Big Brown's Owner's Boiler Room Past

What is it about horse racing that seems to attract such wonderful role models for our children? The part owners of Curlin, the best horse in training anywhere in the world right now, are currently standing trial in federal court in Kentucky for plundering Kentucky's $200 million fen-phen settlement, effectively stealing millions from their own clients in the process. Now comes stories that the owner of Big Brown, Michael Iavarone, was suspended by securities regulators in the 1990s for his part in several boiler room operations.

Not only was Iavarone suspended from the securities by the regulators and fined but he also ran into some trouble with Keeneland, the horse industry's leading auction house. It seems that Mr. Iavarone had a little trouble paying his bills after buying some horses back in 2003 and 2004, so much so that Keeneland obtained a judgement for $554,156 and the IRS put a lien against him for $130,000. Iavarone says that he has subsequently paid those debts and that his investors in IEAH, the owner of Big Brown knew about those debts.

Those investors may have known about the problems with Keeneland and the IRS, but in the preliminary prospectus reviewed by Newsday in connection with the $100 million hedge fund he hopes to raise for thoroughbred racing and breeding, there was no mention of his past issues with securities regulators. Iavarone told Newsday it will be added to the final document. Whether it would have been had the issue not been raised by Newsday is a question that we can never answer. However, its absence from the preliminary prospectus may well reflect Iavarone's intentions and there is no question about the necessity of such disclosure from a securities law perspective. If I were an investor being asked to commit a minimum of $500,000 I would sure like to know that the person I was entrusting it to had once upon a time been a boiler room salesman.

Sounders Score with Xbox

The Seattle Sounders FC may still be a year away from fielding a team but yesterday announced their most significant milestone yet. The Sounders announced that Microsoft's Xbox 360 Live division will be the Sounders jersey sponsor for a period of five years. This is Microsoft's first major foray into sports sponsorship. The deal is reputed to be worth $4 million per year, which would place it at the high end of MLS jersey deals.

In addition to jersey placement, Microsoft will get naming rights to the Sounders field at Qwest Stadium, which will now be known as "The Xbox Pitch at Qwest Field". Xbox 360 will sponsor the Sounders foreign exhibition tour. Like several of the other jersey deals in the league, this one carries with it league wide rights, in addition to team sponsorship, Xbox 360 will become the official and exclusive video game console of MLS.

This is a superb deal for both the Sounders and the league. Not only do they get Microsoft in the fold, but they get them in at a very good price and continue generating enthusiasm for the club in advance of their entrance into the league. The fan base is certainly energized, as the team has taken over 16,000 deposits for season tickets already.

Tuesday Tidbits

Welcome to another edition of Tuesday Tidbits as I pass along a few links to interesting stories I have found while frittering away countless hours surfing the web (avoiding real work):

1. Is the market in sports betting a bigger insider trading game than the stock market? (NY Times)

2. The SEC will take up the possibility of forming its own network at league meetings this week.  Wonder what Comcast thinks of that. (Memphis Commercial Appeal) 

3. Does posing in Playboy signal the end of your marketing career?  (Darren Rovell)

4. Should insurance on thoroughbreds take into account the horse's lineage where its breeding might indicate that it would be more prone to injury?  Big Brown is being insured for $50 million with no premium rating reflecting his breeding that indicates he would be injury prone. (Wall Street Journal)

5. Ten pro coaches that would make exceptional CEOs (HR World)

6. Major League Baseball tells Little League teams that they can't use team names on their jerseys - no more Cubs and White Sox for suburban Chicago kids team, (WBBM per Sports by Brooks).

7.  Sean Avery of the Rangers not only dates actresses but now is interning at Vogue. (Page Six via Ben Maller)

8. Once lowly Hull City wins promotion to the English Premier League for the first time in its 104 year history (Times Online)

NCAA and Ticketmaster Hit with Class Action Lawsuit

In order to obtain tickets to the Final Four at face value from the NCAA, you have to enter a lottery that begins on the day after the previous year's Final Four ends. The NCAA and its ticketing partner Ticketmaster have just been hit with a class action lawsuit in a California federal court alleging that the ticketing scheme constitutes an illegal lottery.

