Indiana Horse Racing Commission Meeting Notes

Date: August 21, 2007

Please note: These are NOT official minutes of the Indiana Horse Racing Commission meeting.  They are notes developed by our representative attending the meeting.

The Indiana Horse Racing Commission met on Tuesday, August 21, 2007, at the Indiana State Library.  Commission Chairman Sarah McNaught called the meeting to order at 10:00 a.m., asking all those in attendance to turn of cell phones and other electronic devices which may disrupt the meeting.

The first matter of business was approval of the minutes from the July 18, 2007, meeting.  These were approved unanimously, as written.  The meeting then progressed to the other items included on the agenda.

The first item on the agenda was a report from Robin Babbitt (IHRC Attorney) on recent court decisions involving litigation against the Indiana Horse Racing Commission.  Babbitt began his comments by stating it is not enjoyable for him to make these types of reports to the commission.  It is never a positive experience to have to report on litigation involving the commission.  He noted, however, the decisions to be shared were in favor of the IHRC.  Babbitt stated that in 1997 there was a Thoroughbred lawsuit against the IHRC.  Since then, all civil rights violation suits have been made by Standardbred individuals.

Babbitt first discussed the Noel Daley and Adam Victor and Sons Stable, LLC case briefly.  Although the ruling was in favor of the IHRC, he noted, “No case is over until it is over.”  With this in mind, there is a period of time when an appeal could be entered.  All those attending the meeting were provided a copy of the 29 page summary of the case, listing and clarifying the issues involved.  Babbitt explained that, within the lawsuit, Joe Gorajec (IHRC Executive Director) and other specific individuals were cited.  In Babbitt’s opinion, it was too bad exact names were included.  Babbitt shared some verbiage from page 15 of the judgment, which explains the exoneration of those named.  Since Commissioner Steve Schaefer was not a member at the time, he was not involved.  Moreover, the findings of the case will be passed along to outgoing member Will Koch.

In order to refresh everyone’s memory, Babbitt explained a few details of the case.  He explained the situation of Daley in New Jersey, with respect to some previous rule violations.  At the time he applied for a license in Indiana, Daley had recently been licensed in a number of other states.  On this basis, Daley felt he should be able to be licensed in Indiana as well.  As noted in the document provided, the judge ruled that is not the case.  Instead, the IHRC has the authority to grant or deny licenses on a case by case basis.

Babbitt said there were also specific claims made against Gorajec, which were also addressed in the judgment.  There were also a number of due process claims made in the lawsuit.  Babbitt stated, “We don’t like to go through these things, but the good news is we now have a judgment.”  In many ways, he views this as a plus for the IHRC because there is now a precedent.  The IHRC does not need to worry about these types of claims in the future.

Babbitt explained the judge’s decision indicated the Victor horses were entered into the racing events with the assumption that Daley would be able to be licensed in Indiana.  Babbitt then read a few excerpts from the judgment.  He read, “The Due Process Clause protects people from having their life, liberty or property taken away without due process of the law; it does not protect corporations that count their chickens before they hatch.”  Further, he said the judge made it clear the claims made were not viable in the State of Indiana.

Within the lawsuit, Daley made a due process claim as well.  Babbitt noted the judge’s comments about this.  He said, “To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it.  He must have more than a unilateral expectation of it.  He must, instead, have a legitimate claim of entitlement to it.”

To conclude his report on this topic, Babbitt noted the thoughtful analysis included in Judge Tinder’s ruling.  The result shows the commission has the right to look at a request and make a decision on whether it is granted.  Moreover, a license application is only a request.  Nothing is guaranteed and no license is required to be issued.  Babbitt then said, “This is a complete victory for the commission.  We will now wait to see if an appeal is pursued.”

The second court decision shared by Babbitt was a petition filed by Mark P’Pool in the Lake Superior Court (Hammond, IN) requesting stay of suspension of owner/trainer/driver license of standardbred horses.  As he began sharing the decision, Babbitt reminded those present at the meeting of the decision by Judge Janeway which had been shared at an IHRC meeting back in June 2007.  After receiving that decision, the IHRC determined, with some modifications, to accept the Janeway decision.  As a result, P’Pool filed a petition requesting a stay of the suspension he was issued.  The request was filed on July 20, 2007.

