Wagering Insecurity: ‘Trust Us’ Isn’t Enough

This is Part 6 of the Thoroughbred Idea Foundation's (TIF) series “Wagering Insecurity.”

Faced with remarkable competitive pressure from the rise of legal sports betting, horse racing is at a crossroads.

Confidence amongst horseplayers and horse owners is essential to the future sustainability of the sport. Efforts to improve the greater North American Thoroughbred industry will fall flat if its stakeholders fail to secure a foundation of integrity, along with increased transparency of the wagering business and its participants over time. Achieving this is growing increasingly difficult after the sport has neglected its core base – horseplayers – for decades.

“Wagering Insecurity” details some of that neglect, and the need to embrace serious reform. Fortunately, there are examples across the racing world to follow.

PART 6 – PROOF

Past-posting is the act of placing a bet after a race has started because the wagering pools were not properly closed. Professional horseplayer Mike Maloney had suspected past-posting was happening with regularity and pleaded with a variety of officials for years to clamp down, but to no avail.

Paul Bowlinger, then Vice-President at the Association of Racing Commissioners International (ARCI), a trade group of racing commissions, recounted his 2007 observations of Maloney in a 2008 conference at the University of Arizona.

“He basically came and told this audience [one year earlier]…I past-posted and I did it to show the industry how easily and how frequently it can be done.' “

Mike Maloney is a member of the Thoroughbred Idea Foundation's Wagering and Integrity Issues Steering Committee and documented his experience uncovering past-posting opportunities in the 2000s at the end of his 2017 book “Betting With An Edge.” After engaging, or attempting to engage, with a plethora of track executives and even the NTRA, Maloney realized there was almost no traction to securing wagering systems.

He wrote:

“To make people in racing realize what's going on here, I don't just need proof…I need to drop a bomb. At Fair Grounds in 2007, I found one.”

After months of trying to understand the issue while betting the races, Maloney explained how he identified that betting pools were not closing appropriately. Tracks maintained little to no record of when races actually started and a series of issues with time syncs between tote betting machines and the host track made it increasingly challenging to prove when there was an actual problem.

What Maloney knew, for certain, is that if the mechanism to stop betting at the host track and all other simulcast and online sites was being used, it was not always functioning correctly.

Stewards at tracks are provided a mechanism to close the betting pools for a race under their supervision.

This mechanism, known as a “stop wagering device,” is supposed to lock all wagering on that race from on-site and at all other locations off-site, and online, where bets are accepted. Maloney noticed that the act of closing the pools was replicated in individual betting terminals with an audible notification to live tellers.

THE BEEP

With an established “office” for wagering at Keeneland, and with a semi-private teller to enter Maloney's bets, he began to notice the “beep.”

“The beep is just an alert to the teller. I began to listen for the beep. In the vast majority of races, it came at the proper time. The gates would open, within two seconds I would hear the beep, and I knew the race was properly closed.

“If I was betting that track, my tickets would stop coming out. But that's not how it was all the time, and I noticed that certain tracks were a lot worse than others.

“Fair Grounds was really bad about it. Golden Gate was really bad about it. Aqueduct was really bad about it. The Florida tracks had issues. As I watched this, I no longer suspected that past-posting was possible, I knew with certainty it could happen.”

To prove the point, Maloney bet on a race at Fair Grounds where wagering remained open during the race, well after the start.

“We were over 50 seconds into the race when I heard the beep and wagering finally closed.”

Following these startling revelations, Maloney thought an investigation would be forthcoming and wagering security bolstered.

“I got a visit from the TRPB…I was hoping I'd be able to help them investigate the incident, but that was naïve. They were more interested in investigating me.”

While Bowlinger simplified Maloney's actions in his 2008 remarks, Maloney clarified his intent in a 2021 interview for TIF.

“I certainly wasn't doing it for fun. Despite regular pleading with some officials, very few believed it was happening and said they did not have actual proof.

“So, I showed them the proof from my bets and all of the other legwork I did to expose this for them. I thought that would be enough for those in charge to realize that there was a real problem with the tote systems and that now it could get fixed.

“Instead, I was called before two Commission meetings to show cause as to why my racing license shouldn't be revoked.

“It seemed that more than anything, they wanted to intimidate me and interrogate me, almost like I was a criminal for revealing to them their own systems' failings.”

June 2008 past-posting incident came to public attention after it was learned customers at Tampa Bay Downs were able to bet on a race at Philadelphia Park (now Parx) after the race was over, clearing more than $13,000 from $2,000 in bets made after the race.

The TRPB's Curtis Linnell told the Paulick Report at the time “it didn't look like it was widespread.”

Paulick wrote:

“This issue begs the question of who is minding the tote, a patchwork, less-than-state-of-the-art wagering network that handles the approximate $15-billion in bets each year and flows through racetracks, hubs, guest hubs, off-track betting sites, account wagering systems, and off-shore rebate shops?”

WHISTLEBLOWING

More than 18 months after Maloney's first proof and exposure of past-posting, and seven years since the Breeders' Cup Fix Six, Maloney was contacted by a tote employee “who didn't trust his company to report” such an incident properly.

The race in question was the Grade 3 Los Angeles Handicap at Hollywood Park on May 16, 2009.

“Rather than immediately report it myself and initiate the usual industry cover-up, I decided to wait and watch what the tracks and regulators would do…

“I was hoping the higher-ups at Hollywood Park would inform the betting public of the failure of the tote system. Then I hoped to see the California Horse Racing Board, since it regulates all wagering and racing in the state, issue a press release regarding a potential investigation.”

