NYRA Takeout-Interim Report April 26, 20122In August 2011 (almost a year after the rates had expired) the Daily Racing Form (DRF)publisher and columnist Steve Crist passed along an email from a DRF reader indicatingthe rates had expired and were outside the parameters of the Racing Law. Mr. Haywardemailed Mr. Crist on August 1, 2011 confirming that the reader was correct and requestedthat Mr. Crist keep the information confidential. Mr. Crist agreed.As part of its 2010 financial statement audit, NYRA provided the incorrect exotic takeoutrate to its independent auditor, UHY, LLP. NYRA personnel reported to UHY that therewere no statutory changes in takeouts for 2010. UHY attempted to verify the rates withstatute. However, UHY verified the inappropriate 26% exotic rate by reconciling it to theexpired section of statute containing the 26% exotic rate instead of the effective sectionof statute containing the 15-25% range.
United Tote, NYRA’s totalisator provider, failed to verify takeouts with the Racing Law
and instead relied on information provided by NYRA.The Board requires annual independent aud
its of NYRA’s tote system (provided by
United Tote) which includes the verification of correct takeout rates. Berry, Dunn,McNeil & Parker (BDMP) performed the audit covering the period October 1, 2009
September 30, 2010. BDMP stated that it did not verify the takeout rates with statute.PriceWaterhouseCoopers (PWC) performed the audit for the period January 1, 2011
September 30, 2011. The Board found that PWC attempted to verify the takeout rates andidentified the correct statutory range of 15-25% but failed to note that the exotic rate wasin excess of the limit.NYRA has not properly updated its internal controls on file with the FOB and did notfollow its system of internal controls on file with the FOB as required by law.
NYRA’s former integrity
counsel Getnick & Getnick has written to the Board indicating
that it has documents responsive to the Board’s investigation but cannot provide them
due to attorney-client privilege. NYRA has permitted the Board to review part of whatNYRA asserts is the o
nly document responsive to the Board’s request. NYRA’s current
integrity counsel was to obtain verification that the referenced report is the onlyresponsive document. This remains an open question.
NYRA’s current integrity counsel, Jonathan Sack of
Morvillo, Abramowitz, Grand,Iason, Anello & Bohrer, P.C. has publically reported that he has reviewed the takeout
matter and the evidence suggests that there is “no indication of intentional wrongdoing”,“no one was trying to deceive anyone” and that “it does
not appear that anyone saw the
mistake and perpetuated it.”
In August 2010, the Office of the State Comptroller (OSC) was engaged in “real
time”monitoring of NYRA’s financial condition. OSC found that “NYRA’s cash flow
projections continue to be prepared accurately, based on valid assumptions that have been