Two months ago, this column discussed the reconstitution of the Sales Integrity Task Force. The group, made up of thirty-six (36) industry players representing many horse breeds, has been charged with making recommendations to the Kentucky legislature regarding what actions, if any, government should take to ensure fair dealings in horse transactions. Also discussed were the unanimous actions of the Florida legislature empowering the Florida Department of Agriculture to impose regulations intended to protect buyers and sellers of horses in the state.

Click Here to read the September 2007 Racing and the Law article:

http://www.ustrotting.com/absolutenm/anmviewer.asp?a=23493&z=29

Within the last two weeks, noteworthy events have occurred affecting the sales integrity issue in both states. Why should we care? Clearly, if we are a part of this industry, it is important to understand what mandates are being contemplated in these two horse-rich jurisdictions. I will reiterate one opinion I expressed in September: What happens in the Bluegrass and Sunshine states will be used as guideposts by state governments in all jurisdictions. If you buy and sell your horses in New Jersey, Pennsylvania, Ohio or elsewhere, what is about to happen in Kentucky and Florida is eventually going to have a significant impact on your Standardbred dealings.

As to the substance of what should or should not ultimately be established; my singular opinion doesn’t count for much, but OUR collective opinions might have some influence. Whether primarily on the buying or selling end, let us know what YOU think should be done, if anything, to protect the participants in public auctions and private transactions. We’ll be sure to share those views with the decision makers, as well as with each other in a future web piece. Without much editorializing on my part, here’s a quick update

Kentucky: On October 15, the Sales Integrity Task Force held a public forum at which they announced preliminary recommendations regarding the three main issues debated in closed-door sessions over the last several months:

Licensing: The Task Force rejected the concept that bloodstock agents and consignors need to be licensed. Rather, it recommended industry self-regulation, accomplished by requesting that a “code of conduct” be included in the conditions of sale of the auction companies. This code apparently differs from the “Code of Ethics” governing Thoroughbred sales established by the predecessor Task Force in 2005. Among other things, the new code requires agents to notify their principals (the folks they are working for) a) when a conflict of interest arises; b) before representing more than one principal (dual agency), or; c) before accepting “luck money,” meaning anything of value in excess of $500.00 paid by a Seller. It is proposed that complaints concerning breach of the code be resolved by binding arbitration, however the only permissible sanction contemplated against an offending agent or consignor is exclusion from participation in sales and from the sales grounds for a period of time.

Ownership Disclosure:  On this point, the Task Force indicated that disclosure of horse ownership is “encouraged” and proposed establishment of a voluntary Ownership Registry to be maintained by the respective sales companies.  If identity of an owner is voluntarily disclosed, a change in more than 10% of that ownership after the horse is on the sales grounds must be announced; however, there is no obligation to identify the new ownership interests. If the information contained in the voluntary registry was later found by “clear and convincing evidence” to be “not materially accurate,” or an ownership change was not disclosed, the purchaser may seek liquidated damages. The purchaser’s damages are set at 50% of the hammer price against the seller and twice the commission if the buyer is successful against the horse’s consignor. In order to avail himself of the liquidated damages clause, the purchaser must notify the sales company within six months of the sale. Apparently, the time when the material inaccuracy was discovered is irrelevant. Again, resolution is contemplated via binding arbitration.

Medication Transparency:  Here also, the Task Force “encourages” owners to disclose “known and material medical information” through veterinary repositories. Repositories are areas maintained by the auction companies on the sales grounds that contain copies of X-rays and other data about catalogued horses that may be viewed by prospective purchasers. They are quite common at Thoroughbred auction sales. The Task Force additionally recommends that sales companies adopt a policy permitting purchasers to have horses they buy tested for exogenous (foreign to the body) anabolic steroids, with a positive result triggering return of the animal at the purchaser’s option. Also recommended is adoption by the sales companies of a “Prohibited Practices” list, the violation of which allows a purchaser to rescind (reject) a purchase. Suggested prohibitions include such things as injecting a horse behind the knee to conceal its true condition.

