Horse Racing Law to Benefit Some of Davis’ Donors

Even as Gov. Gray Davis downplays the significance of his recent decision to permit armchair wagering on horse racing, gambling experts are betting that his action will be a boon to their business.

Davis signed into law a bill that will permit Internet and telephone gambling on horse races. He vetoed a similar bill last year, concluding that “changing state law to allow wagering via the Internet and telephone would be a major change in the status quo and, I believe, a significant expansion of gambling.”

On Monday, however, Davis signed a slightly reworked version of that legislation, contending this time that it would not result in a significant growth in gambling.

Davis said he relied on a letter signed by Atty. Gen. Bill Lockyer that concluded the bill, though “very similar” to last year’s measure, would not “create a new form or expand an existing form of gambling.” Rather, Lockyer wrote, the bill would help ensure California tracks receive roughly $30 million wagered illegally at offshore sites.

Others see it differently. Race horse owners, executives at companies that stand to profit from legalized at-home betting and experts such as John Reagan, a 20-year veteran at the California Horse Racing Board, believe the legislation will bring about some of the most far-reaching developments ever in California horse racing.

Reagan, a state official who will help write regulations implementing the bill, said legalizing bets by computer and telephone is “kind of like Pandora’s box. We’ve opened it, and now we’ll see what it is.”

Davis’ action represents the latest step in his complicated relationship with legalized gambling.

He repeatedly has said he personally dislikes gambling. But in 1999, he approved compacts authorizing Nevada-style casinos on Indian reservations. The decision allows tribes to operate at least 45,000 highly profitable slot machines, and possibly as many as 113,000, depending on how the compacts are interpreted.

With tribal casinos expanding, the horse racing industry feared its allure would diminish. So-called account wagering, in which gamblers open accounts and place bets online or by phone, was seen as a savior.

Horse racing interests, meanwhile, have been good to Davis.

In 1999, at the start of Davis’ administration, the industry held a fund-raiser for him in Palm Desert, contributing more than $100,000, although Davis would not discuss any pending legislation at the event, said John Van de Kamp, a former California attorney general who is president of an association of thoroughbred owners.

Lawmakers held off pushing legislation allowing account wagering in 1999, in part because Davis had signed compacts with tribes and was balking at other gambling bills.

After voters approved Indian gambling in March 2000, lawmakers proceeded and the horse racing bill won legislative approval by a wide margin. But Davis, who was criticized for signing tribal compacts that could lead to far more than a modest expansion of gambling, vetoed the bill.

Regrouping this year, the industry tapped the Legislature’s most influential Democrats--Assembly Speaker Bob Hertzberg (D-Sherman Oaks) and Senate President Pro Tem John Burton (D-San Francisco)--to push the new version, which was approved July 18.

Unsure how Davis would react, the race track and thoroughbred owners in July retained lobbyist Darius Anderson, who was fund-raising chairman for Davis’ 1998 election. He declined comment.

In a statement when he signed the bill, Davis cited two factors that changed: First, the new bill contains provisions that he says will guard against betting by minors. Second, Lockyer’s letter pointed to a change in federal law approved in December that says placing bets by phone or the Internet across state lines would not violate federal law as long as bets are legal in states where such action is legal.

Nelson Rose, a gambling expert and professor at Whittier Law School, was puzzled by Davis’ reliance on the change in federal law. Even with the change, Rose said, telephone and computer betting in California would have been illegal if Davis had not signed the law.

By signing it, however, Davis delivered an important bit of help to some of his largest benefactors. One is media mogul Rupert Murdoch, whose News Corp. has an ownership stake in Gemstar-TVG, which operates Television Games Network, a cable television operation that airs horse racing and can handle bets in states where it is legal. Murdoch contributed $150,000 to Davis in 1999 and various Murdoch affiliates and associates have donated tens of thousands more.

“Absolutely not,” Davis spokesman Roger Salazar said of any link between donations and Davis’ action.

John Lindman, general counsel for Los Angeles-based Television Games, said California horse racing loses money as gamblers place bets with out-of-state and offshore account wagering operations. Once the bill is implemented next year, California tracks will receive what has been leaving the state.

“Obviously, we’re looking forward to the opportunity to increase the distribution of their product,” Lindman said. “We can help them by increasing the popularity of the sport, increasing the revenue for the sport and ensuring that the revenue returns to California racing.”

As betting increases and purses grow, thoroughbred horse owners also may benefit. One such owner is Martin Wygod, a Rancho Santa Fe businessman who is chairman of the dot-com firm WebMD and owns one of the state’s premier thoroughbred ranches, Riveredge Farms in Santa Inez. Wygod and his wife have contributed $150,000 to Davis since he took office.

Wygod said he did not discuss the bill with Davis but predicted the change is “going to be very advantageous” to the horse racing business. “If the rest of the country was going to be doing it and California was not,” he said, “it would put us at a decided disadvantage.”