Horse track industry gets Native money

Author:
Updated:
Original:

Innovations meet resistance

UNCASVILLE, Conn. - Scandal-plagued and tattered, American horse racing is
receiving a much-needed infusion of new investment from American Indian
tribes. But the welcome has been mixed.

While some of racing's biggest companies actively court tribal investment,
other groups in the fragmented industry are pushing punitive measures
against several casino betting services. Well-respected tribal leaders
charge they have been unfairly smeared by the reaction to indictments that
uncovered organized crime dealings at one of the nation's most famous
tracks.

The overall picture, however, is one of vigorous and expanding Native
involvement in an industry that once seemed the strongest potential
challenger to tribal gaming.

Tribes now own three tracks outright, including two historical thoroughbred
and quarter horse courses in Oklahoma and the Mohegan Indian Tribe's more
than $500 million investment in a Pennsylvania harness track.

The Muckleshoot Indian Tribe in Washington state has invested $1.6 million
in the Emerald Downs race track four miles from its casino, giving the
track's owners a visible boost as they open the longest season of their
history. And Magna Entertainment Corp., a heavily-indebted racing giant,
has opened partnership talks with the Confederated Tribes of Grand Ronde in
Oregon to save the Portland Meadows race track by adding a casino.

In New Mexico, the Pojoaque Pueblo has floated plans to resume racing at
the Downs in Santa Fe, which it bought in 1996 and ran for one season of
live racing.

Other tribes are watching keenly for suitable racino investments. The
Penobscot and Passamaquoddy tribes in Maine made a brief bid, backed by the
Mashantucket Pequot Tribe, for the harness racing license at Bangor Raceway
but were blocked by the state's standardbred interests. The Mashantuckets
have continued to look elsewhere, notably in Pennsylvania, the new frontier
for racetrack-casinos.

Less visibly, tribes have become major players in high-tech off-track
betting. Their sophisticated services push across international frontiers,
producing a backlash from federal agencies who charge that tribal
governments aren't paying enough attention to the goingson behind the
scenes.

At least three casinos, including two headed by highly visible national
Indian businessmen, are processing hundreds of millions of dollars from
high-volume bettors in controversial "rebate shops." Depending on one's
position in the industry, these shops are either leaders in applying new
technology or schemes to shortchange horsemen and tax collectors, as well
as potential money-laundering conduits.

Moreover, tribes aren't just latecomers to these innovations, brought in
because they conveniently own casinos. They have been involved in
simulcasting, the economic core of modern horse racing, throughout the last
15 years of its revolutionary growth.

The downside of this involvement came sharply to light in mid-January when
an 88-count indictment from the U.S. Attorney in Manhattan charged that
alleged associates of the Gambino crime family ran an illegal international
betting operation and used the Tonkawa Tribe's Casino and Bingo Hall in
north-central Oklahoma as one of their conduits.

The indictment hit a nerve in horse racing by documenting an alleged
instance of doping a mediocre entry to win a race at Aqueduct. Possibly
because the practice was rumored to be widespread, racing supervisors
reacted with a flurry of activity.

The state-chartered New York Racing Association, which runs Aqueduct and
the two other leading New York thoroughbred tracks, shut off its
simulcasting signal and betting ties to the Tonkawas and the other "rebate
shops" mentioned in the indictment. (The Tonkawa casino, which was
mentioned only twice as a location at which two of the alleged conspirators
held conversations, was not charged with any wrongdoing.) The NYRA later
went further, suspending contracts with the 10 largest "rebate shops,"
including the Coeur d'Alene Casino in Idaho.

David Matheson, a spokesman for Coeur d'Alene Casino, former tribal leader
and BIA official, insisted that its off-track betting operations were a
model of accountability. He said it insisted on notarized identification
from anyone opening a telephone account, preventing the use of false
identities featured in the New York indictment.

A spokesman for the Tonkawas, the house lawyer for the simulcast service
provider Las Vegas Dissemination Corp., noted that the NYRA might have
overreacted because it was operating under federal supervision as part of a
suspended prosecution arrangement and that its own license would soon be up
for renewal.

