Long before they unleash the beast on a track, engineers, through various mathematical equations, can calculate a racecar’s horsepower. As noted in “Long Shots” (page 147), determining a Thoroughbred’s performance capabilities before its racing career commences is a decidedly less precise science. Indeed, the formula for producing a Triple Crown winner remains as elusive as it was when Robb Report last explored Thoroughbred ownership, nearly 16 years ago (“Risky Business,” August 1989). However, industry leaders recently have launched an initiative to reduce the risk of Thoroughbred ownership. In December, the Thoroughbred Owners and Breeders Association (TOBA) drafted and publicized an ethics code designed to help novices avoid scams and expensive mistakes and ultimately make Thoroughbred racing a more attractive, though still highly unpredictable, venture.
The ethics code, the first of its kind for American Thoroughbred racing, focuses on the issue of dual agency, the practice by which an individual receives a commission from the buyer for advising him on a purchase while at the same time secretly accepting compensation from the seller. In a typical scenario, an agent approaches a seller about a horse that is worth $200,000 and agrees to split with him any profits above that sum. The agent then convinces the client to bid $300,000.
Unscrupulous agents are not unique to American Thoroughbred racing. Last summer, the Jockey Club of England issued new rules that grant it the power to ban miscreants from Britain’s 59 racecourses. But its counterpart across the pond, TOBA, lacks the ability to enforce its code by punishing violators, a shortcoming that concerns Satish Sanan, owner of Padua Stables in Summerfield, Fla. Sanan founded the Alliance for Industry Reform (AIR) to campaign for change, and in response TOBA formed a task force that created the ethics code. “I think we achieved80 percent of what AIR set out to do, but publishing a code and implementing a code are two different things,” Sanan says. “With no teeth, implementation is a challenge. We’ve made headway, but the jury is still out.”Others believe that the TOBA code, regardless of whether it ever becomes enforceable, is good for business. “For a long time, there was public denial that people were getting cheated. Some still don’t like to admit that there’s fraud,” says Ray Paulick, editor in chief of the industry publication The Blood-Horse. “The long-term effect is that when people get into the horse business, they’re being greeted by a code of ethics and warned that they need to be vigilant about representation, and they need to ask a lot of questions. It forces people to be more intelligent.”
Don Engel, founder and president of the Thoroughbred Information Agency in Rohnert Park, Calif., gives the TOBA effort long odds for success, but he agrees that those who enter the Thoroughbred business should not do so naively. “It seems to me that the only solution is for the buyers, the source of money for the swindlers, to protect themselves,” he says.
Engel suggests that if a buyer suspects he is being set up, he can exact a measure of justice on the coconspirators by capping his bidding at a price that is less than his adviser expects or by not bidding at all on a horse that his adviser strongly recommends. The adviser will lose an extra commission and gain an enemy in the seller, who likely will have to settle for far less than he anticipated for his horse. This is one instance where it could prove prudent—and rewarding—to play a hunch.