Archives for June 2013

The Forbes 400 is an annual ranking of the richest Americans, and typically includes a few racehorse owners. The people on the list got there from one of two means, either they inherited their vast wealth (and expanded it) or they made it in business.

The owners of the winners of the 2013 Triple Crown races follow the identical pattern.

Orb, the Kentucky Derby victor, was bred and owned by Stuart Janney III and Ogden Mills Phipps. These fashionably educated first cousins descend from old and extreme wealth—Henry Phipps, Ogden L. Mills, and the Livingston family from early America, and their roots go way back in Thoroughbred racing at the highest level.

Brad Kelley, owner of Preakness winner Oxbow , is the only winning connection in the 2013 Triple Crown who is wealthy enough ($1.9 billion) to be included on the Forbes 400 at number 250. Forbes describes Mr. Kelley as a self-made man with a high-school diploma (who dropped out of college four times and never earned a degree)…and writes:

“Brad Kelley made his fortune from discounted cigarette brands like USA Gold, Bull Durham and Malibu. He sold the business, Commonwealth Brands, for $1 billion in 2001 to conglomerate Houchens Industries. Now a rancher; he is one of the top five landowners in the U.S. with 1.7 million acres in Texas, Florida and New Mexico. He is breeds and races thoroughbred horses. He purchased the historic Calumet Farm in Lexington, Kentucky in May 2012…”

Cothran Campbell, managing partner of the Belmont-winning Palace Malice, dropped out of two colleges, but founded and later sold a premier Atlanta, Georgia, advertising agency and pioneered the concept of racing partnerships.

Mr. Kelley and Mr. Campbell took the path followed by such famous college-dropouts as Bill Gates of Microsoft, Steve Jobs of Apple, and Mark Zuckerberg of Facebook. Certainly, all of them are highly intelligent people, who could easily have earned a college degree, but had entrepreneurial callings that did not require it.

Mr. Campbell’s popularization of racing partnerships has been a boon to the sport and Mr. Kelley’s purchase of Calumet Farm saved an historic site from development.

Mr. Janney and Mr. Phipps have used part of their great wealth to not only own fine Thoroughbred bloodstock but also to give back so much to improve the sport of racing.

Horse racing is fortunate to have such a Forbes-like mixture of owners.

Copyright © 2013 Horse Racing Business

Conducting background checks on prospective employees is usually perfunctory. Racetracks must have trustworthy pari-mutuel clerks, horse transporters require drug-free drivers and pilots, and racing stables and farms need to make sure the people they hire have the appropriate character and temperament to work with animals.

However, recent decisions by the U. S. Equal Employment Opportunity Commission, coupled with its new and voluminous regulatory guidance, subject employers to increased legal risks whenever they use background checks to screen job seekers. Even when a business finds that an applicant has a felony conviction and turns down the individual for that reason, it may be vulnerable to an EEOC challenge. In one case, the EEOC is demanding that a company pay compensation to job aspirants who concealed their criminal records.

The EEOC’s reasoning is based on the concept of disparate impact, meaning that background checks discriminate against minorities because their criminal conviction and incarceration rates are considerably higher than for non-minorities.

EEOC actions indicate that a business in compliance with state employment law may still run afoul of federal law. For instance, a firm that provides security guards in Pennsylvania was targeted by the EEOC for excluding a twice-convicted felon, in spite of the fact that Pennsylvania law prohibits felons from working as security guards.

A racing-related business should be reasonably certain that it can defend using certain types of negative information in a job candidate’s past as an automatic disqualifier in hiring. The main concern is whether a conviction in a court of law is relevant to job performance. In making this determination, a company also needs to consider the applicant’s conduct since the incident. If the individual has no repeat occurrences over a significant period of time, then the employer must be especially circumspect about using a previous record as a basis for rejection.

Copyright ©2013 The Blood-Horse. Used with permission.

As horse racing fans in the United States know, Pimlico in Baltimore, Maryland, is home to the Preakness Stakes, the second jewel of the American Triple Crown. While the race itself attracts Grade 1 caliber entrants, Pimlico is no place to hold one of the premier races on the American calendar. Whereas the Preakness is a coveted jewel, the retail facility offering it is about as far from a Tiffany & Co. as one can get.

An excerpt from the Pimlico website reads as follows:

“Historic Pimlico Race Course, home of the Preakness Stakes and second oldest racetrack in the nation behind Saratoga, opened its doors on October 25, 1870. Pimlico has hosted many racing icons for over a century; legendary horses such as Man o’ War, Sir Barton, Seabiscuit, War Admiral, Citation, Secretariat and Cigar have thundered down her stretch in thrilling and memorable competition… On its journey to becoming a true national treasure, Pimlico has earned its patina of age.”

Compare this statement with three of the typical comments on a website that lets people rate various entertainment venues:

1. “Pimlico’s heyday was two generations ago, at least. It shows its age, and is… gloomy and empty for much of the year…”

2. “… Located in a really bad part of town. I’ve been there twice over the years and found it depressing both times.”

3. “If you enjoy watching horse races while wondering which direction the bullets are going to come from, this place is for you…. I have never seen such a disgusting array of impoverished, dangerous-looking drug-addicted miscreants. I have been all over Baltimore and I’ve never been in such fear of being robbed/murdered as when I was at Pimlico. If you value your life, stay far, far away.”

“Pimilco has earned its patina of age,” all right, but not in a favorable sense.

Following the 2013 Preakness, the Baltimore Business Journal carried an article indicating that the Maryland Jockey Club, which owns Pimlico, plans to address the dilapidated state of the racetrack:

“Maryland Jockey Club President Tom Chuckas said plans for a $100 million renovation of the 143-year-old Pimlico Race Course will be unveiled in ‘mid to late summer’ [2013] and may include tearing down the barns behind the track’s grand stand. ‘Our real charge is that we know something has to be done,’ Chuckas said… during a post-Preakness Stakes news conference. ‘The amenities have to be improved, the experience, the actual physical structure has to be improved.’”

My main question is why the Maryland Jockey Club would want to renovate a racetrack located in an area of Baltimore that is not conducive to attracting customers? The Preakness will always draw a crowd, but what about the remainder of the days on the racing calendar?

Why throw $100 million into a plant that is so poorly located? Seems like that would be doubling down on a bad bet.

The guess here is that a scientifically conducted market research study, among current and potential customers, would not come close to supporting the concept of leaving Pimlico in its present location, even if the venerable racetrack is updated.

Copyright © 2013 Horse Racing Business