Sunday 1 December 2019

Corruption and / or Contempt for Owners and / or Incompetence? The Worrying Stories of Phoenix Thoroughbreds and the Supreme Racing Club, and What Changes will the BHA Have to Make?

Two years ago, in Autumn 2017, I wrote a lengthy, four-part blog series on Trust, Transparency and Integrity in Racing. My concerns for some time had centred around unacknowledged risk and vulnerability in racing, particularly to do with the bloodstock industry and sales house practices; welfare of racehorses post-retirement; and the relatively unregulated syndication and racing clubs sector. Two years on and, perhaps not unsurprisingly in the glacial world of racing decision-making, not a lot has happened; although, to be fair, at least there has been a report into the bloodstock industry, and equine welfare is currently under greater scrutiny. To the cynical observer, however, it does seem as though racing only really responds to crises, incidents and the proverbial hitting the fan. It has been well and truly splattered this Autumn!

Some of the journalists at the Racing Post, particularly Peter Scargill, Scott Burton, David Jennings and Tom Peacock, have been digging into the Phoenix Thoroughbreds accusations, and it really does look a sorry mess. The 56-year-old founder, Amer Abdulaziz Salman, hit the global racing industry like a tidal wave with apparently limitless funds to invest in the best bloodstock on the planet. He made great play that Dubai-based Phoenix Fund Investments Limited and Phoenix Thoroughbreds 2017 were being launched as “the world’s first regulated thoroughbred fund”. Excellent, you might conclude, until discovering that the funds were never regulated and are now in liquidation. In the meantime, Phoenix acquired 300 horses and 27 trainers, as well as bagging Gr.1s with horses such as Dream Tree, Loving Gaby, Advertise, Signora Cabello and Gronkowski, who I believe was being aimed at the inaugural $20m Saudi Cup in February. Undoubtedly, elite racing has some big pots …. but also some big crooks. There are accusations that Abdulaziz was a money-launderer and had stolen €100m from the now collapsed Ponzi scheme, One Coin, which was a scam in fake online crypto-currency. A thief from a thief! It also seems he had form in this area, having defaulted on payments for horses in the US in 2010 via bogus investment companies.

This sounds like an airport thriller, doesn’t it? Don’t you find it incredible that Abdulaziz’s previous history had not followed him, and that the regulators around the world hadn’t picked up on it? Or is the racing world so gullible, and so ready to accept anyone’s cash, that they choose not to raise any of the key questions? Phoenix Thoroughbreds are / were active in the UK and doubtless their demise will have a significantly detrimental impact on trainers and the sport. It’s hard not to conclude that all of this is a combination of contempt and corruption.

Now on to the Supreme Racing Club. A friend and fellow owner is involved in Kemboy and SRC, and I felt sorry for him as the sorry shambles unfolded. I’ve even had jokey emails along the lines of “everyone has a friend in Kemboy”, because at the heart of the matter is the accusation that SRC over-sold shares in their 29 horses and that they had no proper record of who owned what. It was founded in 2011 by Steve Massey and Jim Balfrey, and quickly became one of Ireland’s largest National Hunt syndicators, with over 500 members. Horse Racing Ireland began an investigation, but SRC refused (or was unable to) to provide them with the necessary information on ownership details and shareholding allocations, so after a period of time, HRI had no choice but to void the registration of horse ownership and freeze their accounts. The upshot of course was that the horses could no longer race, in Ireland or elsewhere, and unfortunately that owners couldn’t receive prize-money payments that they were due, not least because no-one appears to know who has the full right of title to the various shares in the 29 horses, or the cash balances. On this one, I don’t know whether it is primarily a question of incompetence or whether there is an element of dishonesty as well. Encouragingly, it now appears to be sorting itself out, and there will be a special cheer from me if Kemboy runs at the Leopardstown Winter Festival en route to winning the Cheltenham Gold Cup.

What a mess, and what damage to racing’s image! There will be many in the outside world, as well as within the sport, who will see this as just confirming their worst fears that there are too many scams and rip-offs, with rogues and vagabond masquerading as “managers” of other people’s money, only to steal it. The BHA has announced that, as a matter of urgency, it is examining the Phoenix Thoroughbreds situation, but it is hard not to draw the conclusion that they have been asleep on the job. What is the point of having a regulator which doesn’t regulate?

When my wife and I set up Owners for Owners, we made a huge point about being fully transparent and running OfO as a “not for profit” operation. Nothing has changed in our model, but as I now know a lot more about syndication, I can line up the industry like skittles from highly ethical at one end of the scale to unethical and unlawful at the other end. On regular occasions in this blog I’ve argued for substantial tightening of regulation of the syndicate industry, and for there to be a much stronger code of conduct with far more explicit indications of good / acceptable practice vs. the bad / unacceptable. Since 2018, I have also argued that shared ownership should be covered in detail within the Industry Ownership Strategy that is being developed by the Racehorse Owners Association. However, despite having received £1.65m to develop this, no such strategy has yet seen the light of day, even though they have been working on it for two years.

Anyone involved in buying, training and racing horses knows that there is a substantial cost involved. Even with a moderate animal kept for 3-4 years, the owners will quickly find that the outlay is not far short of £100,000. In the financial services industry, no-one would be allowed to offer “investments” of this magnitude without there being proper regulation. Surely the time has come for the BHA to review radically the current arrangements and put in place much stricter frameworks designed to secure the necessary trust and integrity. Without that, the industry is going to find it increasingly difficult to attract and retain owners, who are the life-blood of the sport.

I hope I’m not writing this again in two years’ time – but I fear I will be.

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.