The private group that runs New York thoroughbred racing put its $475,000-a-year top executive on leave Monday along with the senior vice president after a state report said $8.5 million in winnings wasn't paid to gamblers.
The New York Racing Association Executive Committee said CEO Charlie Hayward and Senior Vice President Patrick Kehoe are indefinitely on unpaid administrative leave. Kehoe was paid $423,000 a year after he and other top officers, including Hayward, got raises last summer. Kehoe was also general counsel to the entity that holds the state franchise to run racing at Belmont, Aqueduct and Saratoga race tracks.
NYRA board Chairman C. Steven Duncker said the group takes the state report "extremely seriously."
"NYRA will take all appropriate steps and actions to cooperate with the state's inquiries and ensure the integrity of our operations," Duncker said in a press release.
A state Racing and Wagering Board interim report released Monday said NYRA's management intentionally miscalculated winnings paid over 15 months. The report said NYRA knew it was shortchanging bettors by extracting inaccurate "take out rates" from winnings and still did nothing about it, a claim NYRA disputes.
NYRA officials told the Racing and Wagering Board that the issue was the result of an inadvertent error.
The report also said NYRA tried to keep the information from the public, including asking a racing columnist to keep the information out of the Daily Racing Form. The report said the columnist agreed. It identifies the columnist as Steve Crist, who is also the Racing Form's publisher. The report said a reader told him NYRA was taking too much out of winnings, and Crist contacted Hayward. The report says Hayward kept overcharging to accumulate cash for NYRA and to avoid adverse publicity that could have turned politicians in Albany, specifically Senate Majority Leader Dean Skelos, against NYRA.
Crist told New York's Daily News on Monday that he didn't know NYRA was overcharging and if he did, "we would have put it on the front page."
Hayward didn't respond to a request for comment.
"The report is deeply troubling," said Robert Megna, Cuomo's budget director and chairman of the state's Franchise Oversight Board, which oversees NYRA. The franchise holder must maintain "character and general fitness" to keep the racing license.
The probe comes as Gov. Andrew Cuomo seeks to expand gambling and allow a casino developer to build the nation's largest convention center at Aqueduct. He has also proposed a state commission to oversee all gambling statewide.
"The report raises serious questions about the actions of senior management of NYRA," Megna wrote in a letter dated Sunday. "This is not an isolated instance." Megna continued: "A failure to meet this most fundamental obligation puts into doubt the continued efficacy of the state's franchise agreement with NYRA."
The Cuomo-appointed racing committee would oversee the sport if NYRA's franchise is dissolved.
"It was shocking to me," Cuomo said of the report. "If the facts are correct, it's very troubling to say the least and it has been referred to the inspector general."
NYRA is one of New York's most enduring political powers, holding the racing franchise since 1955. In 2008, the state awarded another 25-year franchise to NYRA, even though it was in bankruptcy proceedings at the time. In exchange, NYRA dropped its claim to the land on which the tracks are located and collected $105 million from the state to avoid bankruptcy.
Cuomo made a proposed $4 billion convention center near Aqueduct a major element of his State of the State speech in January. It would be a key to major development of the area in Queens. Real estate and construction interests were Cuomo's biggest campaign contributors in the 2010 campaign for governor, providing $2.6 million.
Belmont, a Long Island community a short drive from the Queens track, is also expected to see development