Archives for December 2009



My Dozen Wishes For Racing in 2010

A huge turnaround in pari-mutuel handle.
A revitalization of the bloodstock auction business.
A safe 2010 for all jockeys and comfort to injured jockeys.
A safe 2010 for all racehorses and especially a secure retirement to those who are leaving the racetrack.
A resolution to the problems plaguing the New York Racing Association.
A beginning of the return to greatness that was once California racing.
A solution to the issues destroying Maryland racing.
A change of heart for Kentucky legislators who are killing the Commonwealth’s racing and breeding industries.
A giant step forward in creating uniform medication standards across state lines.
A radically revamped Breeders’ Cup that attracts a much larger television audience.
A Triple Crown champion and a box office bonanza for the Secretariat movie.
A blessed 2010 to all of you and your families.


On a recent Sunday evening I set my DVR to record an upcoming TVG interview with Hall of Fame trainer D. Wayne Lukas. Shortly thereafter, while I was channel surfing I coincidentally came across a segment on cable television that was showing a horrible racetrack accident involving Lafitt Pincay Jr. Pincay was also interviewed about the incident.

These programs triggered one of those ridiculous and inexplicable dreams that all of us occasionally have. I dreamt that I was about to ride the Lukas-trained Charismatic in the Kentucky Derby. The colt was highly agitated and rank in the paddock, all lathered up, and I was viewing the situation with a great deal of trepidation (I am certain that Lukas was, as well). This lifelike illusion provoked me to write this article.

Riding racehorses is not only a dangerous occupation, with paralysis as one possible outcome and death another, but most jockeys make a very modest living and many barely scratch out a subsistence. Even the highest paid elite jockeys are subject to the peril that money cannot compensate for. To illustrate, during Pincay’s esteemed riding career, he suffered a broken neck, 10 broken ribs, two punctured lungs, two spinal fractures, 11 breaks of his collarbone, and two broken thumbs, plus various sprains. Imagine the time he has spent in rehabilitation.

Jockeys’ legal status as independent contractors means that they, rather than the owners they ride for, must try to find health care and disability insurance. This is a complex subject and, in the view of some in the racing industry, is a moral hazard for horse owners and racetracks.

Unless one has actually been on the back of a horse in full flight in a race (dreams don’t count), it is no doubt difficult to empathize with what it is like to have a spill. Jockeys are as brave and courageous as athletes get. Perhaps only automobile racing carries the same magnitude of danger.

The attitude that “injuries are just part of the game,” is too dismissive for me. Racing, football, boxing, and rugby cannot be played risk free, but all of these sports can be made safer. The National Football League, for instance, is doing a lot of research on helmets and the League is also tightening its rules on when players with concussions can return to play. The objective of a risk-free sport is unattainable, but should be pursued as though it is.

I do not claim to be an expert in the causes of horse-racing accidents, but I am a researcher and would pose several questions that need to be looked at scientifically. For example, among others:

  • What role does permissive medication rules in the United States have in contributing to accidents? In order to get at this answer, a comparison could be made between racing in the United States and Europe (track surfaces and other variables would need to be controlled for).
  • Are some track surfaces more dangerous than others?
  • How does the weather affect the findings?
  • What correlation is there between large fields and accidents? I have never believed, for instance, that the Kentucky Derby should have 20 entries. A cursory look at tapes of some of the Derbies past, especially as the horses enter the first turn, indicates that this stampede is a recipe for a pile-up.

The Jockey Club Equine Injury Database is a major step forward in being able to address these kinds of queries. According to the Blood-Horse, this repository “has compiled statistics over a 12-month period for 84% of all flat racing in North America, but now comes the process of analyzing the data in an attempt to quantify the results.”

As 2009 enters its final days and 2010 quickly approaches, those of us who appreciate and enjoy the sport and diversion of Thoroughbred horse racing can thank the women and men who risk life and limb by riding. Jockeys are small in physical stature but their bodies are resilient and their psyches are strong.

The Permanently Disabled Jockeys Fund is a registered 501 C 3 public charity.

Copyright © 2009 Horse Racing Business


Whether one is investing in common stocks, commodities, real estate, or Thoroughbred bloodstock, a healthy dose of skepticism and due diligence now can save a mountain of regret later. Sadly, when I was looking for examples of fraud for this article, I readily found a surplus and the people who were defrauded included both sophisticated and neophyte investors.

Ponzi schemes recently have received the most notoriety; in fact, these cases pop up with an alarming regularity. This genre of fraud is named for Charles Ponzi, who perfected the eponymous criminal activity in the 1920s of using funds from the most recent investors to provide attractive returns to existing investors. 

The November 23, 2009, issue of Fortune magazine carried a feature (“A Scandal Rocks the Polo Set”) that describes how some members of the ultra-rich in the Unionville, Pennsylvania, horse country near Philadelphia were cheated out of millions of dollars by an alleged financial guru by the name of Tony Young. One of the victims was racehorse owner/breeder George Strawbridge Jr., who is a Campbell soup heir and a member of the company’s board of directors. Others cheated included the heirs to the Milliken textile, Merck pharmaceuticals, and Dow-Jones fortunes.

This case is typical, as all of the scams tend to have the same elements. Consider some past and current examples of how wealthy and frequently financially knowledgeable individuals have been bilked in Ponzi scams.

William Simon had been Secretary of the Treasury and Secretary of Labor and had later grown wealthy pioneering the concept of leveraged buyouts. In 1995, he was victimized by John Bennett, founder of New Era Philanthropy, in a Ponzi scheme that also took advantage of such financial titans as Julian Robertson of Tiger Management, John Templeton of mutual fund fame, and many other seasoned and savvy business people.

Frank Gruttadauria was a Lehman Brothers stock broker in Cleveland, Ohio, with the reputation of being a genius at enriching his clients’ portfolios. He was a personality-plus hometown boy, who had attended a prestigious private high school, where he was captain of the football team and senior class president. He was a member of Cleveland’s most exclusive country club and hung out with movers and shakers. He was also a con man, who bilked some of Cleveland’s most prominent citizens, as well as rich out-of-towners.

In Ireland, Breifne O’Brien followed the Ponzi path until a year ago when the sand castle fell. O’Brien lured the wealthy by convincing them through phony returns that he was an extraordinary enhancer of monetary fortunes. When the Irish economy faltered, O’Brien could not find enough new contributors to meet the demands of existing investors to withdraw funds.

Allen Stanford was supposedly a Texan success story of immense proportions, who built the Stanford Financial Group into a blockbuster. Stanford indicated that he was related to the California Stanford family, as in Stanford University, and he even got himself knighted in Antigua. Sir Allen endowed charities and universities, sponsored sporting events, and hobnobbed with professional athletes. He spoke at the University of Houston about ethics and leadership. The feds have accused him of a Ponzi-like fraud.

Bernard Madoff is the all-time king of Ponzi-scheme perpetrators. Beginning in either the 1980s or the 1990s until he got caught in December 2008, he stole billions from individuals and organizations, many of whom should have known better. Although Madoff’s purported returns to clients were too good to be true, people kept giving him money. His reputation among people with sterling reputations was impeccable and he had been the Chairman of the Board of Directors of the National Association of Securities Dealers.

How does one mitigate the chances of being duped in a Ponzi fraud? Nothing is foolproof, but an understanding of the anatomy of a Ponzi scheme is the place to start. In most cases, at least two of three characteristics prevail. First, the Ponzi perpetrator often lies about his/her credentials and life experiences. Second, the perpetrator ingratiates himself with a respected person (or people), who in turn vouches for the perp. Third, the scam artist claims a return on his/her investing that consistently is much above-average.

In the scam of George Strawbridge Jr. and other Unionville patricians, the perpetrator, Tony Young, had been vouched for by Dixon Stroud Jr., a trusted person from old money with deep roots in Unionville society. Apparently no one bothered to check Young’s phony claims that he had been raised on an antebellum Georgia plantation by a nanny named Mae-Mae and that he held an earned MBA with a concentration in finance (he never even graduated from college). Young and his attractive wife looked the part and reportedly had plenty of charisma. Moreover, the dependable Stroud said that Young was “a financial genius” and “as smart as a whip.” Stroud himself had been fooled by Young.

In the New Era Philanthropy case, it would have been very comforting and most persuasive to learn that William Simon, Julian Robertson, and John Templeton were donors. Bernard Madoff and Frank Gruttadauria had legitimate credentials but appealed to people’s greed by depicting suspiciously high positive returns even when most other investment advisors were being swamped by conditions in the stock market and the economy. Investor greed undoubtedly allowed Breifne O’Brien and Allen Stanford to perpetuate their house of cards.

Any investor should trust but verify. If someone says he or she has an academic credential or a certain background, go to the trouble to make sure. (Perhaps 40% or more of resumes that people submit for job openings have exaggerations or fabrications.) Don’t let a con man’s winning personality cause you to forgo or gloss over fact checking. If other people you respect for their acumen are investing with an individual, that is a promising sign, but you need to do your own due diligence. Finally, if returns seem too good to be true—if an individual always beats the other investing pros—exercise extreme caution.

Not every fraud, of course, is a Ponzi scheme. In the bloodstock world, there are other ways that a relatively small number of unscrupulous individuals have stolen money from their clients or otherwise have abdicated their fiduciary obligation. Most clients new to racing know little about the industry and the intricacies of picking out and buying horses at auction. Therefore, they are particularly vulnerable.

The Thoroughbred Breeders and Owners Association has worked to curb shady practices through its Sales Integrity Program. One bloodstock agent has already been banned from participation at the major auction sales.

Everyone is susceptible to being taken. Stephen Greenspan is the author of the book Annals 0f Gullibility:  Why We Get Duped and How to Avoid It. Ironically, he lost 30% of his life savings in the Madoff Ponzi scheme.

Caveat Emptor.

Copyright © 2009 Horse Racing Business