Saturday 15 August 2015

Incompetence or Corruption – Where Do You Draw the Line on Ethical Practices?

I always remember a lovely story told by the inimitable cricket correspondent, Henry Blofeld. Apparently on one occasion when he was entering Australia at Sydney Airport, he was stopped at Immigration to answer a number of questions. When asked, “Do you have a criminal record?”, his reply was, “My dear old thing, I didn’t realise it was compulsory!”

I don’t know if I was chuckling quite so much when I read on the Racing Post web site this week an almost unbelievable story concerning the Australian trainer, Dean Howard, who was suspended for 18 months after selling a horse without the consent of the owners, and keeping a chunk of the sale proceeds for himself. Apparently he sold the horse, Convincable, to Hong Kong without the owners’ knowledge, before informing them of a lower final sale price. He then kept the difference. What I find even more unbelievable is that he only got 18 months!

Maybe it depends on the Australian interpretation of criminality! The serious issue is that a lot of ownership and partnership problems that can occur are actually a breach of agency law. In most instances the owners are the principals and the bloodstock agents and trainers are merely agents, covered by well-established common law principles and precedents. Agents must act in the best interests of their principals. Alas, that all too often isn’t the case. So I decided to think about problems that I have encountered in the last decade or so of owning horses, and have listed ten examples below. They are numbered from 1 to 10. Where would you draw the line in your interpretation of a breach by the agent? I suspect a lot of you will start to have concerns from 1 onwards!! Unfortunately all of these are relatively common examples.

I just don’t believe that the racing mind-set is to protect owners properly, while seeking out value for money at every opportunity. Indeed, one of the very top NH owners believes that practices such as those listed below are “illegal taxes on owners”.

  1. Trainer uses the same vet for all his horses, but the owner is charged at the standard vet rack rate; no reductions and no rebates for annual volumes, regardless of the profit to the vet over the year.
  2. Inaccuracies on the trainer’s recording of full training fees vs. lower fee out of training, box rest etc.
  3. Vet automatically doubles the cost to the owner of buying in proprietary drugs. Adds no value whatsoever.
  4. Trainer takes a full box to the races and then charges each owner the mileage rate as though for a single horse. Similarly, charges full costs of a visit to a sale (flights, hotels, meals etc.) to each owner for whom he buys a horse at that sale.
  5. Trainer charges for a treatment such as use of a cold-water spa, swimming pool or treadmill, even though the horse has not received the treatment.
  6. Syndicate manager has a “free share”; no cost for this but participates in all benefits / prize-money.
  7. Horse bought by a syndicate manager from a family member’s stud farm. Horse has a chronic wind problem.
  8. Syndicate manager, inept on accounts, manages to “lose” £8,000. “Forgets” to register for VAT.
  9. Syndicate horse entered into a sale without the approval of the owners. Doesn’t meet its reserve. Sold privately the same day by the manager at a lower price to a “contact”. That person sells the horse on the next day for twice as much. Zero owner involvement, discussion or opportunity to make a bid.
  10. Syndicate manager doubles the purchase price of the horse on syndication, thereby immediately halving the value of the asset purchased by the owners, while making himself 100% profit for doing nothing.
You can see why we set up Owners for Owners. We make sure that none of our owners are ripped off. Occasionally mistakes occur, but we’re now in the fortunate position where our relationships with trainers and agents are excellent. However, that doesn’t mean that everything is perfect, and for example the way vets charge is a persistent niggle, and something which from time to time we’ve had to challenge.

I’ve just been invited to take part in an ROA working party, tasked with producing a code of conduct for syndicates. Alas, I’m not going to find it too difficult to come up with real-life examples of incompetence and, I’m afraid on occasion, corruption. It will be interesting to see the appetite for where the line is drawn in the ethical sand. I’m certainly going to be at the robust end of the scale, and would like to see far more transparency and demanding service standards required from the various agents.

I am always interested to hear your views so please do leave a comment. If you can't see the comment box at the bottom of this post then navigate to the post using the right hand navigation or click here > and scroll to the bottom of the page. Look forward to hearing your views. Thanks very much for sharing them.

Saturday 1 August 2015

Have the Racecourses Hijacked Our Sport …. and If So, What Should Be Done About It?

This blog has been triggered by an article in the Racing Post by Colin Russell, and subsequent discussion with a number of our owners who definitely agree with it. Basically, Colin argued that the power in racing doesn’t sit with the BHA, the bookmakers or Horsemen’s Group, but with racecourses, which “act like spoilt kids and don’t worry about how it affects anyone else”. He argues that they control the purse strings, as they sit astride most of the big flows of cash through Levy Board grants, media rights, gate money, sponsorship, owner entry charges, the Tote, bookmakers’ payments – and that’s before you even get to the additional contribution from the racegoers themselves, consuming expensive food and drink. Key decisions are being taken by the racecourses in their own best commercial interests rather than for racing as a whole, as illustrated by silly same-day race meeting clashes between local tracks such as Kempton and Lingfield, Southwell and Nottingham, Haydock and Chester. He believes that the Racecourse Association doesn’t care about this, and moreover the tracks pay as little in prize-money as they can get away with.

At times the article was clearly a bit of a rant, but the argument struck a chord and most people I’ve spoken to believe that the racecourses are definitely calling the shots. It seems that legally they own 1,200 of the 1,400+ race fixtures and therefore hold both the purse-strings and the power in the British racing landscape. Without any doubt this will be tested over the next few months as the BHA tries to implement the proposed tripartite agreement and more importantly the operating principles behind it. At the moment the RCA hasn’t signed up to this agreement alongside the BHA and the Horsemen’s Group. Several of the key issues that need to be resolved at a tripartite board revolve around racecourses and the way the fixture list operates. In essence the BHA has relatively low authority to influence this, so if you take as jaundiced a view as Colin Russell then, yes, there is a risk that the racecourses have hijacked our sport.

Earlier in the week, though, I was encouraged to see that Richard Wayman, Chief Executive of the Racehorse Owners’ Association, is moving across to become the new Chief Operating Officer of the BHA. I’ve worked with Richard on a number of projects and he is an extremely able individual whose natural style is highly collaborative. As he has been given the job of sorting out the fixture list, he is clearly going to be a very important power broker with the racecourses. Indeed I joked with him that he was offered three jobs – by the IMF to sort out the Greek debt crisis; by the UN to address the threats posed by ISIS; and by the BHA to create a more rational race programme. Full marks that he has gone for the most difficult one!?!

However I do think it is wrong to lump all the racecourses together and be critical of the lot. So I sat down to do my own classification and started slotting them into one of four groups: stars (the tracks you really like going to, and which offer a top-quality raceday experience), improvers (where substantial investment is being made), dullards (which are just coasting along) and exploiters (which are ripping off everyone). At the positive end of this scale, my top ten tracks would be Aintree, Ascot, Ayr, Chester, Goodwood, Haydock, Market Rasen, Newmarket, Sandown, York. Six of these are independently managed and four are controlled by Jockey Club Racecourses. My bottom ten are Bath, Brighton, Lingfield, Newcastle, Plumpton, Redcar, Southwell, Towcester, Wolverhampton and Worcester. This time none are JCR; three are independent and seven are under the dubious management of Arena Racing Company. And of course I haven’t flagged up some of the strong improvers such as Cheltenham and Newbury where millions are being invested at the moment.

As the Americans say about strategy, “it ain’t vanilla”. Different racecourses and different operators need different strategies and different levers of power to influence future direction. Every course is a business in its own right, while JCR and ARC are substantial players in the leisure market with hundreds of staff and multi-million pound budgets. As such they are open to a range of negotiating tactics, just like any other commercial organisation. The challenge for the BHA is to create a clear vision for the future shape of British racing, particularly in terms of the fixture list and race programme. Once the gap between the current position and the future requirement is clear, then the levers need to be applied to secure it. One end of the negotiating scale is collaborative but that shouldn’t preclude the other end, which is more aggressive. There are bound to be ways in which racecourses can be persuaded and / or forced to behave in the right way, for the greater good of the sport. After all, the BHA licences all racing establishments including racecourses, so why not introduce a range of criteria that need to be pursued and without which licences can be withheld.

This subject is definitely one of the top three issues facing the sport and its future success. We wish Richard Wayman all possible success in the new role that he will be playing to bring about some of the necessary changes.

I am always interested to hear your views so please do leave a comment. If you can't see the comment box at the bottom of this post then navigate to the post using the right hand navigation or click here > and scroll to the bottom of the page. Look forward to hearing your views. Thanks very much for sharing them.