[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]


 
   THOROUGHBRED HORSE RACING JOCKEYS AND WORKERS: EXAMINING ON-TRACK 
          INJURY INSURANCE AND OTHER HEALTH AND WELFARE ISSUES

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 17, 2005

                               __________

                           Serial No. 109-62

                               __________

      Printed for the use of the Committee on Energy and Commerce


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house


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                    ------------------------------  

                    COMMITTEE ON ENERGY AND COMMERCE

                      JOE BARTON, Texas, Chairman

RALPH M. HALL, Texas                 JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida             Ranking Member
  Vice Chairman                      HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
ED WHITFIELD, Kentucky               SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia             BART GORDON, Tennessee
BARBARA CUBIN, Wyoming               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
HEATHER WILSON, New Mexico           BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona             ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING,       ALBERT R. WYNN, Maryland
Mississippi, Vice Chairman           GENE GREEN, Texas
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania        JIM DAVIS, Florida
MARY BONO, California                JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon                  HILDA L. SOLIS, California
LEE TERRY, Nebraska                  CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey            JAY INSLEE, Washington
MIKE ROGERS, Michigan                TAMMY BALDWIN, Wisconsin
C.L. ``BUTCH'' OTTER, Idaho          MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee

                      Bud Albright, Staff Director

        David Cavicke, Deputy Staff Director and General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

              Subcommittee on Oversight and Investigations

                    ED WHITFIELD, Kentucky, Chairman

CLIFF STEARNS, Florida               BART STUPAK, Michigan
CHARLES W. ``CHIP'' PICKERING,         Ranking Member
Mississippi                          DIANA DeGETTE, Colorado
CHARLES F. BASS, New Hampshire       JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon                  JAY INSLEE, Washington
MIKE FERGUSON, New Jersey            TAMMY BALDWIN, Wisconsin
MICHAEL C. BURGESS, Texas            HENRY A. WAXMAN, California
MARSHA BLACKBURN, Tennessee          JOHN D. DINGELL, Michigan,
JOE BARTON, Texas,                     (Ex Officio)
  (Ex Officio)

                                  (ii)




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Amos, Don, Chief Operating Officer, Magna Entertainment, 
      Inc., accompanied by Andrew Staniusz, Corporate Counsel and 
      Director of Employee Relations.............................    27
    Daney, Bernard J., Chairman, Delaware Thoroughbred Racing 
      Commission.................................................    87
    Finamore, John V., Senior Vice President of Regional 
      Operations, Penn National Gaming, Inc......................    10
    Fravel, Craig R., Executive Vice President, Del Mar 
      Thoroughbred Club..........................................    33
    Giovanni, John, former National Manager, The Jockeys' Guild..    80
    Haire, Darrell, Regional Member Representative, Jockeys' 
      Guild......................................................   100
    Maline, Martin A., Executive Director, Kentucky Horsemen's 
      Benevolent and Protective Association, Inc.................    69
    Metzger, Daniel J., President, Thoroughbred Owners and 
      Breeders Association.......................................    56
    Monahan, Dick, Director and Racing Council Chairman, American 
      Quarter Horse Association..................................    96
    Riedel, Richard, Executive Director, Kentucky Racing Health 
      and Welfare Fund...........................................    74
    Roark, John O., President and Chairman, National Horsemen's 
      Benevolent and Protective Association......................    59
    Scherf, Christopher N., Executive Vice President, 
      Thoroughbred Racing Association............................    14
    Sexton, Steve, Senior Vice President of Kentucky Operations 
      and President of Churchill Downs...........................    22
    Shapiro, Richard B., Commissioner, California Horse Racing 
      Board......................................................    90
    Van Clief, D.G., Jr., Commissioner and Chief Executive 
      Officer, National Thoroughbred Racing Associations.........    19
    Violette, Richard A., Jr., Chairman, Board of Directors, New 
      York Jockey Injury Compensation Fund.......................    84
    Williams, Rose Mary, Director of Racing, Mountaineer Race 
      Track and Gaming Resort....................................    13

                                 (iii)

  


   THOROUGHBRED HORSE RACING JOCKEYS AND WORKERS: EXAMINING ON-TRACK 
          INJURY INSURANCE AND OTHER HEALTH AND WELFARE ISSUES

                              ----------                              


                      THURSDAY, NOVEMBER 17, 2005

                  House of Representatives,
                  Committee on Energy and Commerce,
              Subcommittee on Oversight and Investigations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 1:02 p.m., in 
room 2322 of the Rayburn House Office Building, Hon. Ed 
Whitfield (chairman) presiding.
    Members present: Representatives Whitfield, Stupak, Barton 
(ex officio), Inslee, and Burgess.
    Staff present: Tom Feddo, majority counsel; Mike 
Bloomquist, majority counsel; Clayton Matheson, research 
assistant; John Halliwell, policy coordinator; Mark Paoletta, 
chief counsel; Alan Slobodin, majority counsel; Peter Spencer, 
majority professional staff; Terry Lane, deputy press 
secretary; Jonathan Pettibon, legislative clerk; David Nelson, 
minority counsel; Elizabeth Ertel, research assistant; and 
Chris Treanor, staff assistant.
    Mr. Whitfield. I would like to call this hearing to order. 
I am sorry we are already 2 minutes late but we have a lot or 
witnesses today. In fact, a total of 17 and I really do 
appreciate all of you taking time from your busy schedules to 
be with us as we explore this important issue of thoroughbred 
horse racing jockeys and workers, and I might add Quarter 
Horses, as well. And examining on-track injury, insurance and 
other health and welfare issues.
    I would also make the comment that we have already read all 
of the testimony, which I thought was very good and quite 
thorough on all of the issues. And we are going to go on and 
start all of our opening statements and the reason that we are 
is because it looks like very soon, we are going to have two 
floor votes. One will be a 15-minute vote and one will be a 5-
minute vote and then we are going to come right back and we 
will get started because we look forward certainly to the 
testimony of everyone on the panel today.
    Many of you know that we have already had one hearing that 
focused upon the Jockey's Guild and its leadership. And as a 
result of that hearing, and not only just that hearing but 
other issues as well, as you probably know within the last two 
or 3 days the jockeys took matters into their own hands, and 
rightfully in my view, eliminated Mr. Gertmenien and his 
leadership from the Jockey's Guild. I think that was a right 
decision because it was quite obvious that under his 
leadership, that the Jockey's Guild, they totally lost their 
Disability Fund. All of the funds were depleted from that Fund. 
They totally lost their catastrophic coverage because the Guild 
allowed the policies to lapse and certainly did not notify them 
of that. And under the Gertmenien leadership, such a bad 
relationship with the other players in the industry was created 
that the Guild lost the over $2.2 million that went to them 
each year from the tracks themselves. So we are hopeful that 
under new leadership that the Guild can become quite effective 
in doing what it was set out to do, and that is to provide 
adequate health coverage for the members of the Jockey's Guild.
    I would also say, however, that those of us on the 
committee do not view this to be the end of the story. Because 
we do feel quite strongly that this whole issue of jockey's 
health, the lack of a centralized data system on what causes 
accidents on the racetrack-some of you testified about the lack 
of that data that is available for a centralized place. We have 
the Interstate Horse Racing Act itself. I know that there is 
mixed feelings about how much should the Federal Government be 
involved in racing, should it be involved at all. The Federal 
Government is involved in racing because of the Interstate 
Horse Racing Act, which provided the framework for 
simulcasting. Some people have said don't touch that Act. Other 
people say you can use this Act as a vehicle. Some people have 
raised the question of why were jockeys left out of that Act? 
Why were horseman's groups only included in that Act? What is 
the difference in a trainer and a jockey? They both are 
independent contractors in one extent. Some trainers are 
owners. Some jockeys are owners. But the question was raised, 
should jockeys be a part of the Interstate Horse Racing Act? 
Should they have a split in some of those simulcasting 
revenues?
    We have a lot of different organizations involved 
nationally in racing. We have got the TRA. We have got the 
NTRA, the HPPA, the TOBA and we know that it is a fragmented 
industry with a lot of different rules, depending upon which 
State you are in. We have great progress made by the leadership 
of some tracks like Magna and Churchill Downs, who voluntarily 
went to a $1 million policy. We have other tracks that have 
$100,000 policies to cover on-track injuries. We have the TRA 
that established the first program back with the Jockey's Guild 
many years ago, I guess many in the early fifties or late 
forties through Cigna. And then we have the Churchill Downs and 
Magna, the one through AIG.
    There is a question of should there be a Federalized 
Workman's Comp system? When Mr. Giovanni was the head of the 
Jockey's Guild they established a program in New York, a 
Workers' Compensation program there. And Mr. Giovanni and 
others came to the Congress and said we would like a 
Federalized Workman's Comp program because these jockeys are 
traveling all over the country and there should be one unified 
system to take care of their situation. And at that time, it 
was not decided to pursue that so some arguments will be made 
to do that today.
    I have already indicated that arguments are being made to 
revisit the Interstate Horse Racing Act. And I know that that 
interests many people, particular as it relates to off-shore 
gambling and the loss of revenues in off-shore gambling and the 
conflict with the Wire Act, or perceived conflict with the Wire 
Act. Racing medication, race day medications definitely has an 
impact on racing and many of you represent groups that have 
been advocating a national, uniform system for medications and 
it still seems to be a piece meal approach on that.
    A jockey's weight continues to be a big issue and it is 
important, I think, that there be a standard there because as 
jockeys go into different jurisdictions it doesn't make a lot 
of sense to have a lot of different weights. Knee crops-I guess 
California is the only State that does the knee crops program 
for any horse that goes down on a racetrack in California. My 
friend, Mr. Stupak, and others on his side wrote a letter to 
the NLRB and wanted to know why the NLRB was not more involved 
in this issue. And of course we know that historically they 
have taken the position that while not unrelated to commerce, 
it is presently local in character. Horse racing is presently 
local in character and therefore, they have decided not to get 
involved in it.
    But these are just a few of the issues that are out there 
and I think this hearing can be productive for all of us. I 
mean, we are all interested and this industry has a tremendous 
economic impact. Just last night, a 16-year-old apprentice 
jockey was killed in Indiana and we know that it is a dangerous 
sport. So I look forward to the testimony of all of you. You 
all are the experts and we are trying to come up with some 
solutions to some of the many problems facing the industry. And 
yet we want to be cautious about how we move forward but we 
want to explore every option, look at everything and then move 
forward in what we hope will be the most expeditious and 
productive way. So with that, I would recognize the ranking 
minority member, Mr. Stupak of Michigan for his opening 
statement.
    [The prepared statement of Hon. Ed Whitfield follows:]

  Prepared Statement of Hon. Ed Whitfield, Chairman, Subcommittee on 
                      Oversight and Investigations