For those of you who may not have tried to get Final Four tickets or early round tickets, which are sold separately but the sale is conducted in the same fashion, the NCAA conducts a lottery as follows: You send in the full value for the number of tickets requested and an additional amount per ticket labeled a service fee. The NCAA then holds a lottery and notifies the winners sometime in the fall. If you are not selected than the NCAA refunds your money and keeps the service fee. The NCAA and Ticketmaster benefit from the service fess retained and additionally the NCAA benefits from the interest earned on all of the money received in May and kept until the fall when the price of the tickets is refunded to the those who did not get tickets.

The case was filed in California, a state in which both the NCAA and Ticketmaster do business. Lotteries are illegal in California and Indiana, where the NCAA is headquartered, unless conducted by the state or licensed charities.

The NCAA may be unique in handling tickets in this way - that is keeping the service way for all requests that don't receive tickets.  That payment for a chance at tickets may well be the key to a fairly high judgement against the NCAA and Ticketmaster if they allow this case to proceed to trial.  Plus, the NCAA's track record in court hasn't been too good lately.  Most states define a lottery as payment of value for a chance at winning something of value.  By retaining the service fee, the NCAA has converted its ticket lottery into an illegal gambling enterprise.  Just the thing that Myles Brand spends so much time and effort running around the country trying to prevent states from legalizing.

Cats Win! Cats Win!!

Congratulations to the Northwestern women's lacrosse team for a stirring win over Penn in yesterday's NCAA championship game, for their fourth straight championship. The Cats avenged their only loss of the season in beating the Quakers 10-6 in a game that was not nearly as close as the score indicated.  Penn scored the first goal of the game, but Northwestern took a 5-2 lead into halftime and dominated possession throughout both halves.  They extended the lead into the second half and were never really threatened.  The Cats were led in scoring by Hillary Bowen with three goals and Hannah Nielsen with three goals and three assists, but it was the play in goal of Morgan Lathrop that really stood out.  Congratulations Cats on another amazing season.

Final Four Weekend

Memorial Day weekend is traditionally the weekend of the Final Four in men's and women's collegiate lacrosse. This year, I'm fortunate in having two of my alma maters competing for championships - one in the men's and one in the women's .

Last night, the Northwestern women kept their hopes for a fourpeat alive with a stirring win over Syracuse. After going into halftime with a slim one goal lead, the Wildcats came out roaring in the opening minutes of the second half, scoring the first nine goals of the second half on their way to a 16-8 win. The Cats will play Penn tomorrow night for the championship. Penn is the only team to defeat the Wildcats this year so in addition to the their fourth straight title, the Cats will have revenge on their minds.

Duke will be looking to finally put the "lacrosse case" behind them this weekend in the last go round for the fifth year seniors who had the season taken away from them a couple of years ago due to the Duke administration's fecklessness in the face of the Durham prosecutors persecution of the team. The Blue Devils face old foe John Hopkins in the semi-finals today, in a rematch of the 2005 and 2007 championship games, won each time by Hopkins. The other semi-final pits Syracuse against Virginia, with the championship game to be held on Monday. This is the year I expect the Devils to finally get over the hump, as the Devils should be able to replicate their earlier win over Hopkins when they defeated the Blue Jays 17-6 in the regular season. Duke's offense should be too much for Hopkins and either the Orange or the Cavs, delivering the Devils their first national championship and a fitting coda to the "lacrosse case" era.

Brewers Try Viral Marketing

This is the time of year when it is often hard to sell baseball tickets. School is not yet out so kids often can't go to night games. The weather is often uncooperative, especially in northern cities and the pennant races are a just a distant dream of September. It's the time to try out new promotions and still try to sell season ticket packages.

The Milwaukee Brewers, unexpectedly sitting in last place in the NL Central, are trying a new approach to selling tickets. They are trying a form of viral marketing, using their season ticket holders. An email was sent out to the season ticket holders asking them to forward the email on to their friends. The recipients would be given an offer to purchase tickets to a series with the Dodgers and receive tickets to a series with the white hot Diamondbacks. The original season ticket holder would get club level seats to a D-back game if one of the people to whom they forwarded the email actually bought tickets.

