Most members of the Maryland Racing Commission are financially invested in the sport they govern, including several who have won cash awards from a state program managed by the panel, a Baltimore Sun investigation has found.
Maryland law for three decades has allowed no more than four members of the nine-seat commission that regulates the industry to “have a financial interest" in horse racing.
But today, six commissioners have a financial stake in the sport. And five of them own or breed racehorses that are eligible to receive cash bonuses from a slots-funded incentive program established to bolster Maryland’s equine industry, The Sun found. All five have participated in decisions determining the size of the awards despite a state ethics opinion that some believe prohibits regulators from voting on matters that could benefit their interests.
And commissioner David Hayden has won nearly $500,000 in bonuses with partners for breeding winning thoroughbred horses in Maryland.
“It’s widely accepted practice that individuals who can benefit from state money shouldn’t be able to vote on the allocation of that money,” said state Del. Nick Mosby, a Baltimore Democrat whose district includes Pimlico Race Course.
The head of a government ethics watchdog group agreed. “These are clear conflicts of interest,” said Joanne Antoine, executive director of Common Cause Maryland. “They should not in any way be benefiting from a process they oversee.”
These critics point to how the commission approved $22.5 million in state subsidies for racetrack renovations since 2013 without ever adopting a required capital improvement plan from Stronach. The track owner ended up spending nearly 90 percent of the subsidies on Laurel while Baltimore’s Pimlico continued to deteriorate.
Critics say the panel essentially rubber-stamped moves by Stronach aimed at closing Pimlico and making a refurbished Laurel Park the new host of the Preakness Stakes. Stronach sought support to do that in the General Assembly this year but was not successful. The company had argued that trying to revive the 149-year-old Pimlico was not realistic and targeting resources at Laurel made economic sense. Recently, however, Stronach and Baltimore officials have been in talks about possibly keeping the Preakness at Pimlico.
State officials identified Bowman, Hayden, Tammy Lafferty and Konrad Wayson as horse owners who are the four commissioners the law permits to have a financial interest in the industry. But commissioner Thomas Winebrener also is a horse owner, and commissioner Clarissa Coughlin is a breeder. Both have won cash awards for their horses from the state program, records show.
Only Chairman Michael Algeo, a retired judge from Montgomery County, and commissioner Ernest Grecco, a retired Maryland labor leader, are independent from the racing industry. One seat on the commission is vacant.
Several industry observers expressed surprise that a majority of the commission is made up of industry insiders, and that none have recused themselves from decisions that determine the size of bonuses routinely awarded to owners and breeders of Maryland-bred horses who win races here. The bonuses, funded mostly by slot machine revenues, are designed to encourage both breeding and racing in Maryland.
Sean Beirne, a former chairman of the Colorado Racing Commission, said he and his colleagues there were "not allowed to have a direct tie to the industry.”
“We had clear rules about conflicts of interest,” said Beirne, who is now director of the University of Louisville’s College of Business Equine Industry Program. “You can’t have any interest.”
Members of the racing commission, who are unpaid volunteers, are appointed by the governor to staggered four-year terms. A spokesman for Republican Gov. Larry Hogan declined to address concerns about the prevalence of racing interests on the commission charged with regulating the industry. Hogan spokesman Michael Ricci referred questions to the Maryland Department of Labor, Licensing and Regulation, which oversees the racing commission.
In an emailed response to questions from The Sun, the department noted that governors of both parties have for years appointed a panel with at least five members who are owners or breeders, and the Maryland Senate has confirmed them.
“At no point during Senate confirmation hearings or legislative audits has this precedent been questioned,” the agency said.
The Association of Racing Commissioners International says in its model rules that commissioners should not own horses — nor accept breeding bonuses.
“A commissioner or Commission employee or racing official shall not be an owner of a horse and shall not accept breeder awards at a race meeting where they have jurisdiction," the model rules state. Maryland officials have said the rules serve as a guide when the commission is considering new regulations.
“It’s basic ethics,” said John Wendt, a professor of ethics and business law at the University of St. Thomas in Minnesota who has written about the horse racing industry. “You would really think and hope that they would follow the model rules.”
In its email, the labor and licensing department said it’s OK for commissioners who own or breed horses to determine the size of breeders bonuses since they get them only if their horses win.