But there was no immediate reaction.

Maloney blogged about the incident, which was then picked-up by Paulick Report. Wagering on the race at 33 locations had not been closed properly, enabling patrons there to continue betting on the race even after the results were known.

Tote officials recognized the issue and did not honor winning bets placed at the 33 locations for the race, though they never raised the issue to the public, until Maloney blew the whistle.

“The Hollywood incident summed up the industry response to all of the tote problems.

“First, the industry doesn't want anyone to know about the issue, because it makes them look bad. Then, when they're called on it, they deal with it in a way where they don't even acknowledge the systematic failure that led to the people who fund the game being cheated out of their money.”

Maloney's quest continued for several years, with more incidents identified. Many horseplayers recall the incidents and remain concerned about past-posting, though tote experts, who wished to remain unnamed, told TIF that the specific issues Maloney identified about past-posting were rectified.

While he backed away from the fight in 2012, as Maloney explains in the book, he remains steadfast to this day that the wagering systems for American racing still lack some of the basic security provisions they need.

A STEP BACK FOR INTEGRITY IN 2020

In December 2020, ARCI adopted an update to its Totalisator Technical Standards (TTS) document. This document contains the requirements for North American pari-mutuel wagering operators and bet-takers, and is supposed to be adhered-to by members.

In its most recent update, the document included an adjustment to the requirements of the stop wagering device. As it describes, tote vendors “shall install two separate devices that activate the stop wagering function.”

The device closes wagering on a race and provided all downstream receivers of the signal from the device are calibrated, it stops the occurrence of past-posting as painstakingly identified by Mike Maloney over years.

According to the TTS document:

“The stop wagering device shall be the judge's console and a tote system backup located at the racing association.”

That is, the host track where the race is taking place.

The primary device is in the possession of the stewards overseeing the race itself. But the 2020 update amends the backup device's requirements.

“Said tote system backup may be operated by local racing personnel and/or racing stewards, and also remotely operated by tote personnel not physically located at the racing association.

“If the tote system backup is operated remotely, a protocol for the remote operation shall be submitted to the racing commission for approval.”

In other words, the main device is still with the stewards, but the backup device can be operated remotely, out of control of the track and stewards. This has flabbergasted Maloney, who offered the following comments in 2021:

“I can't imagine a system where an update of these protocols would bring us to, hypothetically, a less secure operation of the stop wagering function in 2021, but that is what seems to have happened.

“The same general lack of concern I felt the industry showed horseplayers in 2007, seems to still be in place now. The betting infrastructure is ancient. How can a reasonable observer look at what we have in place and not think it is in need of monumental upgrades to protect honest customers?”

If technology had evolved across the American pari-mutuel wagering landscape and centralized backup remotes were implemented with transparent oversight, then confidence might be warranted.

But that does not seem to be the case.

Instead, while other gambling technologies continue improving over time, tote technology seems to remain much the same.

“TRUST US” ISN'T ENOUGH

Alarmingly, some of the same “late scan” functions which Chris Harn and his conspirators exposed in the Breeders' Cup Fix Six remain in place.

Maloney documented in 2017 that the method by which tracks identify winning superfecta bets across all North American races still uses the “late scan” approach for verifying winning tickets.

Instead of submitting the full details of every superfecta bet to the host track as it is placed, the remote bet taker only communicates to the host track the dollar amount of superfecta bets they have taken before the race begins. Once the race is run and order of finish confirmed, then the host track requests that the remote betting sites provide detail on how many winning superfecta tickets should be paid to them.

Defined as a process “used after the winners are known” by the Inter Tote System Protocol (ITSP), a shared resource used by tote companies, tracks and remote betting sites, every superfecta bet on North American racing is processed as a late scan.

Maloney said:

“The 2002 pick-six scandal happened for a variety of reasons, all well-documented. To the best of my understanding, the only update that has been made to the ITSP is for the pick six, or any multi-race bet like it, which the industry calls 'Pick-N' bets. They've moved from late scans to early scans.”

The ITSP identifies an early scan is “used after the winners are known from leg to leg of Pick-N pool types.”

The total Pick-N play, with combinations and wager amounts, is still not secured and transmitted to the host track before the betting sequence begins. In 2017, Maloney called these situations “vulnerabilities without reasonable oversight.”

These processes still exist today.

TIF questioned the TRPB about the unusually low superfecta result of the 2019 Kentucky Derby in the weeks following the race. That year's race was unofficial for more than 20 minutes before stewards demoted Maximum Security and promoted Country House, at 65-1, to the win. The longest-priced winner of the race in modern times, which holds America's largest field and largest superfecta pool, produced a superfecta return which was surprisingly low in comparison to other combinations in the past, at just $51,400.

There may be a plethora of reasonable explanations, but none have ever been provided.

“Trust us” isn't enough.

The 2005 remarks of then Del Mar Thoroughbred Club President Craig Fravel, now the Chief Executive Officer for 1/ST Racing (formerly The Stronach Group), questioned the ability of the tracks themselves to properly ensure the security of wagering. Keep in mind that the one entity which exists in this capacity, the TRPB, is a wholly owned subsidiary of a consortium of racetracks.

“We [track operators] are a little suspect simply because we are maybe overly confident at times.

“I think to allow customers to have sufficient levels of confidence in us, we have to demonstrate that not only are we capable of reviewing things, but that there is a sufficiently independent and authoritative organization out there that can be the ultimate arbiter of those kind of decisions.”

