Controversy erupts over proposed horse racing changes

Bo Derek probably didn’t get upstaged much during her heyday in the 1970s and ‘80s, when she was one of the world’s most recognizable sex symbols. But when her name goes before the Senate Rules Committee Wednesday morning, she’ll likely be overshadowed by another appointee to the California Horse Racing Board.

That appointee would be the board chairman, Keith Brackpool. Neither actually has to show up for the hearing, but Brackpool now finds himself in the middle of a bitter fight over AB 2414, a bill authored by Assembly Speaker John Perez, D-Los Angeles, that would make huge changes in horse race betting in the state — including authorizing a kind of betting that reminds some of the complex financial instruments that nearly brought down the economy two years ago.

Brackpool is a former appointee in the Gray Davis administration, and a major player in past water battles in the state via his company, Cadiz Inc. But it’s his lead role in crafting horse racing legislation that has some privately wondering if he could face a confirmation battle. Meanwhile, opponents of the bill have launched a late-session ad buy in an attempt to stop it.

According to Brackpool’s financial disclosure forms filed with the Fair Political Practices Commission, Brackpool owns several horses through a company called Brackpool Racing LLC, but the board’s executive director rejected suggestions of potential conflicts between Brackpool’s dealings and his role on the Horse Racing Board. A Democrat, Brackpool was appointed to the Board by Gov. Arnold Schwarzenegger in September. The Board elected him chairman in January.

Brackpool has long been associated with water issues.

His company, Cadiz, has been a player in the Southern California water market. For years, it tried to interest the mammoth Metropolitan Water District (MWD) in a major water storage plan in the Mojave Desert, but MWD rejected that idea in 2002. Davis appointed him to the Governor’s Commission on Building for the 21^st Century in 1999. In 2006, the Los Angeles Times reported that Susan Kennedy, Schwarzenegger’s chief of staff and Davis former deputy chief, was paid $120,000 in consulting fees by Cadiz the year before, when she was also serving on the state Public Utilities Commission.

Perez, D-Los Angeles, authored AB 2414. The bill has been focused on horse racing since he introduced it in February. It was heavily amended on Aug. 20, just days from the end of the legislative session and past the date where the revisions could get major committee review.

One key component added to the bill is exchange betting. This is a type of betting that allows players to essentially bet against a horse, or bet that a horse will finish in a particular spot in a race, or take innumerable other possible positions. Unlike traditional betting, where the track provides odds on particular horses, the house merely facilitates complex bets between willing parties. People can stake out positions and even sell them to others bettors prior to a race.

Brackpool could not be reached by press time. But the executive director of the Board, Kirk Breed, said that the exchange-betting concepts within the bill had been presented during at least three board meetings over the last several months, including the most recent meeting on August 19.

“All of these items have been bought up,” Breed said. “All of the stakeholders were involved.”

That includes Magna Entertainment, he said, now the key opponent of the bill. The company owns the popular Santa Anita and Golden Gate Fields horse tracks. It has taken out newspaper ads calling the bill, “A loser you can bet on.” It calls the bill “a last-minute backroom deal,” and is accompanied by a photo showing the backsides of several horses and jockeys during a race. Attempts to reach Magna representatives on Tuesday were unsuccessful.

“They were involved in all those discussions all throughout the process,” said Stephen Burn, the chief American-based executive of Betfair, a British company that is a key supporter of the bill.

Not so, said Robert Hartman, general manager of Golden Gate Fields, who countered that there was never the idea raised of putting exchange wagering into the bill.

“I was at the meeting August 19 meeting,” Hartman said. “There was never a conversation regarding exchange wagering. In the past there was some discussion on the topic. But there has never been any lengthy exchange regarding to specifics of exchange wagering.”

He said his company is wary of the practice, because in the two countries where it has been tried, the Great Britain and Australia, jobs have been lost in the track industry. He added that Magna has been happy with Brackpool’s performance as chairman, and he did buy the idea that Brackpool led the charge to add exchange wagering into the bill. In fact, Brackpool had said at meetings that they should not add major new provisions to AB 2414.

“This was a clean bill until a week ago,” Hartman said. “I’m not exactly sure what ha
ppened, but we feel blindsided.”

Betfair bought TVG, an American company which provides gaming technology, in January 2009. It brought Burn over from the British operation in February to run TVG.

The company has been heavily involved in the British version of exchange betting. Everyone seems to agree that the practice increased horse-race betting in Great Britain, and brought in younger bettors — a key problem in horse racing, which is suffering from an aging fan base.

In fact, according to a Republican caucus analysis opposing the bill, between 1998, when exchange wagering was first allowed, and 2008, “purse revenues” went up 54 percent. Track attendance went up 10 percent, the number of horses in competition increased 19 percent, and the number of races jumped 26 percent.

But Republicans have a number of other problems with the bill, most notably that it “seeks to implement a major policy initiative with only one week left in the legislative session….This bill is the antithesis of transparency and open government.”

They also object to portions of that require “exchange wager licensees to enter into agreements with labor unions to provide collective bargaining.” The analysis goes on to say the bill would create 15 new public sector union jobs, which it calls a “buy-off” to “big labor.”

There are other, generally less controversial portions of the bill. The bill aims to bring the prestigious Breeders’ Cup Championships to California more often. This two-day event changes venues each year. The 2009 races were held in California — ironically, at Magna’s Santa Anita Track. It also has provisions that would increase the payout to winning bettors, something seen as a key incentive to bringing more people to the track.

“I think people recognize that there is a bit of a crisis in the California horse racing industry,” Betfair’s Burn said. “We need to find a way to increase purse size.”