Anne Arundel County Executive Steuart Pittman, a Democrat and longtime Maryland horseman, is among those who argue that the state benefits from commissioners who understand the horse racing business.
The commission’s job is to “grow the industry," Pittman said. “I would not want to see a commission made up of political appointees who do not know the industry they’re working with.”
The laws and practices governing the racing commission are in contrast to those for Maryland’s casino gambling industry. State law prohibits members of the commission that regulates casinos from holding any interest in the industry.
The bonuses some commissioners have received come from an incentive account called the Maryland Bred Race Fund, which the commission oversees. Breeders of Maryland-bred thoroughbreds that finish first, second or third in races held in Maryland receive a slots-funded bonus worth 30% of their purse winnings for the race. Smaller 10% bonuses are provided to owners of stallions whose offspring win, place or show in races.
Established in 1962, the fund was revised in 2013 as revenue from Maryland casinos began to flow. Since 2010, the horse racing industry’s revival has been fostered by the nearly $454 million in gambling funds allotted to the industry to increase purses, fund bonuses and help pay for racetrack renovations.
The bonus account is funded by a percentage of slots revenue allocated to horse racing and by a cut of overall betting at the tracks. It has contained about $7 million in each of the past two years and is credited with increasing the number of horses raised and raced in Maryland, boosting the overall industry.
In 2017, nearly $4.7 million was awarded to breeders whose horses were registered with the Maryland Horse Breeders Association, which the commission pays to administer the process of tracking and awarding the bonuses. The total included the stallion awards.
In addition to the bonuses for breeders, owners of Maryland-bred horses are eligible for 30 percent bonuses, which totaled $1.1 million in 2017, according to the commission’s most recent annual report.
For example, a breeder of a Maryland horse that wins $10,000 at the track would get a $3,000 bonus from the Maryland Bred Race Fund, said commissioner David Hayden, who chairs the committee that advises the full commission on how much to budget for the bonuses.
With the committee’s recommendation, the commission determines the size of the bonuses twice a year by projecting how many races Maryland-bred horses could win. The amounts for breeder and owner awards have ranged from 17% to 30% over the past five years, according to the racing commission’s annual reports.
“What I’m doing is managing the numbers,” Hayden said. “We only have so much money.”
Popizar, a horse bred by Hayden’s Dark Hollow Farm, finished third at Laurel Park on March 2, earning a bonus of $1,155, or 30 percent of the $3,850 paid for a third place finish, records show.
Dark Hollow Farm has won about $471,000 in breeder bonuses with partners over the past five years, according to the records.
When asked if his oversight of the fund could present a conflict, Hayden said, “it’s permitted by the rules.”
Thomas Bowman, reappointed to the commission last year, with partners has won more than $1 million over the past five years from the Maryland Bred Race Fund, according to the breeders association’s reports. This year, Bowman and partners through May had won $94,056 in bonuses for 20 different horses. One of the partners was Adena Springs — the breeding division of The Stronach Group.
When asked if a partnership with an arm of Maryland’s main track owner is permissible, state officials said the racing panel “relies on the advice of the Maryland Ethics Commission concerning what is permissible and what is not.”
In an interview, Bowman said his “co-breedership” arrangement with Adena Springs does not present any issues as it is a separate entity from Stronach’s Maryland Jockey Club, which owns the tracks.
“Adena Springs is a breeding outfit,” he said. “I can’t imagine any conflicts of interests.” He noted he is one of the four racing commission members specifically permitted to have an interest in the industry.
He also said he sees no conflict in voting as a commissioner on the sizes of bonuses he is eligible to receive when his horses win.
“Our decisions [as commissioners] are based on our knowledge and experience,” Bowman said. “The racing commission is carefully constructed so that everyone on it doesn’t have an ownership stake."
A review of the commission’s meeting minutes back to 2015 shows that no commissioners have recused themselves from voting to decide the sizes of bonuses that they could earn.
In its email, the Department of Labor, Licensing and Regulation said a 1990 opinion by the State Ethics Commission allows racing commissioners with an interest in the industry to vote on “broadly related policy decisions" such as “helmet safety, program prices, and racing days, dates and transfers.” The size of owner and breeder bonuses is just such a matter, the department said.
Others say the bonuses are not a broad policy matter, and that the opinion makes clear a commissioner potentially eligible for a bonus shouldn’t be voting on how big the awards should be. They point to language calling for recusal if a decision “would have clear and particular fiscal impact on a group that involves a Commissioner.”
