COMMENTARY / HORSE RACING : In the Sport’s Troubled Times, Laurel Executive Has Top Salary

While business at Laurel and Pimlico has been declining sharply, Joe De Francis has been one of the highest-salaried racing executives in the United States. The president of the major two Maryland thoroughbred horse racing tracks collected pay of $719,399.60, plus benefits, in 1991.

Yet the annual financial statement that the privately owned tracks file with the Maryland Racing Commission listed De Francis’s total salary for both tracks as $388,544. Such a disparity in reporting of track officers’ income has been a regular practice in Maryland for years.

The chairman of the Maryland Racing Commission, John H. Mosner Jr., said Wednesday race track officers are not required to file their salaries in their annual statement, but said De Francis was questioned by the commission about the disparity in the audit and was satisfied “no improprieties” had taken place.

“Where we’re going to be concerned is if we see a real deterioration because of salaries and we have not seen that,” Mosner said. “As long as the race tracks have a positive cash flow, we’re satisfied.”

The amount of De Francis’s actual compensation was made public in a lawsuit filed Friday by Tom and Bob Manfuso, part-owners of the tracks, who have been engaged in a bitter legal battle with their partner.

Although the law suit concerns De Francis’s general management, the Manfusos cited the comparison of De Francis’s salary with that of New York Racing Assn. President Gerald McKeon, who earns $261,000 for running an operation whose gross business is more than double that of the Maryland tracks.

McKeon was recently criticized by New York Gov. Mario Cuomo, who called the high salaries of NYRA executives “absurd.” Martin Jacobs, vice president and general counsel of Laurel and Pimlico, also received a salary considerably higher than indicated on the financial statement to the racing commission. He earned $389,739.88 in 1991, according to the Manfuso’s suit, although the statement given to the commission listed his salary at $250,000. Jacobs’s counterpart at the New York Racing Assn. receives $177,000 annually.

On the comparison between the salaries of Maryland and NYRA executives, Mosner said New York racing was a “quasi-public corporation and De Francis and Jacobs are working for a privately owned corporation.” Mosner said McKeon was “grossly” underpaid.

De Francis, 38, said this week that the salaries he and Jacobs receive are “not unreasonable given the size of the enterprise and the value of what we contribute to the business. We earn every penny.”

He said the discrepancies in the salary information filed with the racing commission resulted from accounting procedures that attribute a portion of track officers’ income to general track expenditures. He also said that the statement to be filed with the commission this month would now include full compensation information for track executives.

De Francis, whose tracks have shown a steady decline in attendance and betting for the last three years, pointed out that he has never taken any dividends from the business. “With all that we have at risk,” he said, “the only return we’ve ever received is the salary we’ve earned.”

The discrepancy of track officers’ salaries in the annual audit statement to the commission began when De Francis’s late father, Frank, was operating Laurel and Pimlico in the mid-1980s, according to De Francis. Frank De Francis took a salary of nearly $700,000 a year, but he reportedly was concerned about the possible political and public relations ramifications of that figure.

So in the audited statement to the commission, some of the income of executives were shifted to items covering salaries and expenditures for the entire track operation but didn’t specify who received what. The financial statement was audited by the accounting firm of Ernst and Young. A spokesman for the firm said he would have to know who did the audit before responding.

“The procedure for reporting salaries was set up by the Manfusos and my father, and we have continued the same policy,” Joe De Francis said. “It’s a technical accounting question.”

When Frank De Francis died in 1989, his son took over the presidency of the two tracks and also assumed his father’s salary. He and the Manfusos signed a stockholders agreement--now the subject of their ongoing legal battles. According to the agreement, the Manfusos were allowed to receive $1.25 million each, equivalent to the money they had put up toward the purchase of Pimlico, and were each to receive more than $10,000 a month for four years. De Francis and Jacobs retained their salaries and were to get small annual increases.

If Maryland racing had continued to boom, the size of executive salaries might have been a non-issue. But business at Laurel and Pimlico has declined steadily.

In 1990, Joe De Francis’s first full year at the helm, wagering at the two tracks totaled $435 million. In 1991, the sum fell to $403 million and last year it was $383 million. The racing business in general has been hit hard by general economic conditions and the shortage of horses that have affected the industry. De Francis’s operation of the track has provoked criticism by the Manfusos, as well as some complaints from horsemen, fans and the press. De Francis has responded to the downturn in business by imposing cutbacks and asking for sacrifices from people in many parts of the business.