Horse racing board stripped of budget

For the second time this year, lawmakers are scrutinizing Gov. Arnold Schwarzenegger’s appointees on a state board over conflicts of interest and other issues.

In a rare move this month, a state Senate subcommittee stripped the California Horse Racing Board of its $10.8-million budget. Legislators have accused members of mismanagement and ethical lapses, including the refusal of one appointee to surrender $24,000 in prize money won by a horse he owned that had tested positive for morphine.

Some board members acknowledge that the panel, which is dominated by racehorse owners, may need an overhaul. But they say lawmakers have come after them because the board angered a generous campaign donor with a recent ruling.

In March, the board rebuffed a request from the Bay Meadows Land Co., owner of a Bay Area racetrack. The company wanted permission to keep its hard dirt track rather than spend up to $10 million on softer synthetic turf, which is required by the state to help save horses from fatal injuries.

Bay Meadows executives complain that the board’s decision will force them to close the San Mateo, Calif., track -- already slated for commercial and residential development -- at least a year earlier than planned. The company, which has spent more than $3 million on political campaigns in the last couple of years, took its cause to lawmakers.

According to secretary of state’s office filings, since December 2005 Bay Meadows has given more than $600,000 to political parties, $300,000 to committees controlled by the leaders of the state Senate and Assembly and more than $260,000 directly to lawmakers.

“Once you get on somebody’s radar screen and they’re not a happy camper,” said racing board member and Harris Farms owner John C. Harris, “they’re ... going to try to find everything else that’s going wrong.”

The board’s most vocal critic is Sen. Leland Yee (D-San Francisco), whose district is home to Bay Meadows and 500 of the company’s workers. Yee said he is not being vindictive.

“The mandate, the mission, the way they operate needs to be aired out in public,” he said of the board.

The deletion of the board’s budget has not been approved by the full Legislature.

The board of seven gubernatorial appointees -- six of them Schwarzenegger’s -- licenses nearly 14,000 trainers, jockeys, owners and others involved in an industry that generated $4.2 billion in wagers last year and $38 million in state revenue.

Yee compared the racing board to the Board of Chiropractic Examiners, which was the focus of an April legislative inquiry into conflicts of interest, violations of California’s open meetings law and other problems.

Yee said the racing board warrants similar scrutiny. “This is probably one of the best examples of the fox guarding the hen house,” he said.

Yee began calling for an overhaul of the board after it refused to exempt Bay Meadows from the new turf requirement.

Thirteen horses had to be euthanized during 48 days of racing at Bay Meadows this year, while no horses suffered fatal breakdowns racing on the synthetic turf during Hollywood Park’s 36-day meet last fall, according to the racing board. Bay Meadows Land Co. also owns Hollywood Park.

Edward Halpern, executive director of California Thoroughbred Trainers, which encouraged the board to require synthetic tracks, said the lives of many horses would be spared if all of the state’s major tracks were resurfaced. He questioned Yee’s motives.

“I think Sen. Yee is listening to the wrong people,” he said.

Bay Meadows’ waiver request could be reconsidered at next month’s board meeting. In the meantime, Yee and other legislators appear set to doom the appointment of John W. Amerman, a thoroughbred owner and former chairman of Mattel Inc. It was his horse that tested positive for morphine, a banned substance, after winning at Hollywood Park in 2000.

Amerman must be confirmed by the state Senate within the next month if he is to remain on the board, and senators have postponed his confirmation hearing indefinitely. Earlier this month, Yee sent Senate President Pro Tem Don Perata (D-Oakland) a letter opposing the confirmation.

Yee argued that Amerman showed a “lapse in judgment” by refusing for six years to follow state rules and forfeit the prize money.

The racing board filed a complaint against Amerman’s trainer in September 2000. Lawyers for the trainer blamed the test results on contaminated feed. Board investigators dismissed the complaint June 2, 2006, and 28 days later Schwarzenegger appointed Amerman to the board.

Under board rules, the owner of a disqualified horse must relinquish prize money regardless of whether a complaint about the substance is sustained and regardless of who is culpable for the positive test.

Amerman did not relinquish the $24,000 until this month. He was facing a June 6 hearing before racing board investigators.

Amerman said he forfeited the money “although I was clearly in the right.”

“I just felt that it was something the legislators were using against the CHRB and I wanted that to go away,” he said.

One longtime observer of California’s myriad regulatory boards called Amerman’s situation an obvious conflict.

“You do not want people making decisions as regulators who have matters pending before that very body as a licensee,” said Robert C. Fellmeth, executive director of the Center for Public Interest Law at the University of San Diego School of Law.

Yee has raised other concerns about the board, including its arrangement with attorney and horse trainer Darrell Vienna of Sierra Madre.

Vienna was hired privately by Richard B. Shapiro, the board chairman, to train a horse last year at the same time Vienna was working for the board under a no-bid contract for $348,000.

Vienna was hired by the board to conduct seminars for its investigative and regulatory staff.

“Darrell is the only person I know who is a trainer, is an attorney, has conducted hearings, knows how to do investigations and understands all of our rules,” said Shapiro, a Schwarzenegger appointee.

Both Vienna and Shapiro said they did not know each other before Vienna began working for the board. Shapiro said “it crossed my mind” that hiring Vienna privately might pose a conflict. But every trainer he hires, Shapiro said, is licensed by the board, and Vienna charged him $85 a day, the same as other trainers.

“It would be wrong if I used my position in any way to my benefit,” Shapiro said. “I don’t. I’m a very hands-off owner. I basically show up and hope the jockey’s wearing my colors and that’s about it. I haven’t won a race in over two years.”

Fellmeth argued that racing board members should not be involved in the industry. Under the 1933 law that created the panel, people with a financial stake in racetracks are prohibited from serving, but racehorse owners are not. Five of the seven members own racehorses.

With millions of Californians to choose from, said Fellmeth, “we don’t have to confine ourselves to the 200 or 300 people who own horses and have an economic stake.”

The Schwarzenegger administration defended his appointees.

Spokeswoman Sabrina Lockhart said the governor “stands by his appointees and respects the board’s actions.”

But the governor is open to talking about restructuring the board, she said.

“The governor’s office has an open-door policy if legislators have ideas to make state government better,” Lockhart said.

Shapiro said he, too, was open to revamping the board, but thought it was important to have members who understand horse racing.

“Maybe the board should only allow a certain number of horse owners,” he said.

nancy.vogel@latimes.com