State Sen. Bill Ferguson, a Baltimore Democrat, said he was “genuinely shocked” by the department’s position to “defend even the appearance” of conflicts of interest.
“The whole thing doesn’t pass the smell test,” Ferguson said.
Other horse owners
Commissioner Tammy Lafferty, appointed to the panel in 2013, chairs the Maryland Standardbred Race Fund Advisory Committee. That panel recommends the size of slots-funded bonuses reserved for breeders of harness-racing horses that compete at Ocean Downs and Rosecroft Raceway. The harness-racing bonus fund received $1.3 million in slots revenue in fiscal year 2018, far below the $5.4 million designated that year for thoroughbreds, whose races at Laurel and Pimlico generate the bulk of horse racing revenues.
Lafferty, a prosecutor in Calvert County, reported on her financial disclosure form filed with the state ethics agency that she and her husband are part of a business regulated by the racing commission. The form discloses nothing else, but U.S. Trotting Association records show that four horses Lafferty owns won $43,560 in races at Ocean Downs and Rosecroft this year. Unlike the thoroughbred fund, only breeders, not owners, of horses in harness racing are eligible for the Maryland bonuses.
Lafferty declined to comment for this article.
State officials identified Commissioner Konrad Wayson as a horse owner, but said they did not have any information on any bonuses he may have won through the state program.
While the breeders association publishes the list of breeder winners, the state bonuses for owners are administered by the Maryland Jockey Club — which told The Sun it is “not authorized to provide this type of information.”
Wayson has not reported any potential conflicts of interest on his financial disclosure forms, though he is identified by the state as one of the four commissioners with a financial stake in racing. He did not return calls for comment.
The two commissioners with ties to the industry who are not considered by the state to have financial stakes in racing are Clarissa Coughlin and Thomas Winebrener. Both acknowledged in interviews that they are invested in the sport.
Coughlin reported in her 2018 financial disclosure forms that her husband “trained and owned one horse during 2017″ and that she held an interest in a horse called Just Jack, which she sold in January 2017 prior to becoming a commissioner a couple months later. She said she has not owned a horse since, but is a longtime breeder.
Coughlin and partners last year won about $1,600 in breeder awards overseen by the commission and administered by the Maryland Standardbred Race Fund, according to Cheri Stambaugh, executive director of the fund. The total breeder bonuses paid in 2018 for harness-racing, Stambaugh said, was $116,212, far less than the nearly $4.7 million paid to thoroughbred horses that race at Pimlico and Laurel Park.
Records from the U.S. Trotting Association list Coughlin as the breeder of four horses that have earned a total of about $150,000 in race winnings since 2017. Her horses have scored six wins in 2019 worth $90,572 in purse money, including a third-place finish at Ocean Downs on Aug. 8 for a horse named Kelseys On Cruze.
Winebrener did not win any bonuses from the harness-racing fund in 2018, Stambaugh said.
The U.S. Trotting Association provided data that showed Winebrener has bred nine horses between 2016 and this year that generated total earnings of about $215,000. In an interview with The Sun, he said his company has won bonuses. He said he did not know how much, but the amount would be just enough “to buy you an expensive dinner.” Winebrener said he also owns standardbred horses.
His Fox Den Farm advertises that its Frederick-area breeding operation can result in offspring, or foals, that would be eligible for slots-funded bonuses for Maryland horses.
Fox Den is “committed to the new slots enhanced program," the company’s website states. “Resulting foals will be eligible to be nominated to the Maryland Program enhanced with slot revenue from all MD gaming sites.” The website then provides a link to the Maryland Standardbred Race Fund.
Winebrener was most recently appointed to the commission in 2015 and has reported on his ethics disclosure form that his company is regulated by the panel.
He noted that commissioners are volunteers who give their time to help boost the horse industry and that they trust their appointments adhere to state rules.
Mosby expressed dismay that most commission members are horse owners and breeders when Maryland law makes clear that only a minority of the commission can have financial ties to a state-subsidized industry dominated by one company.
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“The nature of the law is to insure that folks with an interest in the racing industry don’t have a majority on the commission," Mosby said. “It’s one of the most subsidized industries in Maryland. Taxpayers should be comfortable knowing that there is objective governance of those subsidies.”