Tracks mend fences but jockeys trigger major crisis

Dec 28, 2004 7:08 AM

Just when it appeared that an atmosphere of cooperation was being established within the thoroughbred racing industry, operating tracks were hit with a demand from the Jockeys’ Guild that could change the way racing is conducted in America.

The good news came from Churchill Downs Inc. (CHDN) and Magna Entertainment Corporation (MECA) whose executives announced that they would join in marketing an international simulcast distribution system to provide European outlets with America’s racing product.

Casting a spell on the progress was a "Labor-Management Agreement," drawn up by Dr. Wayne Gertmenian’s Matrix Capital Associates as representatives of the 1,250-member jockeys’ group. The demands, if instituted, would change the way racing has been conducted for more than a century.

Actually, the problems began more than two years ago when internal strife resulted in the termination of the Jockeys’ Guild’ executive director, John Giovanni, who had led the organization for some two decades. Also dumped by the revolting jockeys were high-profile members of the board of directors including jockeys Jerry Bailey and Pat Day.

Leading the revolt was jockey Chris McCarron, who convinced the riders to turn to Gertmenian, an economics professor at Pepperdine College, as their organization’s counselor. The group then approved $400,000 annual contract for Matrix and an annual salary of $160,000 for Gertmenian.

Members and non-members then went their separate ways, not paying a great deal of attention to what was transpiring within the industry. Especially, the jockeys either ignored or were unaware that their $1 million catastrophic insurance policy, paid for through an annual donation of $2.2 million from the members of the Thoroughbred Racing Associations (TRA), whose contract with the jockeys for the media rights to their names and images, expired on Dec. 31, 2002. However, the TRA continued the annual payments.

Exactly what happened to the TRA donations has not been explained.

But, after a racing accident left jockey Gary Birzer paralyzed, it was found that his insurance and that of all other jockeys, except those riding in states where they have been given rights to workmen’s compensation insurance, was limited to $100,000.

Demands by tracks for an audit of the Guild’s finances have been ignored. Instead, the Guild crafted the "Labor-Management Agreement" even though traditionally jockeys insisted that they be treated as "private contractors."

Among the new Guild demands are:

A $2 million payment each month from the TRA for the media rights to participating jockeys;

A medical insurance plan that would provide $1 million coverage for each racing accident, or workmen’s comp protection;

A $500 daily payment to be made by each off-track betting outlet, and

Guaranteed riding fees of at least $50 per mount, educational programs in both English and Spanish for participating riders, and certain medical personnel and equipment to be maintained on track.

When questioned about the demands, Joe Harper, who runs Del Mar racing and is president of the TRA, replied, "They’re not financially reasonable, certainly. Many of them are completely out of our control, and remember, the jockeys are not our employees."

At the recent Racing Symposium sponsored by the University of Arizona, Gertmenian was highly critical of racetrack operators and their treatment of jockeys, saying they were referred to as "pinheads." He said that in three and one-half years he had seen "nothing but disrespect." He promised to change that attitude.

As for McCarron, he retired from riding and accepted a position as general manager of Santa Anita racetrack, a property owned and operated by Magna Entertainment. He since has resigned to take another job with Magna.

GTECH slides

When GTECH Holdings Inc. (GTK) failed to show an improved bottom line, despite having experienced a nearly 24% increase in revenues, investors reacted negatively, dropping the share price 10% last week.

CEO Bruce Turner characterized the third fiscal quarter that ended on Nov. 27 as "solid and productive," but he did not address the reason why the operating results left earnings per share to be equal to the previous year’s $0.35. And investors weren’t pleased to hear that prospects for the current fiscal year would place earnings at about $1.46 to $1.48.

Early in the week, it appeared that the share price of GTK would challenge the $30 level but following the earnings announcement, the price of shares fell to the $26 level.

For the nine-month period, the company said, revenues totaled $919.4 million, an increase of 19.1% over the previous year.

Final riverboat

Looking to capitalize on the Texas market — where slot machines are not legal — Pinnacle Entertainment Inc. (PNK) is preparing to open the 15th and final riverboat casino allowed by Louisiana state law.

The $365 million casino resort is located in Lake Charles, making it attractive to Texas gamblers. And there lies the concern of riverboat operators who fear that Texas may eventually approve slots at horse and dog tracks.

A proposal to permit such slots during a special legislative session failed earlier this year but supporters have once again revived the drive suggesting the revenues could be used to help school financing plans as well as bolstering the sagging track revenues.

Bribery rejection

Federal prosecutors in Rhode Island say they have evidence proving that a pair of indicted Lincoln Greyhound Park officials conspired to bribe a law firm whose principals included the former house speaker.

According to papers filed in the case, speaker John Harwood’s law partner, Daniel McKinnon, rejected the money that allegedly was being paid Lincoln Park to influence action on the track’s plans to increase the number of video lottery machines it operated.

The track is owned by the British company Wembley Plc. Track CEO Dan Bucci and Wembley CEO Nigel Potter have pleaded innocent to the charges that they concocted a scheme to bribe the law firm with up to $4 million.

In the filing, the prosecutors charged that after McKinnon refused to accept the money, Bucci told Wembley that McKinnon had said he could not accept a "multiyear arrangement." He suggested a dozen smaller payments instead.

Neither McKinnon nor Harwood was indicted.

THE INSIDER: MTR Gaming Group (MNTG) announced Monday it has withdrawn its plans to build an $80 million horse track in Erie, Pa. Inc. (UBET) says it has signed an agreement so that it will be able to carry all of the races offered by tracks owned by Magna Entertainment Corporation (MECA) in 2005.

Lakes Entertainment Inc. (LACO) has received the $6 million due from Metroflag for the previously announced sale of the Travelodge property in Las Vegas.

Station Casinos Inc. (STN) announced it has completed its new $1 billion revolving bank facility that refinances its previous $500 million revolving account.

Ameristar Casinos Inc. (ASCA) has completed the acquisition of Mountain High Casino in Black Hawk, Colo.

Pinnacle Entertainment Inc. (PNK) has closed on the public offering of 4.6 million newly issued shares of common stock that were offered at $18.25 per share.

An AP survey in Nebraska indicates the state Senate will not discuss expanded gambling during the current session.

Caesars Entertainment Inc. (CZR) is selling its interest in a South African casino for $145 million.

Magna Entertainment Corp. (MECA) has made it official. It will not renew its lease to operate Multnomah Greyhound Park in Oregon.