    Good afternoon and welcome. Today, the Oversight and Investigations 
Subcommittee will continue examining a serious health and welfare 
matter affecting professional horse racing and interstate commerce. We 
will hear testimony on the possibilities of improving the health 
insurance situation for jockeys, exercise riders, and backstretch 
workers.
    The level of urgency for taking action was heightened by our 
hearing of October 18th, which featured the tragic story of 
professional jockey Gary Birzer, who broke his back in a fall and 
became permanently disabled. When he turned to the Jockeys' Guild for 
help--for the catastrophic on-track insurance that he believed he had 
been provided by the Guild--he discovered that he and other jockeys had 
no coverage. To make matters worse, the Guild's Chief Operating 
Officer, Albert Fiss, told Mr. Birzer that Mr. Birzer was being used as 
a guinea pig, to put pressure on the racetracks to provide the 
insurance instead of the Guild.
    The Subcommittee at the October 18th hearing examined the Guild's 
decision to let the on-track policy lapse--allegedly for a lack of 
funds--and its failure to adequately notify its members of that 
decision. The Subcommittee also heard from Dr. Wayne Gertmenian, the 
President of the Guild. The Subcommittee considered Dr. Gerrtmenian's 
leadership of the Guild, the involvement of Dr. Gertmenian's consulting 
company, Matrix Capital Associates, and the compensation and fees that 
both receive.
    We learned that Matrix has no employees, is based out of Dr. 
Gertmenian's home, and that Matrix's sole client is the Guild. We found 
that in 2004, the Guild paid Matrix $335,000 in consulting fees, but 
that Matrix had only about $151,000 in Guild-related expenses, leaving 
Dr. Gertmenian's consulting company with nearly $184,000. This was over 
and above the salary and fringe benefits provided directly to Dr. 
Gertmenian by the Guild. Even more troubling, an analysis of 2003 shows 
that the Guild paid Dr. Gertmenian's company $412,000 in consulting 
fees, and Matrix had just over $87,000 in Guild-related expenses. Thus, 
taking expenses into account, more than $324,000 was still available to 
Matrix, and the use of these remaining funds has not been explained.
    Dr. Gertmenian did little to explain or justify these payments and 
expenditures--which occurred while he oversaw the cut of on-track 
insurance coverage--such as the $50,000 in so-called consulting 
expenses that benefited Dr. Gertmenian's daughter or her company in 
2004. He did little to explain or justify the numbers on Matrix's 
corporate tax returns. Furthermore, with all that money spent on so-
called consulting fees for Matrix, Dr. Gertmenian, Albert Fiss, and 
Lloyd Ownbey have not been able to describe what they and Matrix have 
accomplished for the Guild during the past four years. For that matter, 
the Guild's Chairman and Vice Chairman of the Board, David Shepherd and 
Tomey-Jean Swan, were unable to answer those questions either.
    At the hearing, Dr. Gertmenian also did little to substantiate 
certain items on his resume. To date, we have not received the records 
requested during the hearing by full Committee Chairman Barton--
notarized letters or statements attesting that Dr. Gertmenian served 
with the National Security Council and the Commerce Department, that he 
worked for Dr. Kissinger as ``chief detente negotiator,'' and that he 
is a distinguished professor at two universities in China.
    After these questions were raised about Dr. Gertmenian, Matrix, and 
the Guild's current financial situation, the Guild's membership 
recently took some actions. Dr. Gertmenian is no longer the Guild's 
Chief Executive Officer. This past Tuesday, the Guild's 27 senators 
held an emergency senate meeting. At that meeting, they removed the 
Guild's board of directors, elected new directors, and fired Dr. 
Gertmenian and Matrix. I applaud that decision, and hope that the Guild 
can get back on its feet. It is my belief that a strong and financially 
healthy Guild is in the best interests of the industry.
    Today, the Subcommittee will consider whether and how Congress 
might help to ensure that the horse racing industry has adequate on-
track injury insurance or workers' compensation for jockeys, exercise 
riders, and workers on the backstretch. As we saw from video shown 
during the hearing on October 18th, horse racing is extremely 
dangerous, and serious injuries are common--indeed, in just the past 
month a professional jockey died after a spill during a race in 
Massachusetts, and several other serious spills have occurred on tracks 
around the country.
    The horse racing industry in the United States generates a total 
economic impact of $26 billion annually. Yet for all this money in the 
industry, there are many workers without adequate health insurance and 
on-track coverage, and apparently much resistance to establishing 
workers' compensation for some of the most important workers in the 
industry. Very few states--only four--provide workers' compensation 
programs for jockeys or exercise riders. As this Subcommittee moves 
forward in examining the health and welfare issues of jockeys and other 
workers most susceptible to serious injury in this industry, I will be 
interested in hearing from all of today's witnesses about whether there 
is a role for the federal government: Should there be a national 
workers' compensation fund for jockeys, exercise riders, and other 
freelance workers in racing? Should every racing state provide a 
workers' compensation program for these individuals? Should there be a 
national governing body to oversee the professional sport of horse 
racing?
    Today's witnesses represent many of the various and important 
stakeholders in the horse racing industry. We will take testimony from 
a number of race tracks, both large and small, from some of the most 
prominent trade associations, from health and welfare organizations, 
from current and former Guild representatives, from state racing 
organizations, and from a horse trainer who has been involved with 
establishing New York State's workers' compensation program for jockeys 
and exercise riders.
    Let me extend my appreciation to all of you for appearing here 
today. I look forward to all your testimony and think it will be most 
useful. I now turn to the distinguished Ranking Member, Mr. Stupak, for 
the purposes of an opening statement.

    Mr. Stupak. Well, thank you, Mr. Chairman. Let me begin by 
expressing my sympathy to the family of the 16-year-old 
apprentice jockey, Josh Radosevich, who was killed yesterday at 
Beulah Park near Grove City, Ohio. Josh's death reminded us 
that horse racing is a dangerous sport and we must do all we 
can to protect those involved in the sport.
    This hearing gives us an opportunity to continue to explore 
some of the terrible conditions under which jockeys and 
exercise riders ply their trade on American's racetracks. The 
testimony and questions today will provide us with information 
that is needed to craft legislative solutions to deal with the 
failure of the employers, tracks, trainers and owners to 
provide their workers with the same on the job accident and 
disability insurance that many other Americans enjoy.
    As you are aware, we wrote Secretary Levitt, asking for a 
NIOSH study of safety conditions on racetracks. I have every 
reason to believe that that study will be conducted and the 
recommendations will then be available as standards that OSHA 
can enforce. The Democrats on this committee also wrote to the 
NLRB, asking the Board to correct a grave injustice committed 
over 30 years ago when the NLRB, by formal rule, declined to 
provide protections of the National Labor Relations Act to any 
racetrack employees. This loophole in the law allowed one 
callous racetrack to ban riders that sought to act collectively 
to protect themselves on tracks. And sued them for damages 
under the Anti-Trust Laws that have not been abused in this way 
since the Wagner Act was passed to stop such intimidation in 
the 1930's.
    Of course, not all tracks and horseman mistreat the riders 
that make their sport and their livelihoods possible. We will 
hear from the operator of Del Mar Racetrack in California 
regarding the Workers' Compensation Program and off-track 
health insurance in that state, as well as the efforts his 
track has made to minimize the dangers inherent in horseracing. 
California is also pioneering a study of the terrible weight 
and nutrition problems faced by jockeys. We will hear from 
witnesses that operate in New York and Maryland about the 
Workers' Comp Program on those States. And the admirable 
efforts of the Magna conglomerate to extend comparable medical 
and disability insurance to its tracks in those States that 
fail to require that riders be covered by Workers' Comp.
    Delaware and Kentucky witnesses will speak of their less 
substantial programs to help with healthcare costs. If all 
States had programs like California's, we wouldn't be here 
today. In fact, the California tracks are losing horses to 
tracks in States like West Virginia, that permit the track to 
operate without adequate on-the-job insurance. The West 
Virginia tracks, Mountaineer and Charlestown, are among the 
richest, most profitable horseracing enterprises in the United 
States because West Virginia has made them into gambling 
palaces through the placement of slot machines.
    Like other States that allow slot machines, they are 
licensed in commercial numbers on the grounds of racetracks and 
part of the slot proceeds must be spent on higher purses for 
the horsemen. In fact, as a matter of State law, slot machines 
cannot be operated at either Mountaineer or Charlestown unless 
a collective bargaining contract is in place for the pari-
mutuel clerks. Of course, an agreement must also be in place 
with the horsemen, the trainers and the owners. I am not sure 
what the clerks get out of these racetracks but I will bet that 
a good on the job and off the job health insurance is among the 
benefits. I do know what the horsemen get, purses that have 
increased ten-fold, from about $20,000 per race day to $200,000 
since the slots went in.
    A look at the financial forms of the parent companies tell 
you that the tracks themselves are very profitable enterprises. 
The jockeys share about 10 percent of the purse and in return, 
get a nice, new hot room to sweat the water out of their bodies 
before weighing in and a new receptacle to regurgitate in so 
they can make weight. What jockeys do not receive is adequate 
on-track or off-track insurance. Charlestown takes in about 
$1.7 million in revenues each day. It spends about $200,000 per 
day in purse money. After its expenses, the pre-tax profit is 
about $414,000 per racing day. What do they spend on accident 
insurance for the jockeys? Roughly $1,200 per racing day.
    West Virginia tracks think that the $100,000 insurance 
coverage is generous. They pay no Workers' Compensation, no 
health insurance and very little in the way of charity for the 
worst victims, like our witnesses from last month's hearing, 
Gary Bitzer, who was paralyzed at Mountaineer Racetrack last 
year.
    The NTRA will testify today that going from $100,000 worth 
of coverage to $1 million would cost only 50 to 75 percent more 
than the current $1,200 premium. So if Mountaineer Racetrack 
would have spent $600 to $900 per race day extra, Gary Burzer 
could have had all rehab and other medical costs paid for by 
insurance. This small premium amounts to less than one-half of 
1 percent of the track's daily purse but it would mean a 
lifetime of healthcare security for the jockeys who risk their 
lives so track owners can make millions of dollars.
    Mr. Chairman, the exploitation of the law by some tracks 
comes at great human costs and give those tracks unfair 
competitive advantage. Just as a polluter who transfers his 
cost to the environment can pay for his products lower than the 
competitor who pays the full costs of production by cleaning up 
the manufacturing process. So racetracks can force the cost of 
on the job accidents onto the backs of its riders, can deprive 
the responsible track owner of better horses and of larger 
revenues. The competitive imbalance alone is sufficient basis 
for this committee, the Energy and Commerce Committee, 
responsible for regulating interstate commerce, to act.
    For starters, we can condition the simulcasting of races, a 
larger source of revenue and profits than the betting on tracks 
actually run at most tracks under provision of a decent 
Workers' Compensation Benefit for all the individuals involved 
in horseracing. Tracks in California, New York and other States 
that have 20th century labor laws should not have to compete 
with those States that still permit these courageous athletes 
to be treated like second class citizens. They should be 
treated like any other highly skilled, professional athlete 
whose true value is recognized by their sport and their family.
    Mr. Chairman, I look forward to working with you on 
solutions to the problems that we have laid out today.
    Mr. Whitfield. Mr. Stupak, thank you very much. And at this 
time I would recognize the chairman of the full Energy and 
Commerce Committee, Mr. Barton of Texas.
    Chairman Barton. Thank you, Chairman Whitfield. And in case 
you didn't introduce to the subcommittee, I would like to 
indicate how please I am to see your wife, Connie, in the 
audience and have her presence here. It has got to inspire you, 
as well as other members up here. Also, I missed part of your 
opening statement but in case you didn't mention it, I have 
been informed that the Jockey Guild did terminate the contract 
of Mr. Gertmenien earlier this week. Did you mention that in 
your statement?
    Mr. Whitfield. I did, Mr. Chairman, but I would like for 
you to repeat it.
    Chairman Barton. Okay. I understand that the board meeting 
in which that was done, there were several fist fights that 
broke out and the police had to be called and I think even the 
FBI were called. I am also told that last week or this week, 
the disability checks that the Guild provides to disabled 
jockeys bounced. And I am also told that the day Mr. Gertmenien 
was terminated he had checks written to him for over $217,000 
that were drawn on Guild accounts and that those checks didn't 
bounce. Which makes you wonder why the checks to the disabled 
jockeys bounced but the checks that he wrote or had written to 
himself didn't. I am sure that the members of this subcommittee 
will assist law enforcement officers at the Federal and State 
level to bring Mr. Gertmenien and his associates to justice, 
sooner rather than later. And we should commend you and Mr. 
Stupak for the investigation that you have both led, which has 
resulted in some of the changes that are now being made.
    But today we are here to hear from the rest of the industry 
and I have to commend you. We have got 18 witnesses so you 
pretty well covered the field. If this were the Kentucky Derby 
they would have to add another starting post or something to 
get all the horses into the gate at the time but it is an 
important issue.
    I have trouble accepting that in a $26 billion industry, 
the riders and other workers at the heart of the horseracing 
world, many of them have to go to work each day without 
adequate catastrophic injury insurance that they have been 
promised. I think we all agree this is intolerable and 
something needs to be done about it.
    This subcommittee spotlighted the issue in its opening 
hearing, which focused on why the Jockey's Guild was no longer 
providing on-track injury insurance for its members. We saw the 
effects of Amy and Gary Birzer's life-altering encounter with 
the perils of competitive riding. We learned how the Jockey 
Guild, the organization that they thought they could trust, had 
flimflammed them. We heard from current and former jockeys who 
explained how important on-track injury insurance is to 
themselves and to their families. We also heard Guild 
representatives try to explain why they no longer offered on-
track coverage and watched as they tried to lay the blame in 
other places.
    I have chaired this subcommittee in the past and I have 
attended most of the Oversight Investigation Subcommittee 
hearings for the last 10 years and we do have people that come 
before us and try to obfuscate the truth. But the 
representatives of the Jockey Guild, in your hearing on this 
issue the first time, would have to take the award for the most 
disingenuous if not outright fraudulent testimony. They set a 
new standard for least believable. Just for an example, we were 
lead to believe by his own resume, that Dr. Gertmenien was a 
detente negotiator who had worked directly for Secretary of 
State Henry Kissinger. Dr. Kissinger himself called this 
subcommittee and said in no uncertain terms that he had never 
heard of the man. That is just one example of the testimony 
that we heard at the last hearing.
    I said at the last hearing that if I were a dues-paying 
member of the Guild, I would want new management and as I 
pointed out, the majority of the Guild members agreed with that 
and they now have new management. We have got several documents 
from the new management to that affect. If we have any of the 
Jockey Guild members in the room, I want to commend you folks 
and say I am proud of you for doing the right thing and we will 
keep back you up. That had to be a tough thing to do but you 
did it and the committee is proud of you.
    In closing, I want to thank all the witnesses at this panel 
and the next panel for coming today. We do want to explore the 
issue of on-track injury insurance and Workers' Compensation. I 
know there are different opinions and we are going to hear 
those later today but it is my hope and I know Mr. Stupak and 
Mr. Whitfield share it, that following our hearing we can work 
together to find a solution. Hopefully, not a legislative 
solution and we can do it on a voluntary basis. But I would 
think that we would be prepared to offer a legislative 
framework if such a framework is necessary.
    I look forward to your testimony and I thank ladies and 
gentlemen for you being here. Yield back.
    [The prepared statement of Hon. Joe Barton follows:]

