Cheating, The Fix is in
Following is the first in a series of articles on cheating and race fixing in Thoroughbred Horse Racing, the Sport of Kings. Jonathan Stettin will expound on the various ways people cheat and attempt to fix the outcome of horse races. It may sound far fetched, but history says that it isn’t and we have all heard the saying where there is a will there is a way. When money is involved people will try almost anything. Jonathan has been around the sport a long time, he has seen a lot, and we are sure you’ll be surprised by some of what you read in the series. Unfortunately this is not a subject that could be addressed adequately enough for us in one article. That would have taken a book.
Cheating in horse racing is as old as the game itself. It is a much more complicated issue than it appears. Although it occurs in horse racing, when you think about it, it really shouldn’t tarnish the sport more than it does any other sport, and various other money on the line endeavors. Let us not think for one minute cheating is restricted to horse racing and does not permeate its way into other sports and businesses. When money is involved cheating will creep in at some point. It always has, and probably always will.
We’ve seen point shaving scandals in sports. Just a few years ago a basketball referee pled guilty to engaging in activities that would constitute cheating by most definitions. Games have been thrown, balls dropped, where there is a will there is a way and money creates will.
Horse Racing is an easy target. There is a negative stigma attached to the sport, and to be frank, the industry has largely contributed to that. The stock market is not viewed nearly as skeptical or with a type of stigma even close to The Sport of Kings but they have had their insider trading scandals, junk bond scandals, and of course the good old pump and dump scandals to rival the game most of us love, horse racing.
Racing is a big money game, and as also an athletic competition, it is inherently super competitive. It involves owners, breeders, trainers, jockeys, bettors, amongst others, and of course our equine athletes, the horses. That is a lot of groups of people keeping things moving and trying to win and have an edge. Having an edge can have a bad sound to it, but it really shouldn’t as all edges are not created equal and many are not nefarious or even unethical at all.
Many people who don’t understand the game but think they do point to high trainer winning percentages as “evidence” of cheating. Sure, it can be, but it is far from evidence and definitely not a for sure telltale sign. Winning percentages are generally higher today. A 20% winning percentage today is not the same as it was 10 or 20 years ago. The game has changed. There are more legal and therapeutic drugs available. Horses run less and trainers are conscious of win percentages and spot horses accordingly. Higher claiming purses allow for running horses at lower levels than they may be worth as you can win a big pot and if you get claimed you still wind up fine. The high winning percentage trainer is probably not the cheater who will burn you the most. Much of the time those horses are short prices and used in many tickets and bets. The cheater who is dangerous to the bettor is the low percentage one who strikes sparingly without anyone even noticing. All cheaters are bad for the sport, and more importantly the horse. There are many ways to cheat, and some have nothing to do with a win percentage.
I should also point out that everyone who is presumed to be a cheater may not be. The betting public thinks for the most part they were proven correct in all their assumptions regarding cheating by the indictments of Jason Servis and Jorge Navarro. They may have been proven correct when it comes to those individuals, and we note the case remains pending, but that doesn’t mean they are correct about every trainer they hang that label on. We will go much deeper into this when we talk about trainers. We are starting with jockeys.
We constantly hear talk of cleaning up the game. How exactly is that done? What is cheating?
If cheating was as simple as the Jason Servis and Jorge Navarro indictments it would be a lot easier to clean up. That is not to imply our industry would or could do it. Unfortunately there are many ways to cheat in horse racing. Unfortunately it is not that simple.
We are going to do a series of articles chronicling all the ways we know about. If we were to include them all in one article, as mentioned in the preview it would actually be a book. If you follow this series, you’ll probably see ways you have not thought of and didn’t know existed. I am pretty sure one will surprise even the most diligent students of the game. That is later down the road. Today we will go back and look at some history.
Before we do that let me say I believe the large majority of riders are honest, hard working, competitive, professional athletes. I believe most want to win with every horse they ride, and take a lot of pride in their results, and also how they look achieving them.
Fixing races or a “fixed race” is the first thing that probably comes to most minds when you mention cheating in horse racing. Interestingly, I’d argue it is probably the rarest form of cheating in our game if you define race fixing as I would: knowing or arranging a pre-determined outcome or order of finish in a race. This would be very hard to do given the unpredictable nature and tendencies of race horses, let alone all the other intangibles.
Not really all that long ago there was a race fixing scandal at of all places Saratoga. The elite meet of the elite meets during the glory days of racing had a race fixing scandal. Who would think world class household name riders would be working together to fix races? If you lived through that, as I did, it makes you look somewhat quizzically at people who say things like these big money riders today would never do that. “Oh really.” In no way am I saying they do, but I am saying it is not even close to far fetched to ask the questions and explore the possibility. If it has happened before it can happen again. We, as students of this great game, should know that better than anyone. We read past performances daily. History repeats.
Even the legendary riders of that era, the 70’s and 80’s who were allegedly involved in the Saratoga race fixing scandal couldn’t actually know the pre-determined outcome of a race. What was allegedly being done was certain riders were paid to hold or pull their horses from finishing in the money, and other parties were boxing in triples and most likely exactas the remaining horses who were trying. Favorites and shorter priced horses were being pulled or held resulting in higher priced horses making up triples and exactas. There were no superfectas, pick 5’s, pick 6’s or pick 4’s back then. While they did not know the precise order of finish, they were able to capitalize on knowing who would and who would not finish in the money. With more wagering options on the menu today, there are more ways to make money today if anyone had that same edge or information.
I have long said, knowing a horse that won’t win is every bit as valuable as knowing one that will. It can be more reliable as well.
Back when all this was supposed to have been happening, racing was a lot more mainstream, and was the number one spectator sport in the country. This was front page news in the papers. Mike Hole was an English born jockey riding in New York back then. It was reported he told trainer John Cotter he was offered a bribe to pull or hold one of Cotter’s horses. Cotter reported it to the NYRA stewards. The matter came up again when the then New York State Racing and Wagering Board conducted hearings into race fixing. What happened as a result of the report to the stewards is a matter of dispute but at the hearings Mike Hole was not available to testify. He had been found dead in his car in Jones Beach parking lot. Suicide was suspected, but many at the time doubted it. Some still do. He had breakfast that morning on the backside at Aqueduct and my friend Ray DeStefano ran into him and they spoke. Nothing seemed unusual or troubling according to Ray. A suicide note was found however, and a rubber hose stuffed with paper was attached to his cars muffler and placed through a hole drilled in the floor of the car. After John Cotter reported the statement he said Mike Hole made to him, Hole publicly denied it and said he had never been offered a bribe. Additional testimony at the State hearings was that Hole was to be interviewed and called it off shortly before he died.
Ultimately 14 races were isolated in 1974 as potentially being “fixed.” The betting patterns spoke, but what did they say?
On June 6th in the 9th race at Belmont $35,000 was wagered boxing all horses except those ridden by Angel Cordero Jr., Jose Amy, Jaime Arellano, and Jacinto Vasquez. The bets returned a profit of $185,000. 185K was a lot more money in 1974 than it is today.
On July 13th in the 5th race at Aqueduct $23,000 was wagered boxing every horse except one which was ridden by Jorge Velasquez. The bets returned a profit of $54,000.
On July 16th in the 7th race at Aqueduct $30,000 was wagered showing a profit of $70,000 boxing all the horses except two, ridden by Jorge Velasquez and Braulio Baeza, whose son is a NYRA steward today.
On July 31st in the 5th race at Saratoga $38,000 was wagered for a profit of $23,000 boxing all horses except two ridden by Jorge Velasquez and Eddie Belmonte.
On August 2nd in the 9th race at Saratoga $35,000 was wagered showing a profit of $137,340 boxing all the horses except the ones ridden by Jose Amy, Eddie Maple, Angel Cordero Jr., and Jaime Arellano.
On August 6th in the 9th race at Saratoga 60,000 was wagered for a profit of $109,056 boxing all the horses except those ridden by Jose Amy, Eddie Belmonte, and Jaime Arellano.
On August 30th in the 7th race at Saratoga $42,500 was wagered and lost boxing all the horses except those ridden by Ben Feliciano, Marco Castenada, and Angel Cordero Jr.
On October 30th in the 7th race at Aqueduct $48,700 was wagered for a profit of $130,000 boxing all the horses except two which were ridden by Braulio Baeza and Angel Cordero Jr.
On November 11th in the 5th race at Aqueduct $34,350 was wagered for a profit of $42,300 boxing everyone except one horse ridden by Jean Cruguet.
On November 30th in the 3rd race at Aqueduct $18,050 was bet for a profit of $27,000 again using all the horses but the one ridden by Jean Cruguet.
On December 6th in the 9th race at Aqueduct $22,000 was bet for a profit of $73,570 noxing all the horses except the ones ridden by Jose Amy, Jorge Velasquez and Jean Cruguet.
On December 9th in the 9th race at Aqueduct $34,894 was wagered for a profit of $129,188 boxing all the horses except the ones ridden by Jean Cruguet, Jose Amy, and Angel Cordero Jr.
On December 12th in the 9th race at Aqueduct $30,000 was wagered for a profit of $40,000 boxing all the horses except those ridden by Jose Amy, Jorge Velasquez, and Jaime Arellano.
On December 31st in the 9th race at Aqueduct $84,000 was bet and lost boxing all the horses except those ridden by Jean Cruguet, Braulio Baeza, Jaime Arellano and Jorge Velasquez.
Assuming the 14 races the investigation focused on were the only ones with these isolated betting patterns, which may or may not be a reasonable conclusion, $535,944 was wagered boxing horses leaving out favorites, showing a profit of $1,020,454. A cool mil was also a lot more in the 70’s than it is today.
Jose Amy admitted to taking bribes to hold or pull horses and was ruled off for life. He was reinstated many years later and rode a winner or two a few years back with the support of Barry Schwartz and others who felt he had paid whatever dues he owed, and it would be tough to argue he didn’t. He was the one who took the fall, and if this was a “scheme” then he obviously wasn’t acting alone. Amy had a budding career at the time and that was essentially forfeited.
Amy also testified against former jockey Con Errico in his federal race fixing trial. He testified Errico paid him and “other” jockeys $5000 or up to $7,500 to pull or hold their horses.
Jacinto Vasquez was suspended a year for allegedly offering a bribe.
Jorge Velasquez testified he had never been offered or accepted a bribe and had never ever even heard the expression to hold or pull a horse. His case ended there.
Other than Jose Amy the riders whose names appeared with regularity in the races with the shall we say odd betting patterns were never charged. A reasonable question after reading all the court testimony would be why. If Amy was telling the truth in his plea, and Errico’s conviction was just, it seems an odd place for the case to end.
What went wrong on August 30th was likely Marco Castenada finishing in the money. On December 31st I guess we’ll never know. Below is the summary of appeal of Errico’s conviction from the court files.
UNITED STATES of America, Appellee,
v.
Con ERRICO, Appellant.
No. 229, Docket 80-1255.
United States Court of Appeals,
Second Circuit.
Argued Sept. 29, 1980.
Decided Dec. 1, 1980.
Con Errico appeals from his conviction after a jury trial in the Eastern District of New York, Chief Judge Weinstein presiding, on one count of violating the Racketeer Influenced and Corrupt Organization (RICO) statute, 18 U.S.C. § 1962(c) (1976).1 Errico argues that the government introduced insufficient evidence to establish a RICO enterprise and that we should overturn United States v. Altese, 542 F.2d 104 (2d Cir. 1976) (per curiam), cert. denied, 429 U.S. 1039, 97 S.Ct. 736, 50 L.Ed.2d 750 (1977), which interprets RICO to include the activities of both legitimate and illegitimate enterprise. We reject these arguments and affirm Errico’s conviction.
I.2
The New York Racing Association, a private company operating three thoroughbred racetracks in New York, began during the 1970’s to offer multiple-horse wagers on certain races. In an exacta race, a winning bettor must pick both the winner and the second-place horse. In a trifecta, the winning bettor must pick the first three horses in exact order. Although a bettor’s chances of winning in any race are increased if the bettor knows that certain horses will not place, the higher stakes in these combination wagers make race-fixing particularly profitable, since bets on all combinations of other horses will cost far less than the payoff on the winning combination.3
In 1973, track officials became aware of unusual betting patterns through examinations of their computer records, alerting them that a bribing-and-betting scheme may have been at work. Those computer records displayed a series of large bets on exacta and trifecta races that consistently excluded some horses but covered every possible combination of the others. The ensuing investigation by racetrack officials and the FBI revealed that Errico, a 58-year-old former jockey, was the linchpin of an organization of bribed jockeys and informed bettors who profited by placing high-stakes, combination wagers on fixed races. The government’s evidence against Errico came primarily from three sources: testimony of the jockeys to whom Errico offered bribes, surveillance of Errico’s meetings with the bettors, and racetrack records revealing each day’s big winners.4
Errico first approached Jose Amy, a 26-year-old jockey and the government’s principal witness, in December of 1973 in the jockeys’ locker room of the Aqueduct racetrack. Errico offered to pay Amy to keep his horse out of the money in the trifecta race that day. Amy refused. Errico attempted to bribe Amy again a few days later but met the same refusal. On March 5, 1974, Errico tried a third time more aggressively. He told Amy that the other jockeys had agreed to hold horses and then threatened “Mafia” retribution should Amy refuse him again. A frightened Amy agreed to hold his horse, and Errico gave him $1,500 in cash. Two or three weeks later, Amy held his horse again for another $1,500.5
The month of August, 1974, when the Racing Association held its races at its Saratoga track, was a busy month for Errico’s operation. He bribed Amy on two occasions, August 2 and 6. Eddie Belmonte, a jockey who operated on Errico’s behalf, convinced jockey Ben Feliciano to hold horses for pay; Feliciano received $2,500 for an August 10 race and $5,000 for an August 24 race. Errico did find one jockey that month who could not be bought. Errico offered Michael Venezia $7,500 to hold a horse in a trifecta race, telling him that the “Latin American riders” were making “a good deal of money.” Venezia nevertheless refused.6
Those jockeys who joined Errico’s circle of jockeys, however, made substantial profits possible for his circle of bettors. Internal Revenue Service Form 1099 must be filled in at the track by bettors who win more than $600 on a race, and thus the racetrack’s copies of the forms reveal the identities of the big winners for each race. On August 2, 1974, Harry Kachougian won $91,560 and Salvatore Gannuseio won $45,780 on the trifecta that Errico paid Amy to fix. Track records for that day also reveal-consistent with Errico’s technique of selective betting-that $35,000 had been bet on numerous combinations, all of which had excluded the horses ridden by Amy and other jockeys that Amy had identified as part of Errico’s circle: Angel Cordero, Eddie Maple, and Jorge Velasquez. On the August 6 trifecta race, another race Errico paid Amy to fix, Kachougian won another $109,055 and Harold Hirsch won $13,155. The large bets that day excluded horses ridden by Amy and two other jockeys in league with Errico: Eddie Belmonte and Jamie Arellano. On August 20, 1974, the big bettors in the exacta race, which Errico had paid Feliciano to fix, excluded horses ridden by Feliciano, Cordero, and Marco Castenada, another Errico-corrupted jockey. Castenada, however, fouled Errico’s system that day by finishing in the money; accordingly, there are no records of Errico’s wagering colleagues winning big. However, an agent for the Thoroughbred Racing Protective Bureau, the track security force, observed Kachougian, Richard Perry, and Gaythorn Angell betting that day.7
By November and December of 1974, the races had returned to the Aqueduct track and the FBI had begun a more extensive surveillance of bettors linked with Errico. Amy testified that he received $1,500 from Errico for each of three trifecta races in which he held his horse in those two months: November 22, December 6, and December 9, 1974. The track records reveal that Harold Hirsch collected $77,570 from the December 6 trifecta, and Kachougian collected over $129,000 from the December 9 trifecta. On both days, the major combination bettors excluded horses ridden by Errico-corrupted jockeys.8
The FBI, meanwhile, was observing the other end of Errico’s operation: his relations with his bettors. In late November, 1974, Kachougian, Hirsch, Angell, Charles Garabedian, and David Berger rented rooms 402, 404, 406 and 410 of a Howard Johnson’s Motor Lodge quite close to Aqueduct. On November 22, Errico spent fifteen minutes in that hotel immediately before directing Amy to hold his horse in the ninth race. At the end of that day, Errico met with Angell there for thirty minutes.9
During the next few days, the bettors moved across the street to the Hilton Inn. On November 25, Errico met with Garabedian and Berger in their car in the Hilton parking lot. On December 6, the FBI watched Kachougian spend thirty minutes placing combination bets at Aqueduct and then saw Garabedian, Hirsch, and Berger join him. On December 7, the FBI agents rented rooms at the Hilton across the hall from the bettors; from that close range, they observed Errico entering one of the rooms registered to Kachougian, Garabedian, and Hirsch and then leaving eighteen minutes later. On December 9, Errico met with Angell and another man for several hours in the bar at Howard Johnson’s. Angell and the other man had initially arrived in the company of Berger and Hirsch.10
March 24, 1975 is the final date for which the government offered evidence of Errico’s operations and is a crucial date for purposes of the five-year statute of limitations, 18 U.S.C. § 3282 (1976). Amy testified that, on that day, Errico approached him in the Aqueduct jockeys’ room and then paid him $1,500 for holding his horse in the final race. Most of the track records for that day had been destroyed, but the IRS records reveal a.$19,000 winner who collected those winnings under a fictitious name.11
Errico was indicted for a one-count RICO violation, on March 21, 1980. He moved to dismiss the indictment before trial on the ground that it failed to allege facts sufficient for an enterprise under RICO. Judge Weinstein denied the motion and directed the jury that “enterprise” means “any group of individuals associated in fact, although not a legal entity, a corporation, or partnership … You may find that a group of individuals joined together to fix horse races is an enterprise as defined by this section. That enterprise must continue in an essentially unchanged form during substantially the entire period charged in the indictment…. Essentially unchanged. It doesn’t mean that everybody has to be the same. Essentially, the core of it has to be the same throughout the period.”12
Because of the statute of limitations, the government had to prove that Errico bribed Amy on March 24, 1975, since this was the only overt act alleged within the limitations period. In his defense, Errico presented alibi testimony that he had been in California recuperating from facial cosmetic surgery on March 24; but he did not take the stand himself.13
We hold that the charge accurately states the RICO standard and that the government’s case amply satisfies that standard.
II.14
The RICO statute, 18 U.S.C. 1962(c) (1976), makes it unlawful for “any person employed by or associated with any enterprise engaged in … interstate of foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity.” The term “enterprise” is defined to include “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4) (1976). The defendant does not dispute the jury’s finding that he was engaged in a “pattern of racketeering activity” under the standards of 18 U.S.C. § 1961(5) (1976) and N.Y. Penal Law § 180.40 (McKinney’s 1975). He does, however, challenge the adequacy of the government’s evidence of a RICO enterprise. That challenge takes two forms. First, Errico proposes that this court overturn its holding in United States v. Altese, supra, which interprets RICO to include thoroughly illegitimate, as well as partially legitimate, enterprises. Second, he argues that there was insufficient evidence of a unified enterprise to support a RICO conviction. We reject both of Errico’s arguments.15
First, we see no need in the present context to reevaluate our holding in United States v. Altese, supra.2 The district court in Altese interpreted RICO as a restriction only upon illegal activities of legitimate businesses and thus dismissed a RICO indictment based on the racketeering activity of a large-scale gambling enterprise. This court reversed, holding that “all enterprises that are conducted through a pattern of racketeering activity … fall within the interdiction of the Act.” Id. at 106. At that time, we saw no Congressional intent to restrict RICO to legitimate enterprises. The issue is one for the Supreme Court, since the other circuits3 are divided on the point. As a panel, we are bound by Altese.16
Second, we reject Errico’s claim that his network of jockeys and bettors failed to constitute an enterprise for RICO purposes. The definition of “enterprise” in 18 U.S.C. § 1961(4), supra, includes any “group of individuals associated in fact.” Although we are aware that RICO should not be extended so as to sweep into the federal net all racketeering activities outlawed by state law, see United States v. Huber, 603 F.2d 387, 395-96 (2d Cir. 1979), Errico’s organization here satisfies RICO’s enterprise requirement. A circle of jockeys-including Amy and others-who were joined through Errico with a circle of bettors-including Kachougian, Hirsch, Angell and Berger-regularly attempted to profit and did profit from the illegal fixing of races. The two circles came together and continued to operate with that single, illegal purpose from at least August, 1974 through March 24, 1975. That community of interest and continuing core of personnel provides the “group of individuals associated in fact” that is required for a RICO conviction. See United States v. Wesman, 624 F.2d 1118 (2d Cir. 1980).17
Thus, Errico’s organization was an enterprise that was unlawful under RICO and we affirm his conviction.1
Chief Judge Weinstein sentenced Errico to a ten-year prison term and fined him $25,0002
Errico’s motion to dismiss gives only the vaguest hint that he sought reversal of Altese. However, because this argument affects the applicability of the statute under which he was convicted, we reach the merits of the argument under the doctrine of United States v. D’Amato, 507 F.2d 26 (2d Cir. 1974)
Conclusion:
The court documents paint a decent picture of how involved cheating can be. Things are very different today, and the chance of something with this many participants going on over time is quite slim. That said, who would have thought Jason Servis and Jorge Navarro were communicating via cell phone at the track while there was such a shall we say buzz about them going on, assuming their indictments are accurate?
Again, most riders are honest, hard trying and working athletic competitors. Sadly, the ones who may not be give us a reason to question what we see on the racetrack at times and ask the questions many in the industry simply shrug off as conspiracy theories. In a game of past performances, maybe it is those dismissals that should be shrugged off. As breeders, owners, trainers, jockeys, and bettors we all have a vested interest and skin in the game. That and history gives us every right to ask tough questions and get real answers.
In some jurisdictions if a rider takes a speed horse off the pace without notifying the stewards of those intentions in advance they get called on the carpet. The wagering public is made aware of the planned change in tactics. That is a good practice. It should be employed everywhere they race. We are investing our money, and there should be accountability at every level along with transparency.
A dishonest jockey can find more ways to lose or alter the outcome of a race than one could imagine. Fortunately there are very few of them. Riders can easily take a horse out of their game, leave them too much to do, put them where they are uncomfortable, get positioned behind horses, go too fast, or too slow, and who knows what else to discourage a horse and cause a loss. While we are the first to say we believe in the honest competitive spirit of the large majority of riders, the one bad apple victimizes all who play in the sport, at any level. We know buzzers, or batteries have been used to try and win races. We have even had a rider cut across the infield in the fog to try and win a race. Where there is a will there will be a way. In the end there are many ways to lose, but just one to win. It will be important to remember that as we go forward looking at this whole cheating in horse racing topic.
How do you police something when the rider is the one on the horses back at a high rate of speed, risking life and limb, and subject to making split second decisions? Who besides the rider knows if a horse feels off, or took an awkward step? Basically you can’t and you don’t. We have to give them the benefit of the doubt, and they deserve it. That said, as people with a stake in the game, we have every right to ask tough questions, and get real answers with accountability. Cameras, including helmet cams and high definition shots from multiple angles, along with audio give us more of a glimpse into the exhilarating world of a horse race than ever before. This and more, like the constant monitoring of betting patterns, and key accounts, and interviews made public with riders, trainers, and participants by trained personnel, on a regular basis, and anytime something does not pass the eye or past performance test is a good start.
Every honest participant in the sport is victimized by cheating. No exceptions.
Stay tuned for the next feature in the series. The Juice….