Although both casinos have started talks to resume the signals, and most of
the large winter meets did not join the shutoff, the issue remains
unresolved. The Keeneland Association, a leading racetrack and horse
auction operation in Kentucky, announced April 8 at the beginning of its
spring meet that it would not provide simulcasting to the Tonkawas or the
other outlets mentioned in the indictment.

Federal officials refused to let either casino off the hook. Cloyce "Chuck"
Choney, commissioner for the National Indian Gaming Commission, said that a
NIGC investigation which fed into the indictment started when its Portland
office noticed large money flows into the Coeur d'Alene Casino. His
commission's frustration with local FBI inaction prompted formation of the
federal multiagency Indian Gaming Task Force, he said.

Christie Jacobs, director of the Indian Tribal Governments Office at the
Internal Revenue Service, featured the off-track betting case in a recent
newsletter. She urged tribes to mitigate the problems by "strengthening
internal controls, maintaining tribal oversight of gaming, and looking for
operating aberrations." She warned them to watch for any deviations from
industry norms, either down or up, and that warning bells should go off
"where the performance is better than expected as well as where it is worse
than anticipated."

Although federal agents are focused on possible criminal activity,
including the high-priority charge of money laundering, the industry is
showing an additional fear of a runaway technology. Rebate shops, on-and
off-reservation, are hosting computer and communication techniques that the
race tracks haven't yet learned how to control.

Tracks have cut off simulcasting signals in the past in disputes over the
large bettors who use the rebate shops. Because of the extraordinary
volume, these syndicates are said to get rebates of 10 percent or more on
their wagers, and tracks and horsemen claim that the funds come out of the
"takeouts," approaching 20 percent or more of a pari-mutuel pool that would
go toward purses and track expenses.

In one case a few years ago, the Meadowlands harness track in New Jersey
stopped sending signals to the Coeur d'Alene Casino to protest its
relations with the Players Service Groups syndicate, which the Daily Racing
Form reported was providing $40 million of the casino's $55 million betting
handle in 2002.

Another issue centers on computer-assisted betting. One Las Vegas-based
professional gambler admitted to a betting volume of $200 million a year
through a non-Indian outlet, using proprietary software to predict race
outcomes and make wagers at almost the last second. Tracks have received a
steady stream of complaints about betting odds which appear to change
dramatically after the windows close.

The April 8 release from Keeneland alluded to these complaints. In
explaining its shutoff to the Tonkawas and others, it said, "In order to
ensure the integrity of our wagering pools, we will continue to seek
information about each of the sites; however, we will not make our signal
available to them until we are confident that they are being regulated
appropriately and that their use of betting technology does not place other
Keeneland customers at a disadvantage."

This resistance to new technology has dogged the Indian presence in
off-track betting almost from the beginning. In response, tribes have made
their operations' benefits too compelling to resist.

The saga of simulcasting in Wisconsin is a case in point. The first
proposal to offer off-track betting at an Indian casino came up in 1988,
the same year in which the Indian Gaming Regulatory Act went into effect.
But the Wisconsin and Illinois racing commissions refused.

In 1999 Wisconsin thoroughbred owners enlisted the help of Choctaw Racing
Services Inc., a simulcasting service owned by the Choctaw Nation of
Oklahoma. The Choctaws proposed a turn-key simulcasting operation that
would dedicate a percentage of the proceeds to Wisconsin breeders and set
up an agricultural foundation. Their lobbying won support from Great Lakes
tribes. The state's horsemen backed Wisconsin tribes in renegotiating
gaming compacts to include pari-mutuel wagering.

In April 2004, 16 years after first proposing the idea, the Oneidas of
Wisconsin opened the Derby Room simulcasting facility, provided by the
Choctaws, at their Green Bay casino. Proceeds now support the Wisconsin
Agricultural Growth Foundation, which makes grants to the state's
veterinary school, 4-H council and Horse Council.

The Foundation urges on its Web site: "Let's move forward together through
technology!"