Babbitt then interjected some comments he described as editorial.  He said he finds it interesting that although several hearings were involved and given the fact P’Pool’s counsel could not attend the IHRC meeting to address the previous decision, P’Pool thought it was appropriate to ask for the order without allowing the IHRC the opportunity to present their case.  Babbitt said he attended a hearing for the request on July 30, 2007.  He also noted that, as of the day of this meeting, the IHRC has never received an official notice of the request for a stay by P’Pool.

When sharing some events from the hearing he attended, Babbitt said P’Pool went to the hearing and stated under oath there was absolutely no evidence he had injected horses with dexamethasone.  As part of his testimony, Babbitt presented a large report compiled from what he called months of investigation and scientific studies.  His purpose for including this information was to show P’Pool was making misrepresentations about what had occurred throughout the ordeal.   Babbitt noted Judge Daugherty was very patient and willing to listen to the facts presented in the exhibit.  In the end, the judge denied the stay motion from the bench.  The events pleased Babbitt because they indicated the judge had a willingness to listen.

Before ending his report on this case, Babbitt stated he has heard there have been claims that the judge said the IHRC acted inappropriately in the P’Pool case.  Specifically, this involves claims expert witnesses were not allowed to testify on P’Pool’s behalf.  Babbitt noted the opportunity did exist for providing expert witnesses.  He then read from the transcript, “As to the failure to allow the Petitioner’s expert witnesses, there was a finding by the Administrative Law Judge (Janeway) that the Petitioner had failed to cooperate in discovery and provide potential deposition dates and, therefore, they were denied the right to testify.  The Court finds that the Petitioner has failed to carry its burden and failed to show by a preponderance of the evidence that the action of the Defendants was contrary to law.”  Finally, Babbitt stated P’Pool now has the opportunity to have the court review the entire record, see all the evidence, and decide if the commission acted in an inappropriate way.

With both court decisions shared, Babbitt ended his report on pending litigation.  He described the current status of both cases as all good for the commission.

Continuing to follow the agenda for the meeting, the next two items were petitions which required swearing in a recorder for preparing an official transcript of the hearing.  Chairman McNaught swore in the transcriber at the meeting and appointed her the recorder for the proceedings.

The first of the two petition items was consideration of the petition by Centaur and Hoosier Park for approval of modifications to the physical plant of HoP.

Centaur’s attorney, Robert Hagemier, began the discussion by thanking the commission for allowing scheduling of meetings when necessary to accommodate the needs of the tracks.  He shared with pride the fact Centaur had filed a petition for modifications to HoP, as they prepare for the coming of slots.  Hagemier noted his group has diagrams, plans, etc. for the facility to share.  He said they want to work on the items House Bill 1835 (the slots bill) has provided the opportunity to develop.  He then turned the floor over to Jeff Smith and Rick Moore for making the presentation to the IHRC.

Smith noted his group had previously supplied the commission with the information to be shared at the meeting.  He then displayed a site plan showing the property currently leased from the City of Anderson.  The plan showed the existing facility, as well as a 92,000 square foot addition north of the current grandstand.  The plans call for the buildings to be connected over what is currently a parking lot.  Smith said there are no modifications intended at this time to the existing barn area, or other areas.  However, they are looking at the possibility of paving for parking in some existing areas.  In addition, the group is looking into acquiring more land for future expansion.

Several artist renderings were used to look at the design in more detail.  These showed the drive approaching the building, with respect to the racetrack.  At the entrance, there is a choice of dining/racing or racing/food court/casino.  The grandstand will have a direct connector to the casino; however, no casino gaming will be in the existing facility.

The simulcast area will be modified as the changes occur.  Plans call for the video equipment to be suspended from the ceiling.  New flat screen technology will be used, resulting in a sharper video for patrons.

A food court area will also be added.  Options to be available include a Starbucks-like coffee shop, deli, and ice cream parlor, as well as other venues.  Smith also noted the current Hall of Fame Room will be converted to additional dining area to use even when there is no live racing at the track.

Chairman McNaught asked if the square footage of the new dining area will be enough for the racing and casino areas.  Smith responded they have consulted with food service specialists, who feel it should be appropriate.  He also noted the track will work hard to monitor scheduling of activities to manage the demand for dining.