Click Here to read the full text of the October 15, 2007 recommendations of the Sales Integrity Task Force:            http://www.bloodhorse.com/pdf/RecommendationsoftheSITF.pdf

In calling for industry self-regulation through voluntary compliance, the group points out that two major auction companies, Fasig-Tipton and Keeneland, have already agreed to incorporate the task force recommendations in their conditions of sale. The preliminary guidelines have therefore been adopted, at least for the time being, by key industry participants.

Interestingly, and to provide some perspective, it must be noted that the prime industry force behind change, major Thoroughbred owner and breeder Jess S. Jackson, immediately lambasted the preliminary report, as well as the makeup of the Task Force itself, claiming that the group was “manipulated and essentially hijacked” by a handful of individuals, and that the Task Force, of which he was a part, was “selected in secret” by those opposed to the legislation he proposed. His caustic comments caused one of Jackson’s closest allies, Thoroughbred Owner and Breeder Association Chairman Bill Casner, to resign from the advocacy group they jointly founded.

Click Here to read Mr. Jackson’s October 15, 20907 open letter to the Task Force:  

http://www.bloodhorse.com/pdf/JSJStatementonSITF.pdf

The final report of the Task Force to the Kentucky legislature is due on or before December 31, 2007. Consideration of pending bills in the Frankfort legislature will be taken up during the 2008 session.

Florida: On October 29, a public forum was conducted by the Florida Department of Agriculture and Consumer Services in Tallahassee. The conference was in furtherance of recently enacted legislation charging the Department with the task of adopting rules to prevent unfair and deceptive trade practices in the sale and purchase of horses. While the language of the law is brief, the concerns raised in the statute directing the promulgation of administrative regulations mirrors the very concerns facing the legislature in Kentucky: Transparency regarding the identity of seller and buyer; the issue of dual agency; medical condition and surgery disclosure, etc.

According to Kerry Flack, Assistant Director for The Florida Agriculture Department’s Division of Marketing and Development, the agency will be moving quickly to fulfill its statutory mandate. By the beginning of November, there should be initial regulations drafted which will be subjected to a fourteen (14) day public comment period. Recognizing that all aspects of the equine industry were well represented at the public forum, Ms. Flack admitted that, “It’s not going to be easy to develop regulations that are palatable or acceptable to all parties.” Still, she indicated that there appeared to be consensus on a number of items, and suggested that “dual agency” and “bills of sale” were two issues that would definitely be addressed by the Department’s proposed regulations.

Your Thoughts:  The words, “speak now or forever hold your peace” have clear applicability to the issues presented. While laws and regulations are amended all the time, the overwhelming majority of governmental pronouncements are with us for years to come. Right now, the figurative slate is clean, so the drafting of policy in the equine sales area will be fresh and new. Don’t expect things to change rapidly thereafter. Legislators and administrators only have so much time and resources to allot to areas out of the mainstream. Once the first horse sale rules are on the books, it might be a good, long while before the rule makers revisit them.

How many of your state representatives are in the horse business? Have you ever sold or bought a horse? Congratulations, you are an expert in this field! Now, pleasure us with your expert advice. Tell us, so we can tell them what level of protection in certain areas is needed, and how that protection should be administered and enforced.

Simply, Click Here to tell us what you think should be done about any aspect of sales integrity and the reasons why your ideas should be implemented. We will be sure to forward your thoughts to the Florida Department of Agriculture, as well as to the appropriate folks in Kentucky: WittstruckC@aol.com

Chris E. Wittstruck, an attorney and Standardbred owner, is the founder and coordinator of the Racehorse Ownership Institute at Hofstra University, New York and a charter member of the Albany Law School Racing and Gaming Law Network.

Source: USTA Web site (11-04-07)