting a full investigation of its own. “It is in everyone’s interest to complete the investigation expeditiously – that is, to ‘get the facts first.’” However, on the following Friday, the NYRA Executive Committee voted to fire the two officials.
“Although the Interim Report asserts that the motive behind the purported misconduct was for NYRA to obtain additional revenue, as you are aware it has been Mr. Hayward’s consistent philosophy – expressed publicly and privately – that lower takeout rates actually yield higher revenues. So it simply makes no sense to conclude that NYRA or Mr. Hayward knowingly attempted to set higher rather than lower takeout rates,” wrote Corngold.
Hayward is “extremely disappointed in the New York Racing Association’s Board of Directors action.” He described the state report that led to his dismissal as “flawed” and “admittedly incomplete.”
“The interim report badly misinterprets documents and were prepared without interviewing me or any other individuals relevant to the investigation.” Hayward added that he has “been fully cooperating,” and expects “to be fully exonerated when all of the facts come out.”
The report also alleges that the NYRA tried to persuade a Daily Racing Form columnist to keep the information out of the newspaper, a charge the columnist denies.
The state-run Franchise Oversight Board, which was created in 2008 and oversees the NYRA, has the power to recommend that the association’s franchise be revoked but did not comment. The Racing & Wagering Board also withheld comment as the investigation is still ongoing.
Hayward had been the president and CEO since 2004, and was recently named a member of the prestigious Jockey Club. Kehoe served as general counsel since 2002. Hayward was paid $475,000 annually and Kehoe was paid $423,000 by the private entity that holds the state franchise to run thoroughbred racing at the Belmont, Aqueduct and Saratoga tracks.
In addition to the investigation, Governor Andrew Cuomo said he has begun debating potential legislation to give the state greater control over the NYRA.
“It seems like there is a never-ending list of the problems at NYRA. It’s not one incident. It’s an incident every couple of months for the past 10 years. At one point, you say, let me find a better way, and I think we’re at the point of trying to find a better way.”
According to Duncker, the NYRA is cooperating with the state investigation.