 Prepared Statement of Hon. Joe Barton, Chairman, Committee on Energy 
                              and Commerce

    Thank you, Chairman Whitfield. Thank you for holding this hearing 
and for continuing to examine the issue of on-track injury coverage in 
the horseracing industry. I have trouble accepting that, in a $26 
billion industry, the riders and other workers at the heart of the 
horseracing world have to go to work each day without adequate 
catastrophic injury insurance that they were promised. This is 
intolerable, and I commend the Chairman for spearheading an 
investigation of this issue.
    Last month, the Subcommittee spotlighted the issue in its opening 
hearing, which focused on why the Jockeys' Guild was no longer 
providing on-track injury insurance for its members. We saw the effects 
of Amy and Gary Birzer's life-altering encounter with the perils of 
competitive riding. And we learned how the Guild, one of the few 
organizations they thought they could trust, had flim-flammed them. We 
heard from current and former jockeys who explained how important on-
track injury coverage is to them and their families. And we heard Guild 
representatives try to explain why they no longer offered on-track 
coverage and where they thought that responsibility should lie instead. 
I must say that people occasionally sit at our witness table and tell 
us things that are very hard to believe. That's usually because the 
things they are telling us are not completely true. It happens. But of 
all the questionable testimony that I've heard, I think the Guild's 
sworn testimony last month set a new standard for the least believable.
    Today we will expand the scope of our examination and look at how 
the rest of the industry views the absence of on-track insurance for 
jockeys, exercise riders, and backstretch workers. During the course of 
the Subcommittee's investigation, it has become apparent that even 
though many in the industry have devoted considerable amounts of time 
and effort to this issue, they have been unable to find a solution.
    I hope our panels of witnesses here today--which include 
representatives from all different segments of the industry--will have 
some constructive ideas.
    Let me also add that the Jockeys' Guild left many unanswered 
questions last month about its management and finances. Even more 
importantly, it failed to produce records the Subcommittee had 
subpoenaed weeks before. It took a congressional hearing to pry loose 
some of the Guild's meeting minutes, and I understand that the Guild 
still has not delivered numerous email records and other documents. 
Also, Dr. Gertmenian, who claims to be a onetime detente negotiator 
working for then-Secretary of State Henry Kissinger, has yet to provide 
a lick of evidence to support his resume. I think we all know why.
    At last month's hearing, I said that if I were a dues-paying member 
of the Guild, I would want new management. The Guild seems to agree. 
After that hearing's emotional and disturbing testimony, the Guild's 
members this week took back their organization. I am proud of the 
members who had the courage to stand up to Dr. Gertmenian, and to 
terminate the contracts of Dr. Gertmenian and his organization, and of 
Mr. Fiss, and Mr. Ownbey. Absent those actions, it seems plain that the 
Guild would have collapsed. I hope that the new board and new managers 
will now right what was wrong inside the Guild, and will dig out the 
records that we requested and subpoenaed.
    In closing, I want to offer my thanks to today's witnesses for 
taking the time to help us explore the issue of on-track injury 
insurance and workers' compensation. It is my hope that all our 
witnesses, and everyone else in the horseracing industry who is 
following our hearing, will listen to what is discussed and will be 
inspired to work together to find a solution to this and other health 
and welfare problems in the industry.
    I look forward to the testimony and yield back the remainder of my 
time.

    Mr. Whitfield. Mr. Chairman, thank you very much and we 
appreciate the support you have given as we have looked into 
this important issue. And as I said earlier, I want to thank 
all of you for taking time from your busy schedules. I 
understand even Mr. Amos, that you came back from a vacation, 
which is quite impressive to come up. But we are now ready for 
this first panel and I am going to introduce the first panel. 
And then because this is an Oversight and Investigation 
hearing, we do swear witnesses in.
    But before I do that, first of all we have with us today 
Mr. John Finamore, who is the Senior Vice President of Regional 
Operations for Penn National Gaming Company. Thank you for 
being here. We have Ms. Rose Mary Williams, who is the Director 
of Racing at the Mountaineer Race Track and Gaming Resort in 
West Virginia. We have Mr. Christopher Scherf, who is the 
Executive Vice-President of the Thoroughbred Racing 
Association. Thank you. We have Mr. D.G. Van Clief, who is the 
Commissioner and Chief Executive Officer of the National 
Thoroughbred Racing Association and it is great to see you 
again. We have Mr. Steve Sexton, who is the Senior VP of 
Kentucky Operations and President of Churchill Downs and 
delighted to have you here. And then of course, Mr. Don Amos, 
who is the Chief Operating Officer of Magna Entertainment. I am 
glad to have you here. And then we have Mr. Greg Fravel, who is 
the Executive Vice President of Del Mar Thoroughbred Club from 
Del Mar, California and we thank you for being here.
    The gentleman to the far left, I don't see that you are a 
witness and I was just wondering if you might tell me--okay. Do 
you intend to testify? Okay. Well, in that case would you mind 
taking a seat back there and we do appreciate your being here 
very much. And at this time I would ask those of you who are 
going to be testifying if you would simply stand up. And as I 
said, you are aware that the committee is holding investigative 
hearing and when doing so, we have the practice of taking 
testimony under oath and do any of you have any objection to 
testifying under oath today? Okay. The Chair then advised you 
that under the rules of the House and rules of the committee, 
you are entitled to be advised by a counsel and I understand 
that maybe two of you do have counsel with you today. Ms. 
Williams, you have counsel. Is that correct? And would you give 
us his name again?
    Ms. Williams. Mr. Stan Brand.
    Mr. Whitfield. Mr. Stan Brand. Okay. And Mr. Amos, did you? 
And who is your----
    Mr. Amos. Andrew Staniusz, Mr. Amos' counsel.
    Mr. Whitfield. Okay. Yes, sir. Okay. But none of those 
attorneys intend to testify. They are simply advising you? 
Okay.
    [Witnesses sworn]
    Mr. Whitfield. You are now under oath and you may give a 5-
minute summary of your written statement. As I indicated to 
you, we do have 17 witnesses. We value the testimony of each 
person here. We have read the testimony but at this time I will 
call the first witness and that will be Mr. John Finamore of 
Penn National Gaming, recognized for 5 minutes.

    TESTIMONY OF JOHN V. FINAMORE, SENIOR VICE PRESIDENT OF 
  REGIONAL OPERATIONS, PENN NATIONAL GAMING, INC.; ROSE MARY 
 WILLIAMS, DIRECTOR OF RACING, THE MOUNTAINEER RACE TRACK AND 
GAMING RESORT; CHRISTOPHER N. SCHERF, EXECUTIVE VICE PRESIDENT, 
     THOROUGHBRED RACING ASSOCIATION; D.G. VAN CLIEF, JR., 
COMMISSIONER AND CHIEF EXECUTIVE OFFICER, NATIONAL THOROUGHBRED 
  RACING ASSOCIATIONS; STEVE SEXTON, SENIOR VICE PRESIDENT OF 
KENTUCKY OPERATIONS AND PRESIDENT OF CHURCHILL DOWNS; DON AMOS, 
CHIEF OPERATING OFFICER, MAGNA ENTERTAINMENT, INC., ACCOMPANIED 
BY ANDREW STANIUSZ, CORPORATE COUNSEL AND DIRECTOR OF EMPLOYEE 
 RELATIONS; AND CRAIG R. FRAVEL, EXECUTIVE VICE PRESIDENT, DEL 
                     MAR THOROUGHBRED CLUB

