California’s conflict of interest morass: This is a way forward

Bewildered. Befuddled. Baffled. Bemused.

Yep. All those words cover the reaction to the news of the apparent conflict-of-interest issue raised by the ownership of a horse involving the vice chairperson of the California Horse Racing Board (CHRB).

The Los Angeles Times broke the news on August 5, 2019, with an article called, “Joint stake in horse by state regulator and Santa Anita executive raises questions.” The piece begins as follows:

The buzz started Friday when Del Mar racing secretary David Jerkens posted the Wednesday overnight list, a look at what horses are entered in races for that day.

The No. 2 horse in the seventh and final race was named Fravel, a 3-year-old colt for trainer Richard Mandella and ridden by Flavien Prat. The ownership: “M. Auerbach LLC, Timothy Ritvo or Stacie L. Clark.”

The fact that state regulator Madeline Auerbach and Ritvo, who runs Santa Anita, were business partners in the ownership of a horse is seemingly the most basic of conflicts of interest. Auerbach is vice chair of the California Horse Racing Board (CHRB) , the agency that regulates racetracks in the state, and this year likely will be chairman.

Ritvo is the chief operating officer of The Stronach Group (TSG) , which owns Santa Anita, which is regulated by the CHRB. And the apparent conflicts of interest didn’t end there. Clark is the wife of Mike Rogers, the president of TSG’s racing division and a member of the Breeders’ Cup board.

I won’t belabor the plain-as-the-nose-on-your-face appearance of conflict of this business arrangement. Other than to say that it allows anyone to view decisions the CHRB has made affecting The Stronach Group (TSG) through a tainted prism.

Evidently, the CHRB view this matter from a different perspective.

The same Los Angeles Times story stated:

“Commissioner Auerbach would not have to recuse herself from matters involving Santa Anita because she does not have an interest in the racetrack,” CHRB spokesman Mike Marten said. “Ownership of a horse and any purses winnings do not create a financial conflict of interest with the track.”

What to do about this?

Questions abound. And it is up to the newly elected governor, Gavin Newsom, to get to bottom of this. His administration needs to ask some questions and give us the answers. I’ve outlined just a few lines of inquiry for him to begin.

  1. Was the amount paid for this horse fair and reasonable given its value?
  2. Was the money paid by the partner from personal funds or did TSG group pay, directly or indirectly, for the horse?
  3. Is this the only horse or are there others?

In addition to these questions, an inquiry should be made of every CHRB member to ascertain if any similar such conflicts exist. A full accounting should be made to the public.

One step further

Why are horse breeders and owners serving as regulators? There is an inherent conflict in these situations. Whether some states, such as Kentucky, do this or not shouldn’t matter. If California is supposedly going to be the leader in reforming the sport, why not be a leader on reforming its own regulatory structure, too?

Board members who are actively involved in the sport in California should be given an option. Divest or step aside.

This would be a bitter pill for other states, again, such as Kentucky, to swallow. Such conflicts have been embedded into the very fabric of their regulatory scheme for generations.

Horseracing Integrity Act

Doing away with this type of conflict is just another reason to support federal legislation – the Horseracing Integrity Act (HIA).

The legislation is clear regarding the board that would oversee horse racing’s anti-doping program. It reads as follows:

To avoid any conflict of interest, no member of the Board shall be—

(1) an individual who has a financial interest in or provides goods or services to covered horses;

(2) an official or officer of any equine industry representative or serve in any governance or policymaking capacity for an equine industry representative; or

(3) an employee or have a business or commercial relationship with any of the individuals or organizations described in paragraph (1) or (2).

That’s how a properly regulated industry should operate.

The ball is in the court of Governor Newsom. He holds the reins of power and persuasion through his appointments, criteria for active members, regulation recommendations, and initiation of legislation.

Governor, please see that this never happens again.

Comments (3) -

  • Joe this is common practice in pa. First we have executive director of the hbpa todd moesteller who runs under commonwealth new era racing he had horses with todd beattie and ran horses at the same track hes directly tied too. The next is salvatore debunda who runs under dun roamin farms hes had horses race at parx with richard vega. This is nothing but a direct conflict of interest and im sure the story runs much deeper then that giving pas track record of blatent corruption. Do you feel the fbi did a good job in pa? Because i feel they fell well short of many of the issues that have come about.
    • Billy - I think the FBI did a great job. I do, however, agree with you. There is probably a lot more shenanigans going on that hasn't seen the light of day.
  • Joe -  Well it appears to be at a minimum a clear example of “what not to do” if a leader/regulator of the sport wants to demonstrate integrity and ethical behavior for the public.  By entering these horses in a race with that ownership team and then trying to justify it by pointing the finger at conflicts of interest elsewhere  it could lead people to believe that Ms. Auerbach is arrogant, entitled and wants to maintain the status quo.

    I like the idea that the board has some experienced horse people on it, and I think divestment might be the answer.  However I also fear that very few horse people will want to sit on the board if it means they can no longer participate in the sport.  I’d just like to see a balance of board members that cover multiple interest with the common goal of improving and promoting the sport.
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