What a great idea! I'll be very interested in hearing how the promotion turns out. If anyone is in Milwaukee, please let me know what you hear. The Brewers believe that no one else in MLB had tried it before and I have not heard of anyone else in one of the four or five majors (MLS included) having done so. It's a little bit hard for me to believe but so be it. The Brewers choice of the Diamondbacks as the giveaway is a little suspect as I think the D-backs probably would have been a big draw on their own the way they have been playing, but I guess the promotion was dreamed up before the D-backs got hot.

Almost Preakness Day

It's Black-Eyed Susan Stakes Day at Pimlico, which means tomorrow is Preakness Day, the most overlooked and overshadowed jewel of horse racing's Triple Crown. The Preakness has the misfortune of being the second race and the shortest and comes too close to the Derby, being only two weeks later. The proximity to the grinding mile and a quarter of the Derby causes many of the losing Derby horses to skip the Preakness for freshening with an eye towards going after the Derby winner in the Belmont, which comes three weeks after the Preakness.

Being a somewhat overlooked race bodes well for Big Brown as he will face only one other Derby horse in Gayego. Big Brown will go off as the odds on favorite to win in a race that almost everyone will be wishing and hoping to see both the colt win and all of the horses to complete without incident.

In an all too familiar pattern, Big Brown's principal owners IEAH has announced that Big Brown will not race past this year. An announcement about where he will stand at stud and the deal that will be made with the stud farm and his stallion syndication was supposed to have been made yesterday but the announcement was postponed as the deal apparently fell through. For IEAH to get the maximum value from the syndication deal, he better win tomorrow. Leaving value aside for the moment, retiring Big Brown after six races, assuming he goes on to run in the Belmont, is no good for either the industry or horse racing fans. Big Brown has the potential to be the star the industry needs to help rebuild its fan base. It would be a great benefit to the industry to see him, like Curlin, run as a four year old. More importantly, for the benefit of the breed, it is important to see him run as much as possible to determine if his bad feet are a condition that would ultimately be a conformation and racing flaw that would be passed along to his offspring. As we discussed earlier, the injury problem with horses as shown with Eight Belles and Barbaro is attributable, in my opinion, mostly to breeding horses for quick sale rather than for racing durability. Early retirement of quality horses to the breeding shed only reinforces the problem.



The owners of Pimlico are praying for more than just a safe trip of all of the horse tomorrow. Among other things, the principal owners of Magna Entertainment are praying that the weather forecast calling for a sunny day with highs in the seventies comes true as it will help bring out a crowd. Pimlico definitely needs a crowd as the viability of the track is more and more dependent on the Preakness. The failure of Maryland to pass legislation allowing slot machines at the track has put the continued operation of Pimlico, and with it the location and perhaps the date of the Preakness, in question. The Preakness has been sponsors and corporate tent buyers in recent years and the current economy is helping matters. Although attendance was a record 121,000 last year corporate sales were down. Even though the Preakness managed to drive Pimlico's profit up, Magna lost over $100 million last year. It wouldn't take too many down years at Pimlico to put the Preakness in jeopardy.

DC United Gets Shirt Deal

DC United became the ninth MLS team to have a jersey sponsor today with the announcement that Volkswagen would sponsor the team's jersey. VW will the club $14 million over 5 seasons making the deal the second richest jersey deal in the league behind the $5 million a year deal that Herbalife has with David Beckham, - oops, I mean the LA Galaxy. Volkswagen has also agreed to become the official car sponsor of MLS, replacing Honda whose deal ended this season. The league has been without a car sponsor since the season began. VW has recently moved it US headquarters to Herndon, Virginia, just outside DC.

BCS Confirms Big East Membership

While the lead story coming from last week's meeting of the BCS Commissioners was that there would be no change in the structure of the BCS Bowl Championship Series, meaning no playoffs and no adoption of the Plus One format, the more important decision for fans of the University of Louisville (and most of you know I am one) was the reaffirmation of the participation of the current six conferences through the end of the 2013 season. That means that the participation of the Big East is secure despite the harping of some sportswriters.

There was a very complicated mathematical formula applied taking into account Top 25 rankings, BCS bowl performances, conference rankings and other measures. The formula was first derived when the ACC raided the Big East and the Big East was forced to search for new members back in 2003. At that time, the formula was put in place to give the Big East an adjustment period which ended this year. However, it was the reconfigured ACC which actually found itself in greater danger of falling prey to the vagaries of the formula. Its performance since the raid has been far inferior to that of the Big East under all of the different categories used to measure continued membership. However, all is well under the Big Tent and none of the Big Six are going anywhere. They will continue to cut up Fox's and ABC's money among themselves and go home happy.

Eight Belles Leaves More Questions Then Answers

Before I get into the Eight Belles issues, let me first say a few words about Big Brown. I'm not afraid to admit when I'm wrong and I was very wrong about this Derby. I didn't think that Big Brown could get a mile and quarter off of only three races and especially when he would have to use up so much energy coming so wide of the field. Well, he's a whole lot better colt then I gave him credit for, or he was really juiced or some combination of the two. I lean towards the latter. He is a whole lot better than I gave him credit for and we'll never know about the juice. He shouldn't be challenged in the Preakness but the Belmont should be very interesting.

The Eight Belles tragedy raises several questions about the conduct of thoroughbred racing and breeding, some of which I discussed in my pre-Derby post, but will get into in a little more complete way today. The horse racing and breeding industry is going to have to do some serious soul searching and take a good hard look at the way it has been doing business if it is to restore the public's confidence and regain the public's interest in the sport.

There is no quick fix to a rash of breakdowns, if there is even a rash occurring. We may think there is as a result of Eight Belles and Barbaro in just three years, but Eight Belles is the first fatal injury in the Derby in at least 80 years and perhaps ever, although records and history are a little sketchy. It just so happens that the two horses were injured in the only races that most of the country seems to care about.

Three factors stand out in addressing fatal injuries. One is the condition of the racing surface. Churchill Downs is a dirt track. Whether synthetic surfaces reduce the rate of injuries is something that is too early to tell, but is being studied by vets and race tracks. The results will determine the course of tracks in the future. With the history of the Derby, and the care taken with the track, it's only natural for Churchill Downs to be one of the last track to switch away from dirt. I should point out that there is no indication that track conditions had anything to do with Eight Belles' injury.

The two major factors I believe are breeding and medication. Over the last twenty years, there has been a radical shift in the breeding industry as breeders have bred almost exclusively for the sales market rather than for racing themselves. As a result, importance is placed on how the animal looks in the show ring (conformation)and the pedigree line, rather than the ultimate track performance. This has led to inbreeding to successful sire lines and the unwillingness to try and inject new blood into the breed since buyers are reluctant to take chances. Sellers will often have surgery performed on young animals to correct conformation defects at a very early age thereby hiding problems which will be passed on to later offspring or will arise once the horse is placed into training. As Jon Weinbach showed in his Wall Street Journal article every horse in this year's Derby could be traced back to Native Dancer. That inbreeding is bound to produce problems.

Medication is an issue the thoroughbred industry refuses to face. America is the only nation in the world were a horse is allowed to be given race day medication. Why we allow the medication of horses in training that can mask an unsound horse's troubles or allow for the medication of horses in the weeks leading up to sales, is a question I have never seen adequately answered. That question is likely to continue to dog this year's Triple Crown quest, given the sketchy past of Rick Dutrow, Big Brown's trainer, who has received multiple suspensions for illegally medicating his horses. The thoroughbred industry needs to get together and agree that all drugs should be banned and no horse should run on anything but hay, oats and water - just like the rest of the world.

Finally, and this relates back to breeding, the industry should push for longer races, particularly at the stakes and allowance level. This would force breeders to breed more for stamina instead of just speed as they do now, since buyers would increasingly be looking for stamina in the horses they would want to purchase.

I may be living in a fantasy world thinking that racing would adopt any of these suggestions. Racing is notoriously fragmented and slow to react to change. However, the uproar that has greeted the industry in response to the Eight Belles tragedy may just be enough to provoke real action. Horse racing is supposed to be the stuff of dreams, right?

Computer Crash

My apologies for the intermittent posting over the last few days - it will be like that for the next week or so as well. My computer has probably breathed its last. It crashed last week and the Geek Squad believes it to be beyond repair at a reasonable price. That means I'm borrowing my wife's machine for periodic checks of email and sundry other things but my usage is limited. Posting will be accordingly light.

It also means that I will be in the market for a new laptop. I'm not sure what I want to buy since I didn't plan on buying this soon and haven't really been thinking about it. The thought of making the jump to a Mac has appeal but the price doesn't. I am still thinking about getting one for under$850, preferably well under and am soliciting any and all suggestions, comments and helpful advice, war stories, etc. I need to start researching but keep putting it off.

A posting about the Derby will be forthcoming as soon as time allows.

Three Questions For Handicapping Derby 134

It's Thursday of Derby Week and here in the River City that means it's Pegasus Parade Day. The Parade goes off around 5:00 tonight and is Louisville's answer to the Macy's Thanksgiving Day Parade, only without the bearded guy in the red suit. It's a light day for the horses and no event real events surround the race

Yesterday was the post position draw and that brings us to Question number 1 (the questions are in no particular order of importance). How important will post position be? Derby morning line favorite Big Brown will break from post position 20, on the extreme outside. That post position has seen only one winner in the race's history, Clyde Van Dusen in 1929, but Big Brown has the speed to get out early and away from the cavalry charge that is the post charge from the gate. Whether he uses up too much getting away from the field may determine his fate. Second choice, Colonel John, (my current pick still subject to change) will break from the 10 spot, an almost perfect post position. Third choice, Pyro has the post position 9 just inside Colonel John and has a great spot as well.

Question number two deals with the racing surface and for this question Colonel John and Pyro are the poster boys. Will the horses who have raced primarily on synthetic tracks to the Churchill Down dirt? Colonel John who has raced exclusively in Southern California has never run a race on dirt. He has trained well all week and posted some terrific work out numbers but that's not the same thing as racing on dirt. How he reacts to the dirt, especially if it turns out muddy is impossible to judge at this point. I loved his Santa Anita Derby - it was the most impressive run I saw all Spring but I have nagging doubts about how he will handle the Downs dirt.

Pyro presents a somewhat different problem. Never worse than third in six starts over a variety of tracks and conditions, the Louisiana Derby winner flamed out in the Bluegrass Stakes over Keeneland's polytrack synthetic surface, finishing tenth. Do you just throw the race out and figure he will revert to form when he returns to the dirt at Churchill Downs or was the Bluegrass a signal that something is wrong with the colt? It's often the case that a horse running on a different surface for the first time won't run well so the Bluegrass truly could be just an aberration worth throwing out when trying to decide if Pyro is worth betting. Still, the drop in form was huge and I rather prefer Colonel John although the price might not be as large as I hoped given Big Brown's post position.

Question number 3 is the same one dogging human sports: what is the effect of performance enhancing drugs? The return to the Derby of Rick Dutrow, Big Brown's trainer, brings the issue back to the forefront. While there is no evidence that he is doping Big Brown, he has a bit of a checkered past. In 2005, he served a 60 day suspension when two horses tested positive for prohibited drugs and he had a claiming violation. Last year he had a one week suspension because of a medication overage in one of his horses and a two week suspension for violating his 2005 ban by having contact with one of his horses. In addition to Dutrow, Steve Asmussen served a six month suspension in 2007 for a medication violation in Louisiana. Does that mean that either of them is using banned substances on their Derby horses? Of course not, but it does indicate that horse racing is no more immune from the performance enhancing substance controversy than any other sport and that it is a problem that the horse racing community needs to address. It needs to focus on and face squarely and publicly and not sweep under the rug. It also presents an X factor in trying to handicap the Derby because it is a great unknown and unknowable.

So, three questions to ponder as we sit two days before Derby and one day before the Oaks. Today, I like Colonel John to win and I'll include him in an exacta box with at least Z Fortune (Steve Asmussen trained and Robbie Albarado jockey) a play on the jockey as much as anything, with one or more of Monba, Eight Belles and Tale of Erkati on the bottom. I just don't think that Big Brown can get 1 mile and 1/4.