    Mr. Finamore. Good afternoon, Mr. Chairman, and members of 
the subcommittee. My name is John Finamore, and I am the Senior 
Vice President of Regional Operations, Penn National Gaming. By 
way of background, Penn National is a publicly traded company. 
We began in the early 1970's as a small, family owned business 
that operated one of Pennsylvania's original thoroughbred 
racing licenses at Penn National Race Course outside of 
Harrisburg. While today Penn National operates riverboats, 
casino resorts and racing facilities in 13 jurisdictions across 
the country and in Canada, it has never forgotten, and 
continues to buildupon, its horseracing heritage.
    My role at Penn National is to oversee four of the 
company's racetracks, including Penn National Race Course and 
Charlestown Races in West Virginia. I am based at Charlestown, 
which provides me a continued perspective of the continued 
revitalization of that historic track, which began live 
thoroughbred racing in 1933.
    Penn National purchased Charlestown Races in 1997, when it 
was on the verge of closing its doors. Since then, we have 
invested more than $200 million in new capital into the 
property. Reflecting our ongoing commitment to live racing, we 
have renovated the grandstand and barns, built new jockey's 
quarters and a new paddock and began simulcasting the races 
around the country. Last year, Charlestown Races completed the 
latest phase of renovations and upgrades to the track, 
including adding a new surface, installing a new safety rail, 
banking the turns, replacing the lighting system and other 
significant improvements. Turning to the subject of today's 
hearing, at Penn National Gaming we take the issue of safety at 
our tracks seriously. We support working together with the 
jockeys, the horsemen and the trainers to ensure that in the 
event of an accident, there is adequate insurance to address 
the injured jockey's needs.
    As you know, jockeys are independent contractors who work 
not for the racetracks but for the horse owners. Like any other 
individual that is self-employed, jockeys are responsible for 
addressing their own insurance needs. As a long-time member of 
the Thoroughbred Racing Associations, we have in place at our 
tracks in West Virginia and Pennsylvania, accident insurance 
that provides jockeys with an additional $100,000 maximum 
benefit toward medical expenses if they are injured while 
riding. In addition, the policy provides $200 per week in 
Disability payments, up to 104 weeks, and includes $50,000 in 
accidental death and dismemberment coverage. The racetracks pay 
100 percent of the premiums, as well as the deductible for 
every medical claim.
    Furthermore, we have been paying additional money directly 
to the Jockey's Guild in the form of mount fees to supplement 
their medical insurance coverage and to provide additional 
accident insurance. In 2004, this amounted to more than 
$160,000 for Penn National Race Course and Charlestown Races. 
Looking back to 2002, the last year for which there is industry 
data, the collective amount racetracks contributed to the 
Jockey's Guild for this purpose was $2.2 million.
    It is now clear that these funds were not being used for 
either medical insurance or supplemental accident insurance for 
the jockeys. As a goodwill gesture, we have been continuing to 
donate these funds to the Jockey's Guild, in the hope that they 
will be used for the purpose they were intended. Unfortunately, 
the Jockey's Guild has greatly failed its membership on this 
issue and the jockeys themselves, as independent contractors, 
must find a day to address their insurance needs. We believe 
that helping to supplement their on-track accident insurance 
needs should be a collaborative effort between the tracks, the 
horse owners and the trainers.
    As for the argument that jockeys should become employees of 
the track, this would forever change the nature of horseracing 
in this country. The tracks do not and should not exercise any 
degree of control over the manner in which a jockey rides or 
whether a jockey rides or for whom he or she rides. There is no 
permanence in the relationship between the track and a jockey. 
The integrity of racing could be called into question if a 
track were in a position of control over the jockeys.
    In conclusion, while we understand there were five 
accidents out of 487,000 mounts last year where the cost of the 
injuries rose about the $100,000 level in coverage, we firmly 
believe one disabled and destitute jockey is one too many. We 
will be working with the TRA to re-examine the levels of our 
on-track policies currently in place and we look forward to 
continuing to work with the horseman, the trainers and the 
jockeys to address this important issue.
    I would like to thank you for the opportunity to testify 
today and would be happy to answer any of your questions.
    [The prepared of John V. Finamore, Sr. follows:]

 Prepared Statement of John V. Finamore, Sr. Vice President, Regional 
                 Operations, Penn National Gaming, Inc.

    Good afternoon, Mr. Chairman, and members of the Subcommittee. My 
name is John Finamore, and I am the Senior Vice President of Regional 
Operations for Penn National Gaming.
    By way of background, Penn National is a publicly traded company. 
We began in the early 1970s as a small, family-owned business that 
operated one of Pennsylvania's original thoroughbred racing licenses at 
Penn National Racecourse outside of Harrisburg.
    While today, Penn National operates riverboats, casino resorts and 
racing facilities in 13 jurisdictions across the country and in Canada, 
it has never forgotten, and continues to build upon, its horse racing 
heritage.
    In addition to Penn National Racecourse and its six affiliated off-
track wagering facilities, we also own Charles Town Races & Slots in 
Charles Town, West Virginia, and we're the joint owner of Freehold 
Raceway in New Jersey. Our most recent racetrack acquisitions include 
Bangor Raceway in Bangor, Maine, and Raceway Park in Toledo, Ohio.
    My role at Penn National is to oversee these racing and gaming 
operations, with the exception of Freehold Raceway. I am based at 
Charles Town Races, which provides me a first-hand perspective of the 
continued revitalization of that historic track, which began live 
thoroughbred racing in 1933.
    Penn National purchased Charles Town Races in 1997, when it was on 
the verge of closing its doors. Since then, we've invested more than 
$200 million in new capital into the property, resulting in a premier 
regional entertainment center that has generated more than $435 million 
in taxes to West Virginia.
    Reflecting our ongoing commitment to live racing, since acquiring 
the track we have renovated the Grandstand and barns, built new jockey 
quarters and a new paddock and began simulcasting the races around the 
country. In addition, we have increased the number of race dates and 
the number of races per day. Purses have grown from $20,000 per day to 
as high as $200,000 per day, and the number of horse owners and 
trainers has grown from 2,400 to 13,000.
    Last year, Charles Town Races completed the latest phase of 
renovations and upgrades to the track, including adding a new surface, 
installing a new safety rail, banking the turns, replacing the lighting 
system, and other significant improvements.
    Turning to the subject of today's hearing, at Penn National Gaming 
we take the issue of safety at our tracks seriously. We support working 
together with the jockeys, the horsemen, and the trainers to ensure 
that in the event of an accident there is adequate insurance to address 
the injured jockey's needs.
    As you know, jockeys are independent contractors who work not for 
the racetracks, but for the horse owners. The Courts have upheld this 
distinction. Like any other individual that is self-employed, jockeys 
are responsible for addressing their own insurance needs.
    As a longtime member of the Thoroughbred Racing Associations (TRA), 
we have in place at our tracks in West Virginia and Pennsylvania--which 
are states where jockeys are excluded from workers' comp--insurance 
that provides jockeys with an additional $100,000 maximum benefit 
toward medical expenses if they are injured while riding. In addition, 
the policy provides $200 per week in disability payments up to 104 
weeks, and includes $50,000 in accidental death and dismemberment 
coverage. This long-established policy was entered into after 
discussions with the TRA and with the Jockey's Guild. The racetracks 
pay 100% of the premiums, as well as the deductible for every medical 
claim.
    Furthermore, we have been paying additional money directly to the 
Jockey's Guild in the form of ``Mount Fees'' to supplement their 
medical insurance coverage and to provide additional accident 
insurance. In 2004, this amounted to more than $160,000 for Penn 
National Race Course and Charles Town Races. Looking back in 2002, the 
last year for which there is industry data, the collective amount 
racetracks contributed to the Jockey's Guild for this purpose was $2.2 
million.
    After the unfortunate accident to Mr. Birzer at Mountaineer, it is 
now clear that these funds were not being used for either medical 
insurance or supplemental accident insurance for jockeys. As a goodwill 
gesture, we have been continuing to donate these funds to the Jockey's 
Guild in the hope that they will be used for the purpose they were 
intended.
    Unfortunately, the Jockey's Guild has greatly failed its membership 
on this issue and the jockey's themselves, as independent contractors, 
must find a way to address their insurance needs. We believe that 
helping to supplement their on-track accident insurance needs should be 
a collaborative effort between the tracks, the horse owners and the 
trainers.
    As for the argument that jockeys should become employees of the 
track, this would forever change the nature of horse racing in this 
country. The tracks do not, and should not, exercise any degree of 
control over the manner in which a jockey rides, or whether a jockey 
rides, or for whom he or she rides. Since the earliest days of horse 
racing, the track has always acted as the ``neutral'' party, whose role 
it is to hold a fair and honest meet where the owners and jockeys come 
to compete. There is no permanence in the relationship between the 
track and a jockey. The integrity of racing could be called into 
question if a track were in a position of control over the jockeys.
    In conclusion, we recognize that some of the larger racing 
companies have voluntarily increased their on-track accident policies. 
And, while we understand there were five accidents out of 487,000 
mounts last year where the cost of the injuries rose above the $100,000 
level in coverage, we firmly believe one disabled and destitute jockey 
is one too many. We will be working with the TRA to reexamine the 
levels of our on-track policies currently in place, and we look forward 
to continuing to work with the horsemen, the trainers and the jockeys 
to address this important issue.
    I'd like to thank you for the opportunity to testify today and 
would be happy to answer your questions.

    Mr. Whitfield. Thank you, Mr. Finamore. You were almost 
right on 5 minutes. Great job.
    Mr. Finamore. Thank you.
    Mr. Whitfield. At this time I will recognize Ms. Rose Mary 
Williams of the Mountaineer Race Track. Thank you.

                 TESTIMONY OF ROSE MARY WILLIAMS

    Ms. Williams. Good afternoon. My name is Rose Mary 
Williams. I am the Director of Racing at Mountaineer Race Track 
in Chester, West Virginia. Thank you for the invitation to 
appear before the subcommittee today. I have submitted my 
written testimony and will be happy to answer any additional 
questions that the subcommittee may have. Thank you.
    [The prepared statement of Rose Mary Williams follows:]

     Prepared Statement of Rose Mary Williams, Director of Racing, 
                         Mountaineer Racetrack

    My name is Rose Mary Williams and I am the Director of Racing at 
Mountaineer Racetrack in Chester, West Virginia. I began my career in 
racing in 1977 as a mutuel clerk and have worked in racing ever since. 
I became director of racing in 1997. Mountaineer Racetrack is a mile-
long thoroughbred track and has operated since 1951. By State statute, 
we race a minimum of 210 days per year. By contract with the Horsemen's 
Benevolent and Protective Association, we endeavor to race 232 days per 
year with ten races per day, or approximately 2,259 races per year. I 
am pleased to say that serious accidents are rare.
    Gary Birzer's tragic accident happened at my track. But it could 
have happened at any racetrack in the country. While there has been no 
claim that the track was defective or improperly maintained, or that 
track conditions were a factor in causing this accident, it should be 
noted that, in horseracing, accidents can and do happen even at state-
of the-art facilities, though perfectly maintained, and under ideal 
conditions.
    This is so because riding a racehorse is an inherently risky 
activity, no different than NASCAR racing, prize fighting, football, 
and other sports that entertain, amaze and delight us. During a race, 
thoroughbreds reach speeds of up to 40 miles per hour, and jockeys wear 
only a safety helmet and two-pound safety vest for protection. Jockeys, 
like their counterparts in other sports, accept that risk because they 
love what they do, and because they are highly compensated. Many 
jockeys earn as much as $500,000 per year.
    From those earnings, they choose to pay dues and per mount fees 
into their Guild for the obvious reason: they expect that Guild to 
provide them protection by, among other things, purchasing and 
maintaining on-track injury insurance. I will leave to others the 
relationship between the jockeys and their Guild, the allegations that 
Dr. Gertmenian failed to inform the jockeys that the Guild had 
permitted the catastrophic insurance to lapse, and whether the 
insurance carrier should have notified the jockeys of the cancellation. 
I simply don't have first-hand knowledge that would be helpful to this 
Committee.
    Consistent with industry custom, Mountaineer Racetrack maintains an 
on-track injury policy covering jockeys for up to $100,000 per 
occurrence and exercise riders for up to $25,000 per occurrence. Since 
May of 2000, Mountaineer Racetrack's insurer has paid more than 
$1,000,000 in claims to some 89 individuals pursuant to on-track injury 
policies. Many of those claims were under $1,000 and most were under 
$10,000. Mr. Birzer was able to use this policy and in fact received 
$100,000 in reimbursements.
    Obviously, a $100,000 policy is not sufficient for a catastrophic 
accident, but these policies are intended only to supplement the 
insurance the jockeys obtain through the Guild. It is expensive 
insurance. The premium is $1,230 per race day and $154 per training 
day. For 2004, Mountaineer Racetrack paid $252,500 in premiums for on-
track injury insurance. What is more, even at these premium rates there 
are few carriers willing to provide the coverage.
    Likewise, West Virginia permits employers of trainers and jockeys 
engaged in thoroughbred racing to subscribe to and pay premium taxes 
into the state's workers' compensation fund (See WV Statutes, Section 
23-2-1(b)(6)). Further, West Virginia's unredeemed pari-mutuel ticket 
law earmarks for a jockey's trust up to $250,000 annually, specifically 
for health and disability benefits for active or disabled jockeys and 
their dependents (See WV Statutes, Section 19-23-13(b)(5)(C)). West 
Virginia law also provides that 1+% of the total amount distributed for 
racing purses be placed into trust to help defray the cost of medical 
and other expenses incurred by people whose primary source of income is 
derived from the racing, training and care of thoroughbred horses.
    As a Director of Racing, I can offer some observations concerning 
what racetrack owners can do to make racing as safe as reasonably 
possible for jockeys, recognizing that the racetrack owner has no 
authority to do anything between the time the horses enter the gate and 
the end of the race. This is so because the conduct of racing itself is 
controlled by the state racing commission through its on-site 
personnel. What then can racetrack owners do before and after a race? 
Some examples are:

 Properly maintain and periodically resurface the racetrack;
 Provide a committee that includes a representative of the jockeys 
        that has periodic meetings to discuss track conditions;
 Install safety rails and place light poles and other objects a safe 
        distance (industry custom is ten feet) beyond the rails;
 Pad indoor paddocks, the chutes leading to the track, and the 
        starting gates;
 Provide a comfortable jockeys' room with such amenities as sauna and 
        hot tub;
 Provide a chaplain who is readily available to minister to the needs 
        of jockeys and backside workers;
 Install appropriate lighting for night racing;
 Limit the number of turf races and require shoes that are less likely 
        to make the surface unsafe;
 Provide appropriate ambulance and emergency medical personnel in case 
        of an accident;
 Provide on-track injury insurance in accordance with industry custom, 
        to the extent such insurance remains available.
    It may seem self-evident, but I believe track safety and the 
welfare of those who work on-track should be, and in fact are, common 
goals of racetrack owners, horsemen, and jockeys and trainers. Taking 
these steps helps limit on-track accidents to those that cannot be 
prevented. Preventable accidents and the failure of the system to 
provide for the needs of injured participants, in addition to being 
tragic, are bad for business--all of our businesses.
    On a personal note, I know Gary and Amy Birzer. Gary rode 
frequently at Mountaineer Racetrack. They are a nice family and my 
heart goes out to them.

    Mr. Whitfield. Thant was short and sweet. Thank you. At 
this time I will recognize Mr. Christopher Scherf, Executive 
V.P., Thoroughbred Racing Association.

               TESTIMONY OF CHRISTOPHER N. SCHERF

    Mr. Scherf. Thank you, Mr. Chairman and members of the 
subcommittee. I am gratified to have the opportunity to address 
the issues that have prompted this hearing. As the Executive 
Vice President of the TRA for the past 17 years, I have 
represented its member racetracks, as well as non-members, in 
securing a series of national insurance policies. This program 
has been in place since the Guild came to the TRA in 1949 to 
consolidate insurance from individual track policies into a 
national program, assuring coverage for jockeys no matter where 
they chose to ride. During the past 30 plus years, the Guild 
also has sought and received direct payments from the 
racetracks.
    In 2001, when the Guild's members health plan became 
unaffordable, even with the $2.2 million contributed by the 
racetracks, the Guild allocated $440,000 of that amount to 
purchase an excess accident policy. I do not believe we would 
be here today if Dr. Wayne Gertmenien had not decided to 
discontinue the excess accident policy and instead, use the 
$2.2 million for other purposes.
    What kind of emphasis did the Guild place on accident 
insurance? The current policy does not have the Guild as a 
policyholder merely because the broker was unable to get the 
recent Guild leadership to even sign the policy. In States 
where jockeys are covered by Workers' Compensation insurance 
purchased by the horsemen, the tracks have purchased a 
complimentary injury policy providing lump sum payments to the 
catastrophically injured jockeys. The minimum pay-out is 
$100,000 but a much higher amount, with a minimum of about 
$400,000, is triggered if a jockey elects to provide the track 
with a waiver against suit. The Guild, though its then 
director, John Giovanni, first proposed this additional benefit 
and the waiver provision in the last 1980's and 749 jockeys 
took advantage of this offering. Since Dr. Gertmenien took over 
the Guild, only one new waiver has been received by the TRA. 
Obviously, accident insurance was not a Guild priority.
    Another historical benefit was the Jockey Guild's Disabled 
Riders Fund, which provided income to permanently disabled 
riders. Jockeys recovering from lesser injuries received weekly 
Disability payments from the accident policy and the Guild 
matched this amount from its dues revenue. When Dr. Gertmenien 
took over, the Guild began making the weekly payments to the 
temporarily sidelined jockeys from the Disabled Jockey's Fund, 
which predictably soon ran out of money. This was the duly 
constituted Guild leadership with which the TRA had to deal. 
One that would deplete the existing benefits to its members as 
a ploy to create crisis.
    Regarding basic accident coverage and the relevant 
circumstances of working as a jockey in this country, here are 
the facts. Jockeys are independent contractors by choice and 
enjoy the associated tax benefits, as affirmed by the IRS. 
Skilled, touch and fiercely competitive individuals, jockeys 
want to be free to negotiate riding assignments on a race by 
race basis, choosing those horses that offer the best change of 
winning. A generally accepted estimate of jockey's earnings is 
7.5 to 8 percent of their mounts' winnings. Therefore, total 
jockeys' earnings for the last full year we have, 2004, were 
between approximately $88 million and $94 million. There were 
991 jockeys who rode at least 100 times last year, an average 
of only two horses a week, and they accounted for more than 95 
percent of all the horses that raced. The average annual 
earnings for those jockeys were around $90,000. Five hundred 
ninety-nine jockeys rode at least 300 mounts, which is six a 
week and had average earnings of about $138,000. Getting on a 
horse is recognized as being inherently risky but horseracing 
is the best compensated riding profession.
    In 2004, there were 487,000 starters. Latest records 
indicate, there were 708 paid claims by the TRA policy. In 
recent years, the average claim has been about $7,000. Through 
October 31, there have been five injuries from 2004 that have 
reached the $100,000 medical maximum. The fact is, the lack of 
adequate coverage is a problem on in few specific instances. It 
is a problem that is solvable on a long-term comprehensive 
basis in a relatively quick fashion.
    Jockeys are independent contractors. During the past 2 
years jockeys have decided not to ride and have canceled racing 
41 times at TRA racetracks.
    Regarding safety issues, the TRA has a Safety Committee to 
consider jockey safety issues. The TRA and its member 
racetracks have been supporters of the Racing Medication and 
Testing Consortium, of which I am the Vice-Chairman, to promote 
a safe medication policy for horse and jockey. The safer racing 
environment is the Holy Grail for the racing industry. Injuries 
to horses and jockeys are horrifying to us and our fans. 
Turfway Park in Kentucky spent nearly $5 million installing the 
new revolutionary Polytrack, which appears to be a safer racing 
surface and being anxiously monitored by all tracks.
    Unnoticed but nonetheless true, during the past few years, 
minimum jockey weight assignments have been raised in 
California, Illinois, Kentucky, Maryland, New York and New 
Jersey.
    Returning to the catalyst for today's hearing, is what has 
befallen Gary Birzer acceptable? Absolutely not. As I 
previously mentioned, the scope of the problem is far from 
insurmountable and a shrewd allocation of existing resources 
can provide an enduring, practical solution. The NTRA Jockey 
Injury Task Force, which was comprised of racetracks, horsemen 
and jockeys last winter, has made adequate insurance coverage 
an industry imperative. I am confident that a cooperative 
solution will be completed and implemented. This Congressional 
subcommittee has been very helpful in placing an increased 
focus on the task and situation at hand.
    The tracks and horsemen understand the need for a secure 
safety net for all jockeys. It is well on its way to being 
erected as we speak, and I have every confidence the job will 
be completed in the timely fashion it deserves and demands. 
Thank you.
    [The prepared statement of Christopher N. Scherf follows:]

Prepared Statement of Christopher N. Scherf, Executive Vice President, 
        Thoroughbred Racing Associations of North America, Inc.

    Thank you, Mr. Chairman, and members of the subcommittee. I am 
gratified to have the opportunity to address the important and complex 
issues that have prompted your inquiry into the tragic circumstances 
involving Gary Birzer and his family.
    As the Executive Vice President of the Thoroughbred Racing 
Associations of North America for the past 17 years, I have represented 
its member racetracks, currently numbering 41, in discussions with the 
Jockeys' Guild and in securing a series of national insurance policies 
providing accident coverage across the broad spectrum of racetracks, 
encompassing TRA and non-TRA members, large and small alike. This 
program has been in place since the Guild first came to the TRA in 1949 
to consolidate insurance from a variety of individual track policies 
into a national program assuring coverage the jockeys could count on no 
matter where they chose to ride. Jockeys then, as now, would move from 
state to state seeking to be retained by various racehorse owners. The 
insurance then available did not accommodate perfectly such mobile, 
individual sports professionals and insurance companies sometimes would 
dispute whether a claim was simply a continuing injury originally 
suffered at a different track with a different insurance carrier.
    During the past 30-plus years, the Guild also has sought and 
received direct payments from the racetracks, using those funds to 
subsidize 65 to 75 percent of the cost of the family health plan 
offered to members of the Jockeys' Guild. The Guild's health plan 
included the unusual provision of covering work-related injuries and 
provided reimbursement for medical costs in excess of the $100,000 
track accident policy. In 2001 when the health insurance became 
unaffordable even with $2.2 million from the racetracks, the Guild's 
previous leadership allocated $440,000 of that amount to purchase an 
excess accident policy.
    I do not believe we would be here today if not for Dr. Wayne 
Gertmenian and his leadership of the Guild. In 2002, under Dr. 
Gertmenian's leadership, the Guild decided to discontinue the excess 
accident policy, which would have cost approximately $490,000, and 
instead used the $2.2 million in track contributions for unknown other 
purposes. The bottom line is the racetracks were providing base medical 
coverage and adequate direct financial support to provide for up to $1 
million in accident coverage, but Dr. Gertmenian and his management 
group diverted those dollars to other purposes.
    The new management of the Guild, under Dr. Gertmenian, never 
exhibited concern or even understanding of the accident coverage. 
Through the years, the TRA and the Jockeys' Guild were listed as co-
policy holders, along with the track actually purchasing the coverage. 
This entitled both organizations to important accident data.
    The current policy, however, does not have the Guild as a 
policyholder because the broker was unable, despite repeated attempts, 
to get the Guild leadership to even sign the document.
    In New York, New Jersey, Maryland, and California--where jockeys 
are covered by workers' compensation insurance purchased by horsemen--
the tracks have purchased a complementary injury policy that provides 
lump sum payments to the jockey ranging from $100,000 to almost $1.5 
million in the event of a catastrophic accident, either fatal or 
resulting in a total permanent disability, such as some form of plegia. 
The minimum payout is provided to any jockey, but the much higher 
compensation is triggered if a jockey elects to provide the track with 
a waiver against suit. The Guild, through its then director John 
Giovanni, first proposed this additional benefit and the waiver 
provision in the late 1980s when New York, New Jersey, and Maryland 
brought jockeys under some type of workers' compensation fund. Under 
Mr. Giovanni and his Guild management's encouragement, 749 jockeys 
signed the waiver to assure themselves a benefit ranging from $400,000 
to $1.5 million. Since Dr. Gertmenian took over the Guild, this option 
apparently has not been recommended by the Guild and only one waiver 
has been signed and received by TRA . . . in November of 2001. So much 
for current Guild management's abiding concern for member protection.
    Another historical benefit was the Jockeys' Guild's Disabled Riders 
fund, which was started by John Giovanni to provide supplemental income 
to permanently disabled riders. Jockeys recovering from lesser injuries 
received weekly disability payments from the TRA-endorsed policy, which 
the Guild matched for its members as a form of ``your dues dollars at 
work for you.'' When Dr. Gertmenian took over, the Guild began paying 
even temporarily sidelined jockeys from the Disabled Jockeys Fund, 
thereby diverting those dues dollars revenue to other purposes. This 
and a mysterious transfer of dollars out of the Fund is what quickly 
depleted the Disabled Riders Fund. On behalf of its member racetracks, 
the TRA requested, in 2003 and thereafter, an accounting of the use of 
their contributions to the Jockeys' Guild, but never has received a 
remotely adequate response from Dr. Gertmenian and his associates.
    Regarding basic accident coverage and the relevant circumstances of 
working as a jockey in this country, here are the facts:

