Audit finds poor regulation of Running Aces payouts to horseowners

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Running Aces Harness Park paid out nearly $440,000 less than it was supposed to in purses to horse owners — – a violation facilitated by an acknowledged lack of regulatory oversight — between 2008 and 2012, according to a legislative auditor’s report released on Tuesday.

Rep. Joe Atkins, who chairs the House Commerce Committee, said in an interview that he’s had concerns for some time about the Minnesota Racing Commission’s oversight of the track. He announced a July 22 hearing of the committee to unravel the fresh audit, which gave shape to uneasiness that lawmakers have felt for years.

“I want to say it’s in the neighborhood of a couple of years that we have been concerned about the Racing Commission and its oversight of the tracks,” Atkins said, “but not having a deep enough knowledge of knowing what the specifics were.”

Legislative Auditor Jim Nobles‘ report depicts a commission asleep at the wheel during that period. But the law is tough to parse out, Nobles acknowledged in a subsequent interview. At issue: Running Aces was paying out purses on races based on a smaller portion of the total pot than the auditor’s office found to be legally required.

The smaller portion — known as the takeout — sits between 17 and 23 percent of the total pot, which is called the handle. That shakes out to $383,774 in underpayments for live races and $53,091 shorted during simulcast races, according to the auditor’s report.

How the purses were calculated had been a point of dispute among Racing Commission members since May 2013, and it ultimately spawned the audit. The law regarding simulcast races is even more difficult to interpret.

“In sum, from 2008 through 2012 the commission failed to exercise adequate oversight of purse contributions during the relevant period which resulted in an undetected statutory underpayment of purse contributions,” according to a written response to the audit from Racing Commission chair Ralph Strangis and Executive Director Thomas DiPasquale.

This isn’t the first time Nobles has reprimanded the commission. In 2005, an auditor’s report noted that “the Racing Commission has not paid sufficient attention to the allocation of revenue to purses” at Canterbury Park. Running Aces wasn’t operational until 2007.

There’s been some shakeup at the Racing Commission since 2012, the end of the audit period, and by all accounts the new direction is welcome. Nobles described the previous leadership’s attitude as: “We’ll stand on the sidelines and kind of make sure the parties taking part in horse racing are in agreement, and if they’re in agreement, we’re happy.”

Unfortunately, both parties to the agreement didn’t stay happy. Minnesota Harness Racing, Inc., which represents those who race horses at Running Aces, eventually backed out of deals that they had with the track for the lower purse calculation structure. In a written response to the audit, an attorney for the organization cited contract language that invalidates the contract if it violates state law.

Robert Farinella, general manager of Running Aces, argued in a written response that the track had actually overpaid Minnesota Harness Racing, Inc. in other ways as a result of the dispute. It’s up to the Racing Commission to decide how much payment it wants to extract from Running Aces.