North American racing is still waiting for one, some 16 years after Fravel's remarks, and 19 years since the Breeders' Cup Fix Six.

The lack of oversight is a flashing red light to both existing and new racing fans. In our next installment, we will look at other racing jurisdictions which are tackling these topics and seeking to keep pace with the ever-changing world.

Coming  Tuesday, May 4: Part 7 – Z

Miss a previous installment? Click on the links to read more.

Part 1 – Expectations

Part 2 – Intertwined

Part 3 – Volponi

Part 4 – Confidence

Part 5 – Bingo

Want to share your insights with TIF? Email us here.

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Wagering Insecurity: Tote Monitoring In Racing Falling Behind To Bingo

This is Part 5 of the Thoroughbred Idea Foundation's (TIF) series “Wagering Insecurity.”

Faced with remarkable competitive pressure from the rise of legal sports betting, horse racing is at a crossroads.

Confidence amongst horseplayers and horse owners is essential to the future sustainability of the sport. Efforts to improve the greater North American Thoroughbred industry will fall flat if its stakeholders fail to secure a foundation of integrity, along with increased transparency of the wagering business and its participants over time. Achieving this is growing increasingly difficult after the sport has neglected its core base – horseplayers – for decades.

“Wagering Insecurity” details some of that neglect, and the need to embrace serious reform. Fortunately, there are examples across the racing world to follow.

PART 5 – BINGO

The NTRA-led initiative to bring wagering integrity to North American racing had failed. Independent oversight was falling apart. The frustration was palpable in December 2008. The University of Arizona Racing Symposium (click here to read the full transcript) convened a panel to discuss the state of these initiatives.

Paul Bowlinger, a long-time horseplayer, attorney, former regulator and then the executive vice president for the Association of Racing Commissioners International (ARCI) found it Shakespearian.

“…The real genius of that soliloquy of Hamlet is not 'to be or not to be,' whether that is the question. He goes on to say, 'To die, to sleep, perchance to dream, aye, there is the rub, for in that sleep what dreams may come?'

“Because what Hamlet is really quite simply saying is, what we may discover is scarier than what we already know.”

Later in the session, Bowlinger highlighted that the complexities of the industry, compounded by other issues, distracted the evolution of integrity measures.

“…We no longer have to dream about what's on the other side of an unmonitored pari-mutuel pool…

“The second part in that soliloquy is, 'Whether tis nobler in mind to suffer the slings and arrows of outrageous fortune,' and what has bothered me is that since 2002, the Pick-6 scandal, it was the topic du jour, it was the topic du everything.

“Now granted, there have been other issues that have taken our time, medication issues, the tragic Eight Belles, Barbaro, the steroid issuesthey've all come into place and they've diverted our attention and rightfully so in many ways.

“But I think our betting public is fed up with taking the slings and arrows of outrageous fortune.”

When TIF reached him in February 2021, Bowlinger's recollection of the time was unchanged.

“The industry's complete lack of interest was so frustrating.

“We met with everyone, tried to make it work and we had all the numbers in place for it to work. All of the executives started out by saying 'yes, yes, yes,' and when it came down to executing, they ended up saying 'no, no, no.'

“I owned a nightclub for a long time and I would not possibly think of ignoring my actual customers. Racing is run as if its betting customers don't exist. I would not walk into my club and not notice my customers.

“Instead, racing goes to its distributors and asks them how they are doing. It's a remarkable way of doing business.”

Bowlinger left ARCI in 2010, returned to private law practice and has been out of the racing business ever since.

At the time of the 2008 Arizona Symposium, Bowlinger's fellow panelist Isidore Sobkowski had been out of the NTRA's Office of Racing Integrity for several years and was running his own company, Advanced Monitoring Systems (AMS), described by Bowlinger in the session as “specifically created to meet the pari-mutuel industry's need for cyber security of wagering pools and wagering accounts.”

Sobkowski lamented the lack of accomplishments to that point.

“There's a lot of talk about wagering integrity but so far I think precious little has been done.”

WITHOUT CONTROVERSY

Kevin Mullally provided an external perspective. After 12 years with the Missouri Gaming Commission, Mullally was early in his career with Gaming Laboratories International (GLI) as Director of Government Relations and General Counsel. He had recently served as Vice President of the North American Gaming Regulators Association (NAGRA). Given his broad experience in gaming regulation, he used his time at the 2008 panel to express his bewilderment at how racing could be such an outlier regarding its regulation of technology.

“This is my third consecutive conference.

“I came here two years ago to learn a little bit more about why the racing industry had managed to be the only component of the gaming industry that had not implemented any serious oversight to its technology.”

TIF contacted Mullally in March 2021 and his views were unchanged and now augmented by the new forms of gaming technology which have entered the market, each aligned to a set of technical standards that are independently tested under the authority of their regulators. Racing's controls fall farther behind.

“If you were to put me on a panel today, 13 years later, I'd say the exact same thing.

“The only difference is that the tote systems stand out even more given how technology in the rest of the gaming industry has evolved. Testing is not only ubiquitous in every other sector of gaming but is also without controversy. 

“The only aspect about testing of gaming equipment that is controversial is if someone suggests that it is not needed…

“Automated bingo card devices in church basements have more independent monitoring than the tote systems.”

Ironically, Mullally added, the primary source of new money to the racing business – subsidies via slot machines, video lottery terminals and historical horse racing (HHR) machines (slot machine-like devices driven internally by race results) – are all substantially more controlled than the billions going through the tote system.

“Historical horse racing machines have similar levels of controls and oversight as any casino or lottery-style machines. Tote systems that have been used in America lack the clear lines of accountability and defined processes to independently validate the technology. Moreover, they lack proper safeguards to independently investigate a malfunction, or investigate attempts to compromise the system. The message has always been, 'we can do better.'”

Tote operators, not so much.

Mullally's position from outside racing was affirmed by one active racing executive whose role includes managing wagering, but asked not to be named because of ongoing relationships with tote companies. That executive told TIF in early 2021 that AmTote, which was reported to process about 80% of North America's pari-mutuel bets, has consistently disappointed his track:

“They have not met our expectations on tote processing innovations and it has long seemed like they are not receiving the cash needed to evolve or innovate in racing. If anything, they have given the impression most of their team was working on their historical horse racing technology.”

That technology powers the slot-like devices used to subsidize racing in states including Arkansas, Kentucky and Virginia.

MONITORING

Back in the 2008 panel, Bowlinger, Sobkowski and Mullally were all bearish on the state of wagering integrity and did not hold back.

In the session's Q&A period, Chris Scherf, long-time Executive Director of the Thoroughbred Racing Associations of North America, the owner of the TRPB, publicly contested Sobkowski's monitoring business, challenging the underlying technology and claiming it insufficient to meet industry needs.

“I think it vastly overpromises.”

By this point, Scherf had almost two decades of experience working with the tote companies and noted that the technological infrastructure that was required to institute independent monitoring was not possible given the rather sorry state of technology on the part of the tote companies.

Reached in March 2021, Scherf made it clearer.

“You haven't had an adventure in life until you've tried to get tote companies to do something in concert. I found quickly that when you get them all into a room, everyone was in favor of uniformity and the definition of uniformity was everyone doing it 'my' way.”

The Scherf challenge in 2008 was an engagement familiar to Sobkowski, who had heard the hemming and hawing before.

“We are a vendor. We compete in a free market and we've got a good system. I understand TRA [Scherf's employer, funded by the consortium of track owners] has a system as well, we'd love to go ahead and compete against you, love to go ahead and partner with you.

“We're looking for an industry solution here, we're not looking for any kind of unfair monopoly or any kind of unfair advantage.”

Earlier in his main remarks, Sobkowski struck hard at the racing industry's overwhelming reluctance.

“I just want to say that the industry has had some pretty significant push-back to the things that we're doing as a company.

“I've been told, for example, that our system is too simplistic. I've been told that our system is too sophisticated. I've been told that our system works too well and we don't need it. I've been told that our system doesn't work at all and why bother?

“But what I've really been told over and over is that someone has to pay for this and the industry doesn't want to pay for it.”

A DEAD RAT

In 2009, the Indiana Horse Racing Commission (IHRC) decided to move forward with Sobkowski's firm, AMS, declaring itself the first state in America to institute real-time, independently monitored pari-mutuel wagering.

Joe Gorajec was Executive Director of the IHRC for 25 years, and pulled no punches in 2021 when assessing the state of wagering integrity in America, suggesting little, if anything, has been done in the almost two decades that have gone by since the Fix Six scandal. He told TIF:

“Most racetrack operators would rather have a dead rat in their mouth than expose or take action on any wagering malfeasance that occurred on their races.

“If there is a system in place, today, that is for racetracks to use to monitor live betting, then the tracks should be reporting the results to the public. The reports should indicate exactly the problem that occurred, here's what was done about it and what steps are being taken to ensure it does not happen again.

“You almost never hear that, ever, from anyone.

“Tracks will not take action on their own because tracks are not in the business of integrity. Tracks are in the business of making money conducting horse racing. Some are more integrity and safety minded than others.

“I think most tracks, confronted with a wagering integrity issue, would either bury the information or bury their heads in the sand and it would never see the light of day. That's not every track across America, but the majority would not want to make public any information that would question the integrity of wagering on their product.”

New York adopted a rule requiring independent wagering oversight, and hired Sobkowski's AMS in October 2009 to monitor all betting on tracks in the state. The rule still exists, but one long-time tote executive told TIF the technology is so limited, monitoring to meet the rule can only take place on live, in-person betting at the host track. Thus, actual monitoring only occurs on just a sliver of total betting.

Widespread independent monitoring across the tote landscape never actually materialized in any state, from AMS or another firm. Though formal explanations are impossible to find, TIF learned from multiple individuals that the protocols which govern the tote system are so antiquated that betting details from the tote companies could never get to the monitoring groups in formats that would enable transaction-level oversight. Investment to upgrade systems to enable such transmissions have not been made. These protocols remain in place today.

At present, two of the three main tote companies serving North America are owned by major racing corporations, each of which also own racetracks, ADWs, high volume betting shops, content distribution arms and a host of other service providers. AmTote was bought by Magna Entertainment (later, The Stronach Group and now 1/ST) in 2006 and as was previously cited, controls most of the tote relationships between tracks and betting sites. Churchill Downs Incorporated acquired United Tote in a November 2009 deal as part of its purchase of Youbet. The third, Sportech, sold its global tote business in December 2020 to Australian firm The BetMakers.

TIF asked former TRA boss Chris Scherf in 2021 if consolidating ownership of tote companies with racetracks, as was the case with AmTote and United Tote, made any noticeable difference.

“No. I don't think anyone perceived anything was going to change or be improved, and that's the way it played out.

“It made it easier getting the tote companies to the table a bit more regularly, but that's about it.”

During the period from the Fix Six scandal of 2002 through 2009, horseplayers increasingly questioned the ability of tote firms to secure betting as they witnessed the failings, making it all the more inexplicable that independent monitoring was rebuffed. Tote representatives said there were no such issues.

One professional horseplayer proved, and reported, that he could bet up to 50 seconds into the start of a race.

Coming Thursday, April 29: Part 6 – Proof

Miss a previous installment? Click on the links to read more.

Part 1 – Expectations

Part 2 – Intertwined

Part 3 – Volponi

Part 4 – Confidence

The post Wagering Insecurity: Tote Monitoring In Racing Falling Behind To Bingo appeared first on Horse Racing News | Paulick Report.

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Wagering Insecurity: Tote Systems Have Not Evolved To Address Fix Six Scandal

This is Part 3 of the Thoroughbred Idea Foundation's (TIF) series “Wagering Insecurity.”

Faced with remarkable competitive pressure from the rise of legal sports betting, horse racing is at a crossroads.

Confidence amongst horseplayers and horse owners is essential to the future sustainability of the sport. Efforts to improve the greater North American Thoroughbred industry will fall flat if its stakeholders fail to secure a foundation of integrity, along with increased transparency of the wagering business and its participants over time. Achieving this is growing increasingly difficult after the sport has neglected its core base – horseplayers – for decades.

“Wagering Insecurity” details some of that neglect, and the need to embrace serious reform. Fortunately, there are examples across the racing world to follow.

PART 3 – VOLPONI

The major North American tracks, which are now vertically integrated companies controlling most of the major ADWs, tote companies, other service providers and even some of the high-volume betting shops like Elite Turf Club, have had little incentive to upgrade the oversight of wagering on the more than 30,000 annual Thoroughbred races on the continent.

The one entity which does offer some wagering security apparatus – the Thoroughbred Racing Protective Bureau (TRPB) – is a wholly-owned subsidiary of the tracks themselves, through the Thoroughbred Racing Associations of North America (TRA), a consortium of racetracks.

Despite several attempts from TIF, the TRPB's Executive Vice President Curtis Linnell declined to answer questions for this series.

What was once a robust organization, even called horse racing's own “little FBI,” is now a shell of itself, focused primarily on the microchipping of horses.

The headline of a 1960 piece in Sports Illustrated may offer that generation's perspective of where racing stood relative to security and integrity measures:

“The Best-Policed Sport of All.”

Today, the TRPB does offer its member tracks a tool known as the Wagering Analysis and Security Platform (WASP).

According to its website, the TRPB says: “this platform currently provides each Thoroughbred Racing Associations' member track officials with a robust integrity toolset for distributed betting networks. A variety of reports and modules are included which assist users with timely examination of wagering detail.”

This description suggests the tracks are mostly responsible for monitoring WASP themselves.

When TIF questioned a TRPB official in mid-2020 about a curiously low superfecta payoff, it was affirmed that the organization does not respond to individual questions about incidents, but only those raised by member tracks. If we wanted more insight, we would have to contact the track directly. The burden of dealing with a customer inquiry is on the racetrack.

North American racing does not have independent oversight of betting or wagering systems. The lone protection comes from a small office wholly-owned by the tracks, which gives them tools to monitor their own races.

This was not the plan when many in and out of racing recognized the need for radically improved wagering oversight in the early 2000s.

FIX SIX GROUND ZERO FOR RESET

In the years before and since, tote security has been a looming concern for racing after the “Fix Six” scandal was exposed in the aftermath of the 2002 Breeders' Cup.

Natalie Voss, Editor-in-Chief of Paulick Report, offers a full review of the incident.

In brief, Autotote employee Christopher Harn, who had knowledge of the bet processing function of the pick six and access to the system, altered tickets to guarantee a win after the first four legs of the Breeders' Cup pick six, which had a pool of more than $4.5 million that year. Specific pick six ticket details were only transmitted to the host site after the first four legs of the bet to limit the burden of too much transaction information going through the tote system.

While processing power in many other technological uses has improved since then, racing's tote systems have not evolved at the same speed.

The full plot was uncovered easily in the days after the race. The longshot outcomes of the sequence, capped by Volponi's improbable 43-1 Classic win, helped expose the fraudulent play as the only winning ticket, played through a Catskill OTB outlet in New York and was entered as a lone, $12-base bet, the equivalent of six individual $2 tickets.

The winning combination had the four single winners of the first four races with all horses used in the last two legs. The delays in ticket data transmission enabled Harn to change the four singles to the winners of the first four races. It was later uncovered the $12 base play was a mistake. Before the perpetrators were caught, the total winnings would have exceeded $3.1 million – but Breeders' Cup officials froze the payouts after astute horseplayers cried foul.

It was later revealed Harn, along with conspirators and college buddies Glen DaSilva and Derrick Davis, executed the fraud just weeks before the Breeders' Cup to test their processes, landing a pick four at Balmoral Park for over $1,800 and then more than $105,000 in a pick six at Belmont Park a few days later.

Steven Crist, former New York Racing Association executive, as well as a former publisher of the Daily Racing Formnoted in the Fix Six aftermath that one long-time pari-mutuel operations expert recalled a spate of incidents similar to the Fix Six had been uncovered years earlier, but whatever the weaknesses that enabled them then had been addressed, though without much public awareness.

Crist wrote just after the incident:

“It sure seems that the loophole has been reopened, and now every customer is understandably nervous, too.”

FEIGNED CONCERN

Horseplayers' justifiable anger around the lack of security at the time was further stoked as OTB and tote executives originally defended the outcome, suggesting there had been no impropriety.

Crist wrote:

“Breeders' Cup and the National Thoroughbred Racing Association acted with commendable speed and clarity, freezing the payout and demanding an investigation by the New York State Racing and Wagering Board. Officials of Catskill OTB and the totalizator companies AmTote and Autotote immediately tried to make the story go away, defending the winning ticket as an authentic stroke of good fortune while insisting their systems are impenetrable.

“Their lack of even feigned concern about the situation or respect for a serious investigation only raised more flags. Then three days after Brooks Pierce, the president of Autotote, said that the winning ticket was legitimate and actually 'good for racing,' Autotote announced it had fired a 'rogue software engineer' who 'had the ability to alter the ticket.'”

Reached in March 2021, Crist reflected on the ridiculous reactions from those who originally were defending the results as legitimate.

“Once the longshots came in, you just knew the bet wasn't going to be hit. So, when the details of the winning tickets were released, anyone who knew anything about betting races knew something was off.

“Well, over the next 48 hours, the OTBs and tote companies were just lying, and eventually it was all exposed.

“It was such a perfect illustration of how wagering had just totally gotten past the racing establishment.”

Just weeks after the incident, a survey of 300 horseplayers conducted by Hollywood Park, reported at a November 2002 California Horse Racing Board meeting, showed 68% of the surveyed believe “it was likely that fraudulent bets could be made after the start of the race” while overall, 69% “express a lack of confidence in the tote system.”

It will be notable later in this series that in that same California meeting, commissioners asked Autotote president Brooks Pierce if he had “any evidence whatsoever in California or anywhere else that anybody is able to bet” after the start of a race.

Pierce confirmed he had none.

Harn was fired by Autotote days after the fraud was eventually discovered. Washington Post article captured the remarks of Lorne Weil, then chairman and chief executive of Autotote's parent company Scientific Games, the same day of Harn's ousting.

“Weil…had praised his company's 'detection system.'…

'The good news, if there is any, is our detection system worked the way it should have,' Weil said in a conference call. 'No money was paid or changed hands.'”

“During the call, Weil said Autotote's detection system would have red flagged the alleged alterations to [the Fix Six] bet even if they had not raised suspicions.”

Weil's praise for Autotote's own monitoring, however, was premature.

His remarks came before it was known Harn and his conspirators had changed tickets in a similar fashion earlier the same month without detection at both Balmoral and Belmont, netting over $107,000.

Weil and Brooks Pierce are still working together through British-based Inspired Entertainment.

A PERIOD OF TRANSITION

Where was the TRPB? Was anyone monitoring the pools or these risks?

In 2002, the TRPB was in a period of transition.

The Baltimore Sun's Jon Morgan profiled then TRPB President Paul Berube less than two months after the Fix Six, who offered insight that the control over wagering security was not what it once was, a function of the growth of the internet and simulcasting.

“Berube, president of the Thoroughbred Racing Protective Bureau, has watched as the sport burst in a few decades from the confines of racetracks to the nearly ungovernable realm of cyberspace…

Berube acknowledges the business has changed, making it harder to police. About 85 percent of the $14.5 billion in bets on thoroughbred races last year [2001] were made somewhere other than where the races were run…

“A major heist involving the computers that store and sort the wagers seemed, well, inevitable…

“That's one reason the protective bureau has been spending more time studying the industry's interlocking computer networks and the 'tote' companies that run them.

“The agency convened a meeting a few years ago to give the totes – who aren't members of the Thoroughbred Racing Associations – a list of 'points of vulnerability,' including the forgery of betting tickets, a time-honored scam also linked to the Breeders' Cup scandal.

“They all acknowledged the problem, but said it was too expensive to fix,' Berube said of the tote companies.

In 2021, Berube clarified to TIF that the “too expensive to fix” adjustment was:

“…centered on a flaw in outs book procedures [the process of clearing previously uncashed winning tickets after a period of time, normally months] that had been exploited by insiders to cash before those winning bets reverted to the state.”

The Fix Six scammers, led by Harn, were involved, along with others, in the uncashed tickets scheme too.

The tote companies had avoided stringent monitoring. This remains the norm. Most businesses prefer saving the cost of extra oversight. But that does not mean that businesses should dictate their own oversight requirements, or that what amounts to self-regulation is akin to an acceptable standard of regulation.

The industry was well-aware of the vulnerabilities which led to the Fix Six. Steve Crist's allusion to previous loopholes –insecurities – from well before the Fix Six were known to the TRPB.

The Morgan article continues:

“As recently as September [2002, a month before the Fix Six], Berube had a conversation with someone regarding the possibility of hackers altering bets after a race had been run – especially on bets that require the gambler to predict in advance the outcome of several races.

“The reason: Data on such bets are stored in computers until after most of the races have been run and then are 'scanned' and forwarded to a central hub.”

Berube's 2021 clarification to this portion of Morgan's 2002 story is noteworthy.

“My September 2002 meeting was at the TRA's annual simulcasting conference, and was with a well-placed tote company representative who was asked, by me, what it would take to 'create' winning pick six tickets after the entire sequence of races.”

The tote representative told Berube all it would take is a program and a programmer – less than two months before that actually happened on the sport's biggest stage.

But for years, the TRPB's functions were being trimmed back, with rising costs for placing TRPB agents at tracks cited as the reasoning. Morgan's article captured the transition:

“Tracks complained about the cost of the protective bureau, and in 1995 the Thoroughbred Racing Association restructured. Each member track was allowed to either pay to have [a TRPB] agent on site or to provide its own security in a cooperative arrangement…

“Many tracks opted out, and, as of the end of last year, the protective bureau had only nine full-time agents assigned to 13 thoroughbred tracks – though they help coordinate security with the other 30 member tracks.

“The role of the protective bureau has been 'minimized,' [now Thoroughbred Horsemen's Association chief executive Alan] Foreman said. 'The nature of the industry and business have changed and a number of tracks have found it more cost-effective to do that work themselves.”

Not surprisingly, cost savings did not equate to better protections.

Paul Berube affirmed the degradation of the role of the TRPB over these years in his 2021 conversation with TIF.

“It was an erosion, over time, and it came down to commitment and the perception of need.

“Changes in ownership of racetracks from privately-held [tracks] to corporate conglomerates brought about different thinking on security measures. Lost in the ownership changes was first-hand knowledge and appreciation of the TRPB's history. The expansion of simulcasting added to the changes that have occurred.

“Even though 90% of all wagering dollars come from off-track, that has not and will never change the fact that the races being wagered upon still occur at a hardscape facility and where essential participants are located. In short, racing still needs investigative eyeballs on the actual race event even though less money is being wagered at the live venue.

So how will racing integrity oversight exist going forward?

Berube notes that any effort must be a nationwide one.

“Today, there is no national unity, but in the heyday of the TRPB, that was our strength. So many investigations went across a wide span of states. Today, I don't know how you would do it without some uniform group.”

Around the time of the Fix Six scandal, Berube notes that the TRPB was looking to hire a knowledgeable resource for the TRPB in pari-mutuel operations and was recommended to consider Curtis Linnell, now Executive Vice President of the organization some 19 years later.

“Best hire I ever made,” Berube told TIF.

But as corporate control of American tracks concentrated even further, the TRPB's influence and its role as an agent of the TRA, a consortium of those same tracks, waned as it relates to wagering integrity. Incidents or suspicious findings are almost never publicized, if they were triggered at all.

In 2021, Steve Crist scoffed at the TRPB arrangements, both at the time of the Fix Six and now.

“The TRPB was like some warm blanket the industry would toss on these things in some attempt to reassure horseplayers that they were looking into it. But there was almost no sort of visibility or presence on any modern wagering incident.”

Massive improvements were needed in wagering security as racing became an increasingly off-track, online betting business. The Breeders' Cup Fix Six proved the need to just about everyone.

In its aftermath, the industry started talking, planning and spending – millions – to build a modern oversight arm. It was a total failure.

Coming Thursday, April 22: Part 4 – Confidence

Miss a previous installment? Click on the links to read more.

Part 1 – Expectations

Part 2 – Intertwined

Want to share your insights with TIF? Email us here.

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Wagering Insecurity: Thoroughbred Idea Foundation To Examine Current State Of Oversight

The Thoroughbred Idea Foundation (TIF) will launch “Wagering Insecurity,” a multi-part series which will examine the current state of oversight of North American Thoroughbred racing and wagering, beginning Tuesday, April 13.

In the aftermath of the infamous “Fix Six” at the 2002 Breeders' Cup, the American racing industry pledged millions of dollars to improve the monitoring of pari-mutuel betting and create a central office to oversee wagering security. While plenty was spent, the oversight never materialized. Vulnerabilities still exist, late odds changes impact many races and transparency is nowhere to be found.

TIF believes improved measures of integrity will boost customer confidence, which will lead to increased participation and put racing on a path to a more sustainable future, particularly in light of the rapid expansion of legal sports betting across the continent.

Customer confidence is crucial to any business, especially gambling, but North America's racing industry has done little to instill it over the last two decades.
“Automated bingo card devices in church basements have more independent monitoring than the tote systems,” said Kevin Mullally, Vice President of Government Relations and General Counsel for Gaming Laboratories International.

Track operators seem indifferent. As one 25-year U.S. state racing regulator told TIF for this series:

“Most tracks, confronted with a wagering integrity issue, would either bury the information or bury their heads in the sand and it would never see the light of day. That's not every track across America, but the majority would not want to make public any information that would question the integrity of wagering on their product.”

In 2005, when speaking of the racing industry's post “Fix Six” efforts to upgrade wagering oversight which eventually failed, then Del Mar Thoroughbred Club President Craig Fravel acknowledged the track operators might fall short of the mark.

“We [track operators] are a little suspect because we are maybe overly confident at times. I think to allow customers to have sufficient levels of confidence in us, we have to not only demonstrate we are capable of reviewing things, but that there is a sufficiently independent and authoritative organization out there than can be the ultimate arbiter of those kind of decisions.”

Such a group still does not exist.

THE TRPB

The Thoroughbred Racing Protective Bureau (TRPB) is North American racing's only provider of any wagering oversight, but the group has been defunded over years and is not independent. It is a wholly-owned subsidiary of a consortium of North American racetracks.

The TRPB provides member tracks a platform to monitor wagering on their own races and assist them when needed. The tracks essentially monitor themselves.

Given the consolidation which has taken place in horse racing over the last 20 years, tracks control most of the levers of the greater business. They own most of the online betting platforms which process the majority of bets on North American racing, known as ADWs. They own two of the three main tote companies which handle most betting activity. One conglomerate even owns at least part of a major off-shore rebate shop whose few customers account for an enormous amount of total handle.

Tracks fund the TRPB, which was once called horse racing's own “little FBI,” but has seen its policing functions largely reduced. Horse racing may have been once described as “the best policed sport of all,” but that has changed.

“It was an erosion, over time,” Paul Berube told TIF of the TRPB which he ran for nearly two decades after working as an investigator with the group for another two decades before that.

“Today, there is no national unity, but in the heyday of the TRPB, that was our strength.”

Despite several attempts from TIF, the TRPB's Executive Vice President Curtis Linnell declined the opportunity to answer questions for this series.

SUSPICIOUS BETTING

While the TRPB has taken on an almost invisible profile to most bettors, there is an unexpected group which has started paying more attention to North American racing,

Unbeknownst to most American horseplayers, a large bookmaking market has emerged in Europe offering fixed odds bets on North American racing. Total handle is believed to exceed $1 billion annually. Contracts enabling these relationships are often facilitated by XB-Net, a subsidiary of 1/ST, formerly the Stronach Group.

Bookmakers have their own monitoring group which examines wagering on all sports, investigates suspicious wagers and raises alerts to regulatory authorities with whom they have information-sharing arrangements. For the first time ever, they identified suspicious wagering on U.S. races in the fourth quarter of 2020.

According to Matt Fowler, Director of Integrity at the International Betting Integrity Association (IBIA), the recent alerts on U.S. races go “well beyond just an unusual betting pattern or unexpected price movements.”

European fixed odds betting operators are identifying activity involving U.S. racing that should be concerning to all U.S. racing stakeholders. Where is the American oversight on American races?

At present, there is no reporting relationship between European bookmakers and any American counterparts, the TRPB, North American track operators or regulators. For now, the findings will inform bookmaking decisions but not the patrolling of American races, where pari-mutuel handle vastly exceeds bookmakers.

A world-wide market requires world-wide supervision. The TRPB is the closest thing North American racing has to self-regulation, which is fine…until it isn't.

What we have now is insufficient.

Racing on the continent in the 2020s is run with an integrity infrastructure better suited to the 1970s and a business model from the early 1990s. The oversight measures for the races themselves and their wagering systems have degraded over time. Racing's integrity infrastructure is falling farther behind that of the rest of the developed racing world, where more robust monitoring of all markets is far greater, transparent oversight is commonplace and customers are far better protected. Examples of these modern steps are plentiful throughout the series.

OPPORTUNITY

Improvements to racing's integrity infrastructure will improve customer confidence, increase participation in the sport and lead to a more sustainable future.

“Wagering Insecurity” provides several recommendations for North American racing to consider.

Notably, the new Horseracing Integrity & Safety Authority (HISA) must include elements of bet monitoring to its practices once launched.

Global sports and racing integrity expert Jack Anderson of the University of Melbourne, who was the keynote speaker at the University of Arizona's Global Symposium on Racing in 2018, highlights several key points throughout “Wagering Insecurity” which support this conclusion.

“Effective doping control is of course a vital element of the integrity objectives of a sport such as racing but it should not be the sole integrity concern and should not be seen in isolation. Doping in a sport such as racing is often intertwined with gambling interests,” Anderson said.

“The prevalence of doping in a racing jurisdiction may also be reflective of weaknesses in that racing organization's race day operations such as:

– stewarding and standards of veterinarian oversight,

– lack of capacity in intelligence gathering on and knowledge of industry participants,

– vulnerabilities in the licensing and registration of industry participants,

– and the ability of the racing organization or jurisdiction to punish misconduct by industry participants.”

The role of HISA can and should go farther than its more commonly understood functions which have dominated early dialogue around it – namely its racetrack safety and anti-doping and medication control programs.

The legislation which established HISA empowers much more, declaring that HISA shall “exercise independent and exclusive national authority over the safety, welfare and integrity of covered horses, covered persons, and covered horseraces.” The definition of covered horseraces includes those with interstate wagering and ADW account betting.

TIF makes several other recommendations in the series related to adopting modern, transparent best practices, many of which are in place in other racing jurisdictions and sports. Significant upgrades are possible and, fortunately, the proverbial wheel does not require reinvention.

The opportunity for significant reform is real, lifting the standards of North American racing like never previously considered and importantly, rebuilding confidence in racing's voluntary participants – horseplayers and horse owners.

“TIF's advocacy has focused on improving the business for horseplayers and horse owners as their participation in racing fuels everything,” said Craig Bernick, President and Chief Executive Officer of Glen Hill Farm and founder of TIF. “We need confidence in both groups to sustain the industry, and as the various installments of the series will reveal, it is frightening just how far behind we are in protecting customers.

“Industry consolidation of track operators, technology companies and other service providers has not improved the sport,” Bernick added. “As we move forward over the next two decades, racing needs to compete for customers. Meaningful integrity controls and better pricing are needed to meet the expectations of modern bettors. Right now, we are falling woefully short and present an increasingly uncompetitive wagering offering.”

TIF's Board of Directors established the Wagering & Integrity Issues Steering Committee in July 2020, which was instrumental in the development of this series.

Patrick Cummings, TIF's Executive Director, said: “We are incredibly appreciative of the dozens of current and former racing and gaming industry executives as well as regulators from North America and abroad who provided so much insight, both on the record and for background in this series.”

“This project pulled together many pieces that have not been connected previously, and I believe readers will walk away with a much greater understanding of what has happened for the last 20 years, the extent of the threats facing the business and the tremendous opportunity to bring about changes through HISA. We look forward to sharing the various installments in the coming weeks.”

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