 Jockeys are independent contractors by choice, have been deemed to be 
        so both legislatively and in some states by judicial ruling, 
        and enjoy the concomitant tax benefits, as affirmed by the IRS. 
        As skilled, tough, and fiercely competitive individuals, 
        jockeys want to be free to take riding assignments on a race-
        by-race basis so as to choose those mounts that offer the best 
        chance of winning.
 Jockeys rode in races worth almost $1.2 billion in purses in 2004. 
        While jockeys are free to negotiate their compensation levels 
        above state-regulated minimums, a generally accepted estimate 
        of actual jockeys' earnings is 7.5 to 8.0 percent of his or her 
        mounts earnings. Therefore, total jockeys earnings were between 
        approximately $88-$94 million.
 There were 1,856 jockeys who rode in at least one race in 2004. There 
        were 991 jockeys who rode at least 100 times, an average of two 
        a week. Those jockeys accounted for more than 95% of all rides 
        and this used to be the minimum requirement for active Jockeys' 
        Guild membership and benefits. The average annual earnings for 
        those jockeys was in the $87,000-$93,000 range. The 599 jockeys 
        who rode at least 300 mounts (six a week and representing more 
        than 80% of all starters), had average earnings of $134,000-
        $142,000.
 All equine activity--racing and non-racing, professional and 
        amateur--is recognized as being inherently risky. People making 
        a living riding horses usually have a passion for it, as 
        evidenced by Gary Birzer's return to that activity in a 
        recreational mode. At the same time, race riding is the best 
        compensated riding profession available.
 In 2004, there were 487,416 starters. Through June 30, 2005, the 
        latest loss report available, there were 708 paid claims by the 
        TRA insurance policy. In recent years, the average claim has 
        been about $7,000. Through October 31, 2005, there have been 
        five injuries that have reached the $100,000 medical maximum. 
        We don't know how much above that figure each person's medical 
        expenses went, except for Gary Birzer.
 The salient fact is any lack of insurance coverage is a problem only 
        in a very few specific instances. It is a problem that is 
        solvable on both a short-term and long-term, comprehensive 
        basis in a relatively quick fashion.
    The TRA and its member racetracks have a long history of productive 
dialogue with the jockeys and the Guild. Jockeys are independent 
contractors, but the Jockeys' Guild has been an effective liaison with 
track management, representing riders in instances ranging from the 
riders deciding not to race for various weather or track surface-
related safety issues on certain days (41 at TRA tracks during the past 
two years) to the jockey room environment, which can range from Spartan 
to game rooms and, at Monmouth Park, even a swimming pool.
    In February of 2004, months before the Gary Birzer accident, the 
TRA formed a Safety Committee to constantly monitor and review jockey 
safety-related items and agreed to work in consultation with The 
Jockeys' Guild to promote the best and latest safety practices.
    The TRA and its member racetracks have been supporters of the 
Racing Medication and Testing Consortium to promote a uniform and safe 
medication policy for horses that will ensure the safety of the horse 
and jockey. Horse and rider safety are why state racing commissions 
mandate pre-race veterinary inspection of each entrant.
    The safer racing environment is the Holy Grail for the racing 
industry. Injuries to horses and jockeys are horrifying to our fans. 
Turfway Park spent $5 million installing the revolutionary Polytrack 
surface and a new rail around it this year and the rest of the industry 
is anxiously watching the encouraging early results to make sure the 
synthetic material will withstand the various extremes of climate and 
weather conditions.
    Over the years, gooseneck rails constructed of materials designed 
to withstand the impact of a horse have replaced rails that shattered 
and had straight uprights as support. Distance-marking poles have been 
placed at a safe distance from the inside rail so as not to pose a 
danger to horse or jockey. Rider safety vests have been mandated as 
essential equipment not to be counted against the impost (weight) 
assigned to a horse.
    Safety standards are an ever-evolving issue and, consequently, the 
TRA and its racetracks always have safety-related items on their 
business agenda.
    Jockey health issues also are of continuing discussion and 
refinement within the industry. Unnoticed, but nonetheless true, a 
quick survey by the TRA revealed that during the past few years minimum 
jockey weight assignments have been raised in several major racing 
jurisdictions (California, Illinois, Kentucky, Maryland, New York, and 
New Jersey comprise an incomplete list) and are not the same as 100 
years ago or even 10 years ago. It is a complex issue, however, that 
must also take into account the optimum safety of the horse.
    Attesting to industry desire to have a healthy population of 
jockeys, the California racing industry solicited a proposal for a 
comprehensive study in August to utilize in developing a wellness 
program that will aid jockeys in maintaining a healthy lifestyle while 
meeting the rigorous physical demands of their profession. In 
September, the TRA and other industry groups met with the collegiate 
research team to refine the study so it can be undertaken in the coming 
year and become an industry benchmark for future policies.
    Returning to the principal reason we're here today:
    Is what has befallen Gary Birzer acceptable? Absolutely not.
    What assurances can we give you that the racing industry is willing 
and able to rectify the situation in near-immediate fashion?
    As I previously mentioned, the scope of the problem is far from 
insurmountable and the shrewd allocation of existing industry resources 
can provide an enduring, practical solution.
    The NTRA Jockey Injury Task Force, which was comprised of 
racetracks, horsemen, and jockeys last winter, has put everyone on 
record as making adequate insurance coverage in the event of a 
catastrophic injury an industry imperative. I'm confident there is a 
cooperative solution that will be devised and implemented.
    This Congressional subcommittee has been helpful in placing an 
increased focus on the task at hand. Furthermore, your work may help 
restore a long and valuable working relationship between the Jockeys' 
Guild, under a responsible new leadership, and other industry groups.
    In any event, the tracks and horsemen understand the need for a 
secure safety net for all jockeys. It is well on its way to being 
erected as we speak and I have every confidence the job will be 
completed in the timely fashion it deserves and demands.

    Mr. Whitfield. Thank you, Mr. Scherf. Mr. Van Clief, you 
are recognized for 5 minutes.

                TESTIMONY OF D.G. VAN CLIEF, JR.

    Mr. Van Clief. Thank you, Mr. Chairman. As Commissioner of 
the National Thoroughbred Racing Association, I thank Chairman 
Whitfield and the members of the subcommittee for this 
opportunity to address the issues of jockey safety and 
insurance.
    The NTRA as a member-based trade association comprising 
horse owners, breeders, trainers, racetracks and other 
horseracing organizations. The corporation represents its 
members in marketing and television contracts, public 
relations, government affairs, sponsorship sales and product 
development programs. It also produces the Breeders Cup World 
Thoroughbred Championships, a day of championship level racing 
that takes place at a different racetrack each year.
    From time to time, the NTRA serves as a convening authority 
to address issues of natural importance to our industry. Over 
the years, the organization has empanelled industry groups to 
address topics such as equine medication and drug testing, 
wagering technology and technology security and most recently, 
jockey insurance. The NTRA does not contract with jockeys, back 
stretch workers or exercise riders. However, we and our members 
were shocked and dismayed upon hearing the story of Gary Birzer 
and the failure of the Jockey's Guild to provide catastrophic 
insurance for its members. It is not our role or intent to 
intervene in the Guild's management issues but we have grave 
concerns that the organization's apparent disarray has 
jeopardized the health and welfare of hundreds of riders. The 
Guild was once a trusted partner in vital business-to-business 
relationships within out industry, involving millions of 
dollars and affecting hundreds of families in the racing 
community. It must institute comprehensive reforms to regain 
that status. And Mr. Chairman, as you have noticed, it appears 
to be well under way in that regard.
    The NTRA has and will continue to work cooperatively with 
our member associations, with jockeys, with horsemen and with 
other industry stakeholders, as well as insurance service 
providers and legislative and regulatory agencies to identify 
equitable, cost-effective solutions to the problem of lapsed 
catastrophic coverage for riders.
    In 2004, upon learning that the Guild's catastrophic injury 
insurance had been allowed to lapse, the NTRA formed a 33-
member taskforce on jockey accident insurance. The panel 
included a cross-section of insurance providers, jockeys, 
racetrack representatives and horsemen. They assembled the 
relevant facts, such as existing levels of accident coverage, 
the mechanisms used by each jurisdiction to find this coverage 
and examined Workers' Compensation Programs currently in place 
in major racing jurisdictions; California, New York, New Jersey 
and Maryland. In its findings, the panel endorsed a minimum 
insurance level of a half a million dollars and recommended 
furthermore a $1 million optimum level. The panel also 
identified a private insurance solution through AIG, which has 
since developed a program for North American Thoroughbred 
Racetracks. With AIG, most tracks can purchase $1 million of 
limits for 50 to 75 percent more than what they were paying to 
obtain $100,000 in coverage previously.
    NTRA member tracks, excluding those in States where jockeys 
are already covered under Workers' Compensation, represented 
3,452 race days in 20004. According to AIG, 25 NTRA racetracks, 
including those of Magna entertainment and Churchill Downs, our 
two largest racetrack operators, have purchased jockey on-track 
accident insurance coverage. Most have insured at the $1 
million level. These tracks represented 2,316 days in 2004, 
thus 67 percent of NTRA member exposure, if you will, is now 
ensured under the program. Several other NTRA member tracks are 
considering the AIG program and if they do bind that coverage, 
more than three-quarters of our member exposure will be insured 
at or above the minimum level recommended by our Jockey 
Insurance Task Force. Those outside this group remain with the 
program negotiated by the Thoroughbred Racing Associations. In 
short, despite the Guild's actions or I should say perhaps 
their failure to act in allowing coverage to lapse, virtually 
all tracks offer an on-track coverage for jockeys ranging from 
$100,000 to $1 million.
    We believe that our industry, in concert with State 
regulatory agencies and a reconstituted, credible jockey's 
organization, will ensure that our sport continues to operate 
in a manner that will protect both its participants and its 
public. Not to do so we think is unacceptable. Thank you, Mr. 
Chairman.
    [The prepared statement of D.G. Van Clief, Jr. follows:]

   Prepared Statement of D.G. Van Clief, Jr., Commissioner, NTRA and 

                    President, Breeders' Cup Limited
    Thank you for this opportunity to address the Subcommittee on 
Oversight and Investigations regarding the issues of jockey safety and 
insurance.
    The NTRA is a member-based trade association that represents 
owners, breeders, horsemen, racetracks and other horse racing 
interests. In addition to managing certain events, including the 
Breeders' Cup World Thoroughbred Championships, the association 
represents its members in marketing and television contracts, public 
relations, government affairs and sponsorship sales and development 
programs.
    As a trade association, the NTRA serves from time to time as a 
``convening authority'' to address national issues. Over the years, the 
organization has empanelled industry groups to address equine 
medication and drug testing, wagering technology, and, most recently, 
jockey insurance.
    The NTRA does not contract with jockeys, backstretch workers or 
exercise riders. However, like all members of the racing community, we 
recognize the important role that these individuals play in our 
industry and the risks that they incur each year while discharging 
their duties in connection with the care, exercising and riding of some 
74,000 race horses participating in 58,000 races and making a combined 
total of 487,000 starts.
    The recent media reports of alleged misappropriations by the 
management of the Jockeys' Guild, reports that its health care plan is 
in arrears, as well as the Guild's decision in 2002 to allow its policy 
for on-track catastrophic insurance for jockeys to lapse, create grave 
concerns that the Guild's actions have jeopardized the health and 
welfare of hundreds of riders.
    It is not our role or intent to intervene in the Guild's management 
issues. However, given the organization's apparent financial and 
administrative disarray, the racing industry cannot continue to work 
with it until the Guild institutes comprehensive reforms.
    At the same time, NTRA has and will continue to work cooperatively 
with our member associations, jockeys, horsemen and other industry 
stakeholders, as well as insurance service providers and the 
appropriate legislative and regulatory agencies to identify cost-
effective and equitable solutions to the problem of lapsed catastrophic 
coverage for riders.
    In 2004, upon learning that the Guild had allowed its catastrophic 
injury insurance for its members to lapse, the NTRA formed a 33-member 
Task Force on Jockey Accident Insurance (see attached announcement). 
The panel included a cross section of insurance providers, jockeys, 
racetrack representatives and horsemen. They assembled the relevant 
facts, such as existing levels of accident insurance coverage for 
jockeys; the mechanisms used by each jurisdiction to fund this 
coverage; and examined workers' compensation programs currently in 
place in major racing jurisdictions such as California, New York, New 
Jersey and Maryland.
    The panel endorsed a minimum insurance level of $500,000 and 
recommended a $1 million level (see attached news release). The group 
also identified a private insurance solution through AIG, the nation's 
largest underwriter of commercial and industrial insurance, which has 
since developed a program for Thoroughbred racetracks throughout North 
America. In most cases, racetracks can purchase $1 million of limits 
for 50% to 75% more than they were paying for $100,000 worth of 
coverage with the CIGNA program available through the trade association 
known as the Thoroughbred Racing Associations of North America.
    NTRA member tracks, excluding those in states where jockeys are 
covered under workers' compensation (New York, Maryland, California, 
New Jersey and Idaho), represented 3,452 race days in 2004. According 
to AIG, 25 NTRA member tracks, including those of Magna Entertainment 
and Churchill Downs Incorporated, have purchased the Jockey On-Track 
Accident program. These tracks represented 2,316 race days in 2004. 
Thus, 67 percent of the NTRA member track ``exposure'' is now insured 
under this program. Several other NTRA member tracks have requested and 
received an AIG proposal. If they bind, more than three-quarters of our 
member exposure will be insured at the level recommended by the Jockey 
Insurance Task Force, with the majority at the $1 million level. The 
remaining tracks are with the TRA, whose CIGNA program offers $100,000 
in coverage.
    AIG will also provide an excess policy on top of the $1 million of 
coverage for all individual jockeys riding at tracks that purchased the 
underlying $1 million worth of coverage. Jockeys would be able to buy 
coverage at very competitive rates due to the high deductible carried 
by--the participating tracks. AIG has indicated that Guild reform will 
be needed before it will be confident enough to use the organization as 
a means of channeling this option to jockeys nationwide. We remain 
optimistic that these reforms will be carried out shortly and that 
jockeys will have access to this added coverage.
    In addition to providing on-track catastrophic insurance for 
jockeys at levels ranging from $100,000 to $1 million, North American 
racetracks work to ensure that the racing environment is safe for both 
equine and human athletes as a matter of routine. The safety features 
may vary between jurisdictions but generally include:

 Pre-race inspection exams by state-licensed veterinarians for all 
        race-day equine competitors
 Post-race equine drug testing under an industry-sponsored program
 Track maintenance that includes harrowing, soil conditioning and 
        watering as needed to produce a safe and consistent surface
 Safety rails designed to minimize injuries to horses and riders 
        should a racing accident occur
 Engineered racing surfaces such as Polytrack, which are designed to 
        reduce the incidence of on-track injuries for horses
 An ambulance that follows each racing field from starting gate to 
        finish
 Padded starting gate stalls and professional handlers for each horse 
        in the starting gate
 On track alarms to alert jockeys in the event of an emergency during 
        a race
 Protective helmets and vests for jockeys
    Twenty-six industry stakeholder organizations support the Racing 
Medication and Testing Consortium that develops model rules for race-
day medication and drug testing. The RMTC also funds university-level 
research into equine drugs.
    Members of the industry meet regularly to exchange ideas and 
information regarding numerous issues, including racetrack safety. 
These industry conferences include the University of Arizona's annual 
Symposium on Racing, the Asian Conference on Racing; the International 
Federation of Racing Authorities; the American Association of Equine 
Practitioners' annual convention and conferences conducted by the 
Association of Racing Commissioners International and North American 
Pari-Mutuel Regulators Association, among others.
    Numerous industry organizations provide assistance for jockeys and 
other members of the racing community, including the Jockey Club 
Foundation, established in 1943 to assist industry workers, including 
injured jockeys; the Shoemaker Foundation, formed in 1991 with a 
mission to provide financial assistance to any individual in the racing 
industry who has suffered a catastrophic illness or accident after 
exhausting available workers' compensation and insurance benefits; and 
the Don Macbeth Memorial Jockey Fund, providing a wide range of 
assistance to riders from purchasing medical equipment to providing 
monetary assistance. Numerous benevolent groups exist among horsemen's 
associations to assist backstretch workers in need, while organizations 
such as the Winners Federation and the Race Track Chaplaincy provide 
substance abuse counseling and other social services.
    Equine medical research, focusing on equine health and safety, is 
funded largely by the industry itself through the Grayson-Jockey Club 
Research Foundation, the world's largest private funder of equine 
medical research. Additionally, UC-Davis conducts a racehorse necropsy 
program funded by the racing industry to determine the nature of 
catastrophic injuries to horses and develop injury prevention 
strategies. Ongoing scientific research into racetrack injuries is 
aimed at identifying causal factors for injuries with the goal of 
reducing the incidence and severity of equine injuries and so 
indirectly ensuring the safety of jockeys and exercise riders.
    In closing, I would like to thank the Committee for its work on the 
important issues of jockey insurance and safety. The racing industry is 
committed to a shared and speedy resolution to the jockey insurance 
issue and believes that with requisite levels of accountability, 
transparency and professionalism, the Guild can resume its role as a 
facilitator for jockey health and safety programs. The apparent lapse 
in Guild management that the Committee's investigation has helped to 
expose is, we believe, an aberration in the organization's 65-year 
history of service to riders.
    We look to our industry, in concert with state regulatory agencies 
and a reconstituted, credible jockeys' organization to ensure that our 
sport continues to operate in a manner that will protect both its 
participants and its public.

    Mr. Whitfield. Thank you, Mr. Van Clief. As I told you when 
we started this hearing we were going to have two votes and we 
have 7 minutes left in the first vote so we are going to 
recess. We will be back in, I would say, about 25 minutes and 
then we will pick up with you, Mr. Sexton, and Mr. Amos and Mr. 
Fravel. So if you all will excuse us, we will recess for 20 
minutes and we will be back. Thank you.
    [Brief recess.]
    Mr. Whitfield. I will call this hearing back to order and 
Mr. Stupak is on his way but rather than delay any longer, I 
will recognize Mr. Sexton for his 5-minute opening statement.

