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 Form, noted 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. A 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
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