Moore shared some information gathered during a recent exploratory trip to The Meadows (near Pittsburgh, PA).  He said The Meadows felt hey had overbuilt their dining area and cautioned against this pitfall.  He also noted the reason for the layout presented is to expose facility visitors to racing when live racing is available.

Smith told the commission they plan to have monitors within the casino facility to let patrons see racing.  However, he thinks more exposure will come at the dining area as people redeem rewards earned at the casino for free buffets, etc.

Describing the main entrance as “high energy”, Moore said the entire facility will be getting a makeover in the expansion process.  Noting they want the focus to be on the main entrance, Smith clarified the top entrance will be considered the facility’s main entrance, but recognized the fact regular visitors will likely use the other entrance.  He said there had not been decisions made about the actual furnishings of the facility at this time.  Moreover, he thought those decisions would be soon, but a little later in the overall design process.  Mindful of the future, Smith said he has asked the designers to develop a fall back plan to use if further expansion is warranted down the road.

The next rendering depicted an elevated view, showing the facility with respect to the parking lot and racetrack.  It included an overlook for viewing the track.  Moore shared his stance that it is very important to HoP that patrons in the casino are allowed to view live racing.  Tabletop slots will be installed along the trackside wall to allow dual entertainment for guests.

Smith added they must work within the guidelines of the gaming commission.  This includes not having a glare, etc. to hinder the security systems or monitoring of the facility.  He noted the fact racing is conducted at night makes this easier.

Both Smith and Moore stressed the need for access to the apron of the track from the casino if patrons wish to go out to watch the races.  The duo described the facility as “eye catching”, with many parts visible from as far away as the Interstate.

When sharing what they have gone through to get to this point, Smith recalled they have looked into several ideas.  However, they have continued to return to the design presented.  The cost of the facility will be well over the required $100 Million.  Noting the group has gone through the proper channels in Anderson to gain approval for the changes shared, Smith said the surrounding community is very excited about what is happening at the track.  As far as a timeline for progress on the facility, Smith stated it should be available in 2-3 weeks, once more solid plans are created.  He then asked the commissioners if they had any questions.

Commissioner Grimes was the first to make an inquiry.  He asked, “How is the media reacting?”  Smith replied with an honest answer, noting they have not been very public with the details of the plan.  The members of the media know a facility will be forthcoming; however, no details have been shared.  Moore added to these comments by saying they wanted to come to the IHRC first, before releasing too much detail.  He revealed the local legislators are very excited about what is happening at the track.

Commissioner Schaefer then asked why the decision was made not to have pari-mutual windows in the casino.  Smith and Moore replied nearly in unison, “There will be…”  It was then noted that the drawing shown does not have the exact layout, but betting windows will be available in the casino area.

Grimes then asked what the track is doing to let the community know about the coming jobs, etc.  Smith responded, saying they want to have more firm timelines on construction, as well as the overall process, before publicizing that piece too much.

After looking at the plans, Chairman McNaught shared her big concern over the building exterior and signage.  She said she wants them to build something solid to stand the test of time.  Recalling the existing structure was originally built quite hurriedly, she said she would like to see the skin of the entire facility addressed.  She suggested making the facility look blended, possibly using limestone or other Indiana based products.  Further, she noted the recent loss of the Churchill Downs branding with twin spires means it is a great time to consider utilizing a new look for the entire facility.  She said it is very important to the City of Anderson, as well as the state, to build a people-friendly facility and not merely a box.

Smith said he agrees with Chairman McNaught’s thoughts; however, financing the venture is a challenge.  He went on to say they want to work to integrate with the existing facility.  To help ease her concerns, Smith repeated the fact the displays presented at the meeting were very preliminary.  He said the plans should be available in more detail as it progresses.  Finally, he assured Chairman McNaught that the IHRC will see the plans of everything before it happens.

Chairman McNaught threw out the possibility of re-skinning the entire facility over time.  She said simply matching what exists is not progressive.  Grimes added, “The structure should be something the public can appreciate and be proud of…”  Smith then said he feels the final result will eliminate those concerns.

Babbitt then took the chance to offer a clarification.  He noted the IHRC is being asked to approve the concept presented, with the understanding they are primarily focusing on the grandstand area.  On the other hand, the gaming commission will be looking more at the casino area.  He explained the commission was approving the idea and drawing, with the understanding they will need to come to the IHRC throughout the process to gain approval as the work continues.

Hagemier returned to the podium to remind the commission they must always “bless” any changes to the existing facility.  He then stated Babbitt was correct in his explanation.  The group was asking for approval for their preliminary request and plans to come to the IHRC many times throughout this process.

Historically concerned with a loss of focus on racing at the tracks, Commissioner Armstrong thanked those making the presentation for the inclusion of many windows for viewing and thinking of racing.  He noted this is something the gaming commission may not be as apt to consider.

Smith reassured Armstrong by stating those are things he and Moore want included in the facility.  He said the pair would be there to protect such features because they are very important to them.  Further, he shared the fact the gaming commission has been open and respectful of the racing relationship in every sense.

With no more questions or comments, a motion was made to approve the petition with the understanding it is conceptual and should take into account the thoughts and concerns of the IHRC.  It passed unanimously.

The second item requiring the transcriber to serve as a hearing recorder was consideration of the petition of Indianapolis Downs, LLC and LHT Capital LLC to settle all disputes and redeem (transfer) ownership.

Babbitt presented and explained the petition of transfer before the commission.  Clarifying he and Gorajec’s role was to present the petition, Babbitt said the pair recommends approving the request.  He noted the commission members had already received a copy, at least electronically, the day before the meeting.  As part of the process, Babbitt asked the commission to take official notice of the filings and other proceedings with respect to the ownership of the permit holder, assuming there are no objections.  Lastly, he asked the commission to take notice of Section 3, letters a through j.  He stated, “This is the gist of what the commission is being asked for today.”  The commission’s charge in the matter was to decide whether the transfer should be granted.  Specifically, the commission’s role relates to the rule of track ownership transfer modified at their June 8, 2007, meeting, where the state shares in profits of a sale.  The supplemental information listed the benefit to the State of Indiana as $9 Million.  In addition, proceeds from the sale would be used to make substantial contributions to The Legacy Fund and other charities.  In closing his comments, Babbitt described his summary as the “meat” of the issue before the commission.

Attorney Lee McNeely then spoke, representing Indiana Downs.  He explained the timeline of events relating to the transaction.  Summarizing the filings, he said the result of the transfer would increase Oliver Racing’s stake in the track to 95% ownership.  McNeely noted the documents before the commission show, while selling approximately 34% interest in the track, Paul Estridge has agreed to pay the fees explained earlier by Babbitt.  In addition, McNeely explained that Estridge plans to make contributions to other charitable organizations.  McNeely then took the opportunity to acknowledge the great number of contributions the Estridge Family has made to racing in the state.

McNeely noted the IHRC has been provided with the information needed to make a thorough review and consider the request.  Further, he said he is confident the benefits to the citizens of Indiana, specifically the Shelbyville area, are great.  He stated the transfer should allow creation of a facility benefiting the entire area.

If approved, related McNeely, Indiana Downs would move forward with new and exciting plans for an entertainment facility.  The jobs and benefit to the area around the track will be big.  McNeely stated, “The benefits will far exceed the $250 Million licensing fee his client is willing to pay.”  As the facility grows, over 600 full and part-time jobs should be created.  In addition, growth of the facility should create other opportunities for growth in the area. 

McNeely noted Indiana Downs has been a contributor to the community from the time it was built.  However, the facility will now be in a position to offer more, becoming an even more important part of the community.  From the beginning, shared McNeely, Indiana Downs has enjoyed the support of government officials and economic development areas.  To show the support for the petition, a number of community leaders were in attendance at the meeting.  Approval of the transfer would clear the way for the beginning of a new series of events.  It should allow the track to enter a new era of entertainment, while benefiting the community.  Concluding his comments, McNeely stated, “On behalf of Indiana Downs and those in the community involved in the industry or not, I urge the commission to approve this.”

To move on in the decision-making process, Chairman McNaught referred back to Babbitt for comment.  Babbitt responded by saying he and the Executive Director did not come to the commission lightly to recommend approval of this request.  He noted they had been working diligently with those involved to come up with a proposal beneficial to the State of Indiana.  Babbitt noted there were considerable, substantial, and strong benefits involved.  Part of Babbitt and Gorajec’s task was to work with Estridge to make sure the state gets the $9 Million for property tax relief (hopefully), charitable contributions are made, etc.  As with McNeely, Babbitt highlighted the role Estridge played in the onset of pari-mutuel racing in Indiana.

Babbitt then made some clarifications to be sure the commission understands exactly what is being requested and how contributions to The Legacy Fund are handled.  He praised the efforts of McNeely and all those involved for working so closely and well together to establish the petition presented to the commission.  Babbitt then repeated his earlier stance of recommending the IHRC approves the request and signs the document after the meeting.  He then asked the commissioners if they had any questions.

Grimes was the first commission member to express a concern.  He said he supported the petition, but was uneasy with the use of the word “waiver” within the document.  Moreover, he is always concerned when a body like the IHRC is asked waive its rules for a certain situation.  Grimes said he had reservations about what it may mean for future decisions.  With that in mind, he asked if it would be possible to use a different word in the document, suggesting “conditional” or “subject to” may be options to consider.  He said he considers waiver to be a powerful word and would be more comfortable if the verbiage could be modified.  Grimes said he was merely throwing the modification idea out for discussion to protect the IHRC from similar demands in the future.

Noting his own limitations as counsel on the matter, Babbitt said he looked at it from what was needed in the way of wording.  He said he convinced himself and the others involved the wording used was the only practical way to address the situation before the commission in the timeframe needed for the transaction to occur.  Babbitt added he too is leery of the word “waiver”, noting it had only been used on a few occasions.  He went on to clarify the Executive Director or IHRC does have the authority to waive its rules when needed.  Babbitt then referenced the place within the IHRC rules which included the description of good cause for such waivers.  In this situation, the rule would be unduly burdensome, which also gives them the authority to waive the rule.  Babbitt added that, under the circumstances, nothing in the proposed transfer would change the standards of racing.  Further, he said it was the only way to bring the proposal to the commission to get this completed.  Since this is a unique circumstance, Babbitt said he felt there will not be other instances of waiving the rules pursued.

Grimes then summarized Babbitt’s response by saying, “So, this meets the standards, which causes us to be able to go forward with the request.”  Babbitt verified his summary and complimented Grimes by saying he had stated the situation in better words than himself.

Schaefer then asked McNeely if there is anything that would preclude the transfer from closing in the timeframe needed.  McNeely assured him there were no other issues and the transfer could be completed within two business days.

Babbitt then offered some insight to help reassure the commission.  He said if the conditions set forth in the petition are not met, they will be back to square one.  The commission will have to revisit the request if everything does not go exactly as outlined in the petition.

Showing his client was planning to proceed as outlined in the petition, McNeely informed the commission the stock involved in the sale has already been transferred.  He noted they are working hard to make sure all the conditions outlined are met.

Babbitt then helped the commission establish the wording for a motion.  He suggested making a motion to approve the sale of the percentage of ownership in Indiana Downs with stipulations.  As part of the approval, the permission to transfer is conditional and requires full compliance with the items outlined in the petition.  Babbitt noted the specific passage concerning the waiving of the IHRC rules.  He said, “…the Commission waives its transfer rules (only) with respect to the voluntary contribution of 20% of the membership interest…to The Legacy Fund…”  Noting Babbitt’s wording, the commission passed the motion unanimously.

Following a short break, the meeting progressed to the other items on the agenda.  The next topic was consideration of action regarding out-of-state racetrack withholding simulcast signals from selected Indiana facilities.  Specifically, the signals from Arlington Park, Calder Racecourse, and Tropical Park had been terminated at Indiana Downs’ Evansville OTB.

Gorajec addressed the commission on the issue.  He recommended having the IHRC bar the signal from the tracks involved unless it is allowed to be simulcast to all Indiana locations.  Paralleled to the withholding of other signals from the Southern Indiana OTB’s, Gorajec said he does not feel the commission should stand for an attempt to withhold signals to specific locations.  He then asked representatives for the tracks to speak on the subject.

Jon Schuster (Indiana Downs) was the first to address the commission.  His comments were brief, as he asked to simply get a decision from the commission to resolve the issue.

Rick Moore (Hoosier Park) also offered a response.  He said he agrees with Schuster and hopes it can be worked out.  Moore noted HoP is ready to open a Thoroughbred meet soon, so he would like to see the issue resolved.

Chairman McNaught asked if the tracks supported the recommendation made by Gorajec.  On behalf of HoP, Moore replied, “We will abide by any decision made by the commission.”  Schuster, stated, “We are in full support of the recommendation.”

Grimes asked to what extent federal guidelines are impacted by the commission’s decision.  Gorajec’s response indicated the issue is simply a result of conflict between two racing associations.  He noted he is willing to work in a diplomatic capacity to help resolve this issue.  Moreover, Gorajec said he feels any diplomacy should be concurrent with the banning of the signal to any part of Indiana.  He said that, if the IHRC decided to keep out the signal from those tracks, both Indiana tracks would have to keep them out until the signal is available to all facilities, including the Evansville OTB.

Moore then seized the opportunity to thank Gorajec for explaining the fact this issue was really between the two racing associations.  Additionally, he informed the commission there will be many unhappy patrons if the signal is banned.  He said, “We need to remember the customer is what drives our business.”

Armstrong then recalled the past incident of banning of the Kentucky signal at the request of their horsemen’s group.  He described it as “heart-wrenching”, but noted a decision is needed.  He added that he supports the proposal.

Babbitt asked when any decision made would take effect.  Since neither track is currently racing, Gorajec noted the commission could make it effective immediately.

Babbitt then drafted a motion which included wording requiring making the signal available to all facilities in Indiana.  The action would allow consent to receive the signal as soon as those conditions are met.  Once the signal is made available to all locations, consent to take the signal would be extended again.  The motion passed unanimously.

As follow-up to the decision, Grimes added a request that Gorajec be directed to commence contact to initiate whatever is needed to make this happen.  Also, Armstrong asked for a document to be prepared by the tracks to explain the reason for the decision to their patrons.

Schuster made one final remark, stating he regrets asking the commission for a decision, but appreciates the action.

The next item on the agenda was consideration of the petition by Centaur and HoP for approval to enter into a concession rights agreement at HoP’s downtown OTB.  Hagemier opened the discussion of this topic.  He began by thanking Chairman McNaught for volunteering to have meetings to meet the needs of the tracks in a timely fashion.  He said she was likely not thinking the kind gesture would be taken so literally, adding the request his group was making deals with food service.

Moore then introduced the individuals responsible for food service/concessions at the HoP OTB’s.  Noting a goal of the change is to create excitement, Moore shared a desire to have more of a sports bar type atmosphere in the OTB’s.  As part of the transformation, he wants to see a new sign and name.  In addition, they want to modify and enhance the offerings and service available.

Chairman McNaught stated the corner location of HoP’s downtown OTB is a prime location.  Moore indicated his company wants to use the synergy generated by what is happening in Anderson and Shelbyville (the arrival of slots) to enhance the track’s off site locations.

Babbitt interjected the commission’s approval of the request is subject to the licensing of the concessionaire to be used.  Hagemier assured the commission the person involved is already known to the commission investigators, meaning there would be no problems.

Upon consideration of the information provided, the commission voted unanimously to approve the petition.

The final item on the meeting agenda was consideration of emergency rule amendments.  Gorajec presented the information, explaining the issue deals with 4 emergency rules involving the practicing of track veterinarians.  With recent staff changes, he said there is a concern of not having full and adequate coverage of commission veterinarians when the meets at both Indiana Downs and Hoosier Park are running.  As a result, he is asking that the certified veterinary technicians, which are always on duty, absorb more duties.  The duties would involve all but those where the procedure requires a licensed veterinarian (for example, scoping).  Gorajec stated that this option is not the best scenario, but it is likely and eminent that there will not be full coverage in this area in the very near future.

Moore informed the commission Hoosier Park has their own veterinarian, who is available at all times.  His name is Dr. Dan Eichhorn, DVM.

Chairman McNaught stated she knows the commission has been working hard to rectify the situation.  She admits the option before the commission is not ideal.  However, under the circumstances, she said it seems like what will need to be done for the present time.  When put to a vote, the solution for veterinary coverage offered passed unanimously.

With no further business to discuss, the meeting was adjourned.  The next meeting will be Thursday, September 27 at Indiana Downs.