                    TESTIMONY OF STEVE SEXTON

    Mr. Sexton. Chairman Whitfield, Representative Stupak and 
member of the committee, good afternoon. My name is Steve 
Sexton and I am the President of Churchill Downs Racetrack, 
which for 131 years has been home of America's premiere 
horserace, the Kentucky Derby. Churchill Downs parent company, 
Churchill Downs, Incorporated or CDI, owns and operates world 
renowned horseracing venues throughout the United States. Our 
six racetracks in Florida, Illinois, Indiana, Kentucky and 
Louisiana, host many of North America's most prestigious races. 
Churchill Downs Racetracks have also hosted five Breeders Cup 
World Thoroughbred Championships and Churchill Downs is 
scheduled to once again host the event in 2006.
    Churchill Downs is committed to maintaining a standard of 
excellence in all aspects of our operations, including those 
concerning the health and welfare of the jockeys and exercise 
riders. At present, CDI tracks run approximately 6,000 races 
each year and the overwhelming majority of these races are 
conducted without incident. CDI and its family of racetracks 
stand with the entire horseracing industry in the belief that 
there must be an industry-wide effort to ensure the 
availability of adequate on-track insurance coverage to jockeys 
and to eliminate avoidable racing hazards. CDI has already 
taken steps on its own, as well as in conjunction with these 
other stakeholders, to rectify the jockey health and welfare 
issues currently confronting the horseracing industry today.
    For several decades, racetracks in the United States that 
are members of the Thoroughbred Racing Association or TRA, 
including CDI tracks, have contributed substantial funds each 
year to secure on-track catastrophic injury insurance for 
jockeys. As you know, jockeys are not employees of the 
racetracks but are hired by horse owners or trainers to ride on 
a horse by horse basis. These horse owners or trainers 
negotiate the terms by which jockeys are compensated. Further, 
the individual States establish the racing rules and 
regulations governing jockeys and their work-related activities 
on a racetrack.
    Nonetheless, motivated by a desire to protect the best 
interests of jockeys, since the early 1970's CDI and other TRA 
Racetracks, have provided jockeys with on-track accident 
insurance coverage. CDI and other member tracks have 
additionally paid per-race day and per-mount fees to the 
Jockey's Guild, with the understanding that the Guild would in 
turn use these funds to purchase health insurance and 
supplemental catastrophic injury insurance for its member 
jockeys. Thus, historically each racetrack provided $100,000 in 
on-track injury coverage for each jockey and collectively paid 
$2.2 million annually in fees to the Guild. Until Dr. Wayne 
Gertmenien took over the Guild in 2001, the Guild used that 
money to obtain $1 million in insurance coverage for on-track 
catastrophic injuries to supplement the $100.000 first layer of 
insurance provided by the racetracks. The next year, the Guild 
failed to renew the supplemental catastrophic coverage for 
jockeys. Many in the horseracing industry, including jockeys, 
only became aware that this on-track policy had lapsed after 
the tragic accident at Mountaineer Park in July 2004.
    As jockeys, horsemen and racing companies across the 
company began asking questions about why Guild management had 
terminated that coverage, we wrote the Guild in December 2004 
seeking an accounting for the more than $1 million that CDI 
tracks have given to the Guild since Dr. Gertmenien had taken 
over the organization. At the time we wrote this letter, North 
American Racetracks as a group had provided more than $7 
million to the Guild during Dr. Gertmenien's tenure, funds that 
we understood that would be used by the Guild to pay for the 
on-track insurance coverage for jockeys. We never received a 
response to our letter.
    Accordingly, for the 2005 racing season, we decided on our 
own to use the money CDI otherwise would have paid the Guild to 
purchase additional on-track insurance coverage for jockeys 
racing at CDI tracks. The policy obtained by our company 
affords jockeys a catastrophic injury benefit of $1 million, as 
well as a disability quotient for both temporary and permanent 
disabilities, a significant increase over the $100,000 first 
level coverage typically provided by individual racetracks.
    We are also working to provide a long-term, comprehensive 
and equitable solution to provide adequate insurance coverage 
for jockeys and others who work in our industry. CDI is 
actively working with all members of the horseracing industry 
to support the extensive of State Workers' Compensation 
programs not only to the jockeys but also to the apprentice 
jockeys and exercise riders who previously were not covered. In 
Kentucky, for example, I represented by home tracks, Churchill 
Downs and Ellis Park, on the Blue Ribbon Panel created by 
Governor Ernie Fletcher in February 2005, to study the issue of 
Workers' Compensation for jockeys and others who suffer work-
related injuries while mounting, riding or dismounting a horse.
    Throughout the summer of 2005, members of the panel who 
represent all constituencies within Kentucky's horseracing 
industry, met with representatives of groups within and outside 
the horse industry in Kentucky to hear their concerns and 
suggestions. Although Kentucky recognizes that certain horse 
industry workers, including jockeys, are independent 
contractors, the Blue Ribbon Panel voted unanimously to 
recommend the Workers' Compensation coverage of jockeys, 
apprentice jockeys and exercise riders. The panel also 
recommended unanimously that the cost of the Workers' 
Compensation Fund be shared by racetracks, horse owners and 
jockeys, with a portion of the premium to come from winning 
purses. We applaud Kentucky for moving forward on this issue 
and believe this is a model that would be implemented in all 
stated.
    CDI is committed to maintaining the highest standards of 
safety at its racetracks. CDI actively participates in a number 
of task forces created to study various jockey safety issues 
and assists in formulating recommendations to be made to State 
regulators. As a member of the TRA Safety Committee created in 
January 2004, CDI took the lead in discussions with Jockey's 
Guild members concerning a range of such safety issues. Issues 
that include the quality of the racetrack surface, the use of 
various types of railing on the inner track and the possibility 
of mandating the use of safety reins, which are believed to 
assist jockeys in maintaining control of the horse should a 
rein break.
    In our view, what safety standards should be in place are 
questions best left to State regulators who have substantial 
experience and expertise, in consultation with the jockeys, the 
racetracks and the horse owners. This is because in the context 
of horseracing, there is no one size fits all solution to 
safety. Care must be taken to ensure that a safety feature 
intended to avoid one danger will not inadvertently introduce 
other dangers.
    In our experience, State regulators take their obligation 
to regulate track safety extremely seriously. For example, on 
any given race day at Churchill Downs there are five to seven 
Kentucky regulators onsite monitoring and directing racing 
activities. For these reasons, States are uniquely qualified to 
assess the desirability of implementing a particular safety 
standard for tracks in their jurisdiction.
    CDI is committed to continuing to work with all segments of 
the racing industry, including jockeys, horse owners, trainers 
and the National Thoroughbred Racing Association, to develop a 
viable, comprehensive and equitable solution to the jockey 
health and welfare issues confronting our sport today. Thank 
you.
    [The prepared statement of Steve Sexton follows:]

    Prepared Statement of Steve Sexton, President, Churchill Downs 
                              Incorporated

                            I. INTRODUCTION.

    Chairman Whitfield, Representative Stupak and Members of the 
Committee, Good Afternoon. My name is Steve Sexton and I am the 
President of Churchill Downs racetrack, which for 131 years has been 
the home of America's premier horse race, the Kentucky Derby. Churchill 
Downs' parent company, Churchill Downs Incorporated (``CDI''), owns and 
operates world-renowned horse racing venues throughout the United 
States. Our six racetracks in Florida, Illinois, Indiana, Kentucky and 
Louisiana host many of North America's most prestigious races. 
Churchill Downs racetracks have also hosted five Breeders' Cup World 
Thoroughbred Championships, and Churchill Downs is scheduled to once 
again host the event in 2006.
    As a leader in the horse racing industry, Churchill Downs is 
committed to maintaining a standard of excellence in all aspects of our 
operations, including those concerning the health and welfare of the 
jockeys, apprentice jockeys and exercise riders. The Company's efforts 
in this regard are evident, in part, in our track safety records. At 
present, CDI tracks run approximately 6,000 races each year, and the 
overwhelming majority of these races are conducted without incident.
    CDI recognizes, however, that horse racing is an inherently 
dangerous sport and that the jockeys exposed to these risks play an 
integral role in the Company's live racing operations. Accordingly, CDI 
and its family of racetracks stand with the entire horse racing 
industry in the belief that there must be an industry-wide effort to 
ensure the availability of adequate on-track insurance coverage to 
jockeys and to eliminate avoidable racing hazards. CDI is pleased to 
join other racetracks, owners, trainers, jockeys, state regulators, and 
the National Thoroughbred Racing Association, in developing a viable, 
comprehensive, and equitable solution to these issues. Indeed, as I 
will discuss in more detail shortly, CDI has already taken steps on its 
own as well as in conjunction with these other stakeholders to rectify 
the jockey health and welfare issues currently confronting the horse 
racing industry.

  II. EVENTS LEADING TO THE CURRENT JOCKEY ON-TRACK INJURY INSURANCE 
     COVERAGE CHALLENGES AND CHURCHILL DOWNS' EFFORTS IN RESPONSE.

    For several decades, racetracks in the United States that are 
members of the Thoroughbred Racing Association (``TRA''), including all 
of the tracks owned by CDI, have contributed substantial funds each 
year to secure on-track catastrophic injury insurance for jockeys. As 
you know, jockeys are not employees of the racetracks, but are hired by 
horse owners or trainers to ride on a race-by-race basis. These horse 
owners or trainers negotiate the terms by which jockeys are compensated 
for riding horses in races. Further, the individual states establish 
the racing rules and regulations governing jockeys and their work-
related activities while at a racetrack.
    Nonetheless, motivated by a desire to protect the best interests of 
jockeys, since the early 1970s CDI and other TRA racetracks have 
provided jockeys with on-track accident insurance coverage. CDI and 
other member tracks have additionally paid per-race day and per-mount 
fees to the Jockeys' Guild, with the understanding that the Guild would 
in turn use these funds to purchase health insurance and supplemental 
catastrophic injury insurance for its member jockeys. Thus, 
historically, each racetrack provided $100,000 in on-track injury 
coverage for each jockey, and collectively paid $2.2 million annually 
in per-race day and per-mount fees to the Guild.
    Up until recently, the Guild fulfilled its primary mission of 
providing insurance and support to jockeys. With the $2.2 million in 
funds contributed annually by the racetracks, as well as annual dues 
and per-mount fees contributed by member jockeys, the Guild obtained $1 
million in insurance coverage for on-track catastrophic injuries to 
supplement the $100,000 first layer of insurance coverage afforded by 
the racetracks. In 2001, the Guild was taken over by Dr. Wayne 
Gertmenian. The next year, the Guild failed to renew the insurance 
policy that provided supplemental catastrophic coverage for jockeys.
    Many in the horse racing industry, including jockeys, only became 
aware that this on-track policy had lapsed after the tragic accident at 
Mountaineer Park in July 2004. As jockeys, horsemen and racing 
companies across the country began asking questions about why Guild 
management had terminated that coverage for its members, we wrote the 
Guild in December 2004 seeking an accounting for the more than $1 
million that CDI tracks had given to the Guild through the per-race day 
and per-mount fees since Dr. Gertmenian had taken over the 
organization. At the time we wrote this letter, North American 
racetracks as a group had provided more than $7 million to the Guild 
during Dr. Gertmenian's tenure--funds that we understood would be used 
by the Guild to pay for the on-track insurance coverage for the 
jockeys.
    We have never received a response to our letter.
    Accordingly, for the 2005 racing season, we decided on our own to 
use the monies CDI otherwise would have paid the Guild to purchase 
additional on-track insurance coverage for jockeys racing at CDI 
tracks. The policy obtained by our Company affords jockeys a 
catastrophic injury benefit of $1 million, as well as a disability 
quotient for both temporary and permanent disabilities--a significant 
increase over the $100,000 first-level coverage typically provided by 
individual racetracks.
    We are also working with all members of the horse racing industry 
in order to provide a long-term, comprehensive, and equitable solution 
to rectify the lack of adequate insurance coverage for jockeys and 
certain other independent contractors, such as exercise riders, that 
work in our industry.
    To that end, CDI actively supports the extension of state workers' 
compensation programs not only to the jockeys who previously were 
protected by the catastrophic injury policy in place until 2002, but 
also to the apprentice jockeys and exercise riders who previously were 
not covered. In Kentucky, for example, I represented my home tracks, 
Churchill Downs and Ellis Park, on the Blue Ribbon Panel created by 
Governor Ernie Fletcher in February 2005 to study the issue of workers' 
compensation for jockeys, apprentice jockeys, and exercise riders in 
the Commonwealth who suffer work-related injuries while mounting, 
riding, or dismounting a horse.
    This panel includes representatives of all constituencies within 
Kentucky's horse racing industry. Throughout the summer of 2005, 
members of the Panel convened numerous times to discuss the spectrum of 
issues relating to the group's mission. During these meetings, 
representatives of groups within the horse industry in Kentucky and 
outside the industry appeared to present concerns, suggestions, 
solutions, and various alternatives as to how the state should address 
this situation.
    Although Kentucky recognizes that certain horse industry workers, 
including jockeys, are independent contractors, the Blue Ribbon panel 
has recommended that these workers be afforded access to workers' 
compensation benefits for work-related injuries. Specifically, on 
September 1, 2005, the Panel voted unanimously to recommend coverage of 
jockeys, apprentice jockeys, and exercise riders under a workers' 
compensation scheme in Kentucky. Further, by unanimous vote, the Panel 
recommended that the cost of the workers' compensation fund be shared 
by racetracks, horse owners and jockeys, with a portion of the premium 
to be gleaned from winning purses.
    We applaud Kentucky for moving forward on this issue and believe 
this is a model that could be implemented in all states.

             III. REGULATION OF THE HORSE RACING INDUSTRY.

    CDI is committed to maintaining the highest standards of safety at 
its racetracks, and continuously monitors the development of 
innovations that might reduce or eliminate risks in the inherently 
dangerous sport of horse racing. Among its efforts in this area, CDI 
actively participates on a number of task forces created to study 
various jockey safety issues and assists in formulating recommendations 
to be made to state regulators. Indeed, as a member of the TRA's Safety 
Committee, created in January 2004, CDI took the lead in discussions 
with Jockeys' Guild members concerning a range of such safety issues. 
CDI is thus aware of the concerns raised by Guild members and others 
regarding certain safety issues that arise on tracks throughout this 
country--issues that include the quