DIRECTORS. John E. Mooney Chairman Delaware Park. Charles J. Cella Ellen McClain New York Racing Association

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1 ANNUAL REPORT 2013 Thoroughbred Racing Protective Bureau 420 Fair Hill Drive, Suite 2 Elkton, Maryland Telephone: (410) Fax: (410) trpbinfo@trpb.com Web Site: TRPB is a wholly-owned subsidiary of the Thoroughbred Racing Associations of North America, Inc. (TRA) and was incorporated on January 30, 1946 in the State of New York.

2 DIRECTORS John E. Mooney Chairman Delaware Park Charles J. Cella Ellen McClain Oaklawn Park New York Racing Association Sherwood C. Chillingworth Christopher McErlean Oak Tree Racing Association Hollywood Casino at Penn National Race Course Nick R. Eaves Mike Rogers Woodbine Entertainment Group Laurel Park Franklin J. Fabian Stella F. Thayer Thoroughbred Racing Protective Bureau Tampa Bay Downs Kevin Flanery Bill Thomason Churchill Downs Keeneland OFFICERS Franklin J. Fabian James P. Gowen President and Treasurer Vice-President and Secretary TRPB COUNSEL Robert A. McTamaney Carter, Ledyard & Milburn

3 Foreword T hroughout its 68-year history, TRPB has sought to provide TRAmember racetrack associations with an array of services to address myriad untoward activities which call into question the integrity of the sport, and make vulnerable their business interests. Not unlike other industry organizations, however, the evolvement of the racing industry over recent years has required that TRPB apply its resources in a manner which best addresses the priorities and needs of its corporate ownership. Through innovative change, TRPB continues to provide select, specialized services which, while different from years past, more broadly serve the business and integrity interests of the TRA membership. For the past three years, TRPB has focused considerable resources in advancing its Tote Security System, a communication and database platform designed to improve upon current tote system communications, facilitate the production and dissemination of real-time decimal odds, and provide TRAmembers greater security and transparency throughout their pari-mutuel network. Significant progress on the part of TRPB s technology vendors has been made in recent months; it is anticipated that the network will be in full operation by the 4 th- Quarter, TSS is representative of future technology-oriented solutions TRPB envision providing the TRA membership, as part of its continuing effort to improve the integrity and transparency of pari-mutuel wagering. I encourage you to review the information contained within this report regarding TSS and other important initiatives ongoing at TRPB. Respectfully submitted, Franklin J. Fabian, President TRPB 2013 Annual Report Page 1

4 Highlights Investigative As the sole investigative and security arm representing the Thoroughbred Racing Associations of North America, TRPB remains vigilant in its efforts to recognize and respond to schemes detrimental to the integrity of the industry, as well as to identify new threats and vulnerabilities. Through the offering of a national toll-free telephone number, TIP- TRPB, TRPB continues to advance efforts toward safeguarding and promoting integrity in racing. Sophisticated, autonomous processes enable TRPB to analyze racing and wagering data, the results of which better-direct TRA-member racetrack management in their investigation of nefarious activities detrimental to business operations and the reputation of the sport. Information System The TRPB s Information System, continuously maintained since 1946 to exacting standards by TRPB headquarters professional support personnel, is the only national data repository within the Thoroughbred racing industry that collects, catalogues, and disseminates racing and wagering investigative, intelligence, and security information. Overall, TRPB s database has nearly 5 million records located within a variety of storage mediums. Currently, eleven physical servers, (with two hosting six virtual servers), are configured to handle all Information System operations and administrative functions of the headquarters office. TRPB continues to utilize the contracted services of a well-regarded Delaware-based Information Technology company, whose highly-trained specialists provide a wide array of technology services, manage all aspects of TRPB s Information System, and develop future improvements. As important, they ensure the Information System is protected from hackers, spyware, and viruses by employing the latest in firewall and system security software. TRPB 2013 Annual Report Page 2

5 The Information System is designed to capture and disseminate information vital to the interests of racing and wagering. In addition to responding to requests for specific information, the distribution of data, reports and intelligence by TRPB headquarters staff to TRA-member tracks is standard procedure. Reports or notices pertaining to racetrack exclusions; completed investigations; security breaches, incidents, or alerts; and results of TRPBconducted nationwide racetrack surveys are provided to racetrack managers and security directors. Requests for information from TRPB often cover a wide range of racing or wagering-related matters, thus necessitating searches far beyond what is contained within the TRPB Information System. To enhance information capabilities, daily reviews of on-line news and industry sources are conducted by headquarters personnel, with relevant articles electronically marked for indexing and imported into the TRPB Information System. Additionally, conditioned and contractual access has been established with highly-regarded proprietary business and publicsource database resources, which has proven particularly useful when conducting background checks on individuals or completing due diligence examinations. During 2013, racetrack managers and security directors continued to utilize TRPB as a resource when conducting background checks on racing participants or issues pertaining to wagering activity at secondary retail outlets. Given the exportation of TRA-member racing product to secondary retailers located outside North America, information relevant to racing, wagering, and the regulatory environment in a number of these foreign locations, gathered by TRPB and contained within its Information System, has become of increasing value. Other Member Services TRPB has a wide array of specialized services available to TRA-member racing associations. Its experience in conducting racing, wagering and duediligence investigations; performing racetrack operations and stable security surveys; and consulting with racetrack management and security directors on security, investigative, and training issues makes TRPB an unrivaled choice to address a racetrack s security needs. TRPB 2013 Annual Report Page 3

6 A major integrity component of TRPB is its service of tattooing Thoroughbred horses, the preferred means of race-day identification in most racing jurisdictions throughout North America. This secure means of identification is a cornerstone of racing integrity. In 2013, TRPB technicians applied 19,991 lip tattoos to horses stabled at every North American racetrack and an additional number of fairs, farms, and training centers. The sheer volume of tattoo branding could not be completed without a corps of 61 dedicated technicians who function as independent contractors. Most technicians have, or previously have held, full-time positions as racing officials, starters, valets, trainers, or exercise riders. The close link between The Jockey Club Certificate of Foal Registration number and a horse s tattoo brand has served to bond The Jockey Club and TRPB on matters relating to horse identification, and to improve efficiency in record keeping. A direct pathway into TRPB s tattoo database enables The Jockey Club to import select information pertaining to the horse s tattoo number and date of application. As a result, this information is more readily available to racetrack horse identifiers through the racetrack s access to The Jockey Club s Race Track Operations program. Wagering Integrity Unit TRPB s Wagering Integrity Unit continues to share its extensive knowledge of pari-mutuel wagering and totalisator operations by providing analytical products, presentations, and consultation to TRA-member racing associations, industry organizations, and domestic and international regulatory and law enforcement agencies. The Betting Analysis Platform (BAP), created in 2006, facilitates TRPB s ability to collect and analyze wagering information from TRA-member racetrack associations on a near-real time basis; develop historical patterns of wagering to model betting activity at each location; identify wagering events requiring further investigation; identify new information streams to discern actions of industry TRPB 2013 Annual Report Page 4

7 participants; and deliver integrity tools to monitor wagering and participant activity. Utilizing specialized, proprietary software and processes, TRPB imports, validates, and aggregates wagering data included within the TRA settlement file, representing wagering activity from hundreds of retail locations wagering on TRA host tracks races. Thereafter, through an autonomous process, the BAP applies complex, proprietary algorithms to wagering data which, in turn, identify betting anomalies (referred to as alerts ) based upon (1) atypical variances in cashing by betting location; (2) prices falling outside pre-defined confidence intervals; and (3) win odds fluctuation during each of the last seven tote cycles; the amount of change per-runner in the final odds cycle; and the amount of total change per runner from the start of the seven tote cycles compared to the final cycle. The criteria identified above, coupled with information provided to TRPB by regulators, racetrack officials and bettors throughout 2013, resulted in 1,112 alerts being triggered on wagering associated with races hosted by 41 TRAmember and five non-tra-member racetrack associations. Extensive triage of each alert by experienced TRPB wagering analysts resulted in 23 events requiring extensive scrutiny and reporting. One event involved past-posting, the result of a stop-betting communication failure in a portion of the off-track network. The Betting Analysis Platform provides the foundation for TRPB s RacetrackManager, a secure web-based portal through which TRA-member racetrack managers and, through agreement, their regulator may access analytic toolsets specific to wagering and racing. RacetrackManager incorporates Equibase Entries and Charts in a dashboard feature; a reports suite which includes Win Odds progressions; Exacta and Daily Double probables; and cyclical pool totals throughout the betting period. An innovative Race Query tool, launched in 2013, enables Past Performance data to be exploited through any combination of 29 parameters; the Account Wagering Detail Report can document account wagering by Event, Race and Pool, and summarize this information by postal zip code. TRPB 2013 Annual Report Page 5

8 Throughout 2013, TRPB dedicated considerable resources towards furthering the development of its Tote Security System (TSS), a communication and database platform designed to operate parallel to and independent of Inter- Tote System Protocol (ITSP). Host racetrack associations participating on TSS will be able to better-manage central Race Day Control security and transparency over their entire pari-mutuel network, through their ability to: Ensure all stop-betting commands are immediately disseminated throughout the simulcast network; Authenticate each simulcast retailer s participation in a Host racetrack association s races; Verify execution of all essential Race Day Control functions from every tote within the network; Audit bet detail for scan Pick-n pools on a leg-by-leg basis. Other important goals to be achieved through the TRPB Tote Security System include the ability to: Produce and disseminate real-time decimal odds Provide a reasonable, measured and viable alternative to wagering monitoring systems being mandated or considered by regulators in an increasing number of racing jurisdictions Expand betting markets and facilitate the development of wagering opportunities Vendors contributing to the development and implementation of TSS include The Jockey Club Technology Services, Inc., InCompass Solutions, Inc., Roberts Communications Network, Inc., as well as AmTote International, United Tote Company, Sportech Racing LLC, and Las Vegas Dissemination Company. It is estimated that the network will be in full operation by the 4 th- Quarter, Other TRPB or industry initiatives undertaken by the TRPB Wagering Integrity Unit personnel during 2013 included: TRPB 2013 Annual Report Page 6

9 Presented TRPB Tote Security System, Features and Reports and Wagering Analysis at the Racing Officials Accreditation Program March, 2013 Stanton, DE Co-chaired the TRA2020 / TRA Technical Committee March, 2013 Tampa, FL Presented TRPB Tote Security System, Features and Industry Impact at the California Horse Racing Board s August Meeting August, 2013 Del Mar, CA Presented TRPB Tote Security System Progress Report at the TRA International Simulcast Conference October, 2013 Lexington, KY Co-chaired the TRA2020 / TRA Technical Committee October, 2013 Lexington, KY Presented TRPB Tote Security System Stop-Betting Kiosk to the California Horse Racing Board Stewards Committee October, 2013 Arcadia, CA Presented TRPB Tote Security System Stop-Betting Kiosk and Betting Exchange Market; Breeders Cup Classic & Mile at the ROAP Continuing Education Stewards School November, 2013 Louisville, KY Chaired the International Tote Protocols Working Group at the University of Arizona Race Track Industry Program s 2013 Global Symposium on Racing and Gaming December, 2013 Tucson, AZ TRPB continues to refine its comprehensive Due Diligence Review process, which provides TRA-member racetrack associations great clarity TRPB 2013 Annual Report Page 7

10 regarding secondary pari-mutuel organizations (SPMOs), some of whom operate on Tribal lands or beyond the borders of the United States and Canada, and outside the purview of federal and state regulatory agencies. The review, which is voluntary on the part of the SPMO and conducted at its expense, thoroughly examines an account wagering entity s ownership, senior management and key personnel, business operations, technical infrastructure, and regulatory environment. The process includes conducting interviews and inspections, querying an array of public and proprietary databases, and collecting and analyzing supporting documentation. This information is then expanded upon in a detailed written report, entitled TRPB Due Diligence Review and, together with supporting exhibits, electronically-embedded within a DVD. To date, TRPB has disseminated reviews of 22 SPMOs, and has traveled to countries on three continents and four islands in the Caribbean in support of these examinations. As a result, TRA-member racetrack associations are able to make better-informed business decisions regarding the dissemination of their racing content and permitting entry into their pari-mutuel pools. Comprehensive due diligence reviews undertaken by the TRPB Wagering Integrity Unit during 2013, upon which a summary report was finalized and disseminated, include: April 2013 Premier Turf Club LLC (renewal report) Premier Turf Club LLC is a Florida-registered company, which operates account wagering pursuant to an Oregon-issued Multi- Jurisdictional Interactive Simulcast Tote Hub License. In recent years, the company underwent changes in ownership, management, operations and regulatory environment, necessitating an update to the initial TRPB Due Diligence Review, issued in February A report was requested by or on behalf of 23 TRA-member associations and five regulatory agencies. TRPB 2013 Annual Report Page 8

11 Starting in 2011, TRPB expanded its services in the area of due diligence and background examinations beyond TRA-member racetrack associations when, in May, the North Dakota Racing Commission approved TRPB to conduct, on its behalf, background checks of any applicant desirous of an account deposit wagering (ADW) license in North Dakota. During 2013, a TRPB Limited Scope Background Examination was completed on four companies, who were either seeking ADW licensure in North Dakota, or at the request of a TRA-member association. The services provided by TRPB s Wagering Integrity Unit are available on a strictly confidential basis to all TRA-member racetrack associations. Industry Efforts and Liaison TRPB is recognized domestically and internationally for its expertise in all facets of racing and wagering integrity and security. TRPB cooperates fully with requests received through working partnerships it has forged over the years with: Law-enforcement agencies at every level Investigators representing state and provincial racing commissions and boards The Jockey Club CPMA The Winners Federation University of Louisville Steward s School Organization of Racing Investigators The Jockey Club (England) British Horseracing Authority France Galop Hong Kong Jockey Club TRPB 2013 Annual Report Page 9

12 TRA-Member Tracks Aqueduct Arlington International Atlantic City Race Course Belmont Park Beulah Park Calder Casino & Race Course/ Tropical Park Canterbury Park Churchill Downs Colonial Downs Delaware Park Del Mar Thoroughbred Club Ellis Park Fair Grounds Finger Lakes Fonner Park Gulfstream Park Harrah s Louisiana Downs Hastings Racecourse Hawthorne Race Course Hollywood Charles Town Races Hollywood Penn National Race Course/ Mountainview Horsemen s Park Keeneland Kentucky Downs Laurel Park Lone Star Grand Prairie Monmouth Park National Steeplechase Association Oaklawn Park Oak Tree Racing Association Parx Racing Pimlico Portland Meadows Prairie Meadows Remington Park Sam Houston Race Park Santa Anita Park Saratoga Race Course Tampa Bay Downs ThistleDown Racino Turfway Park Woodbine TRPB 2013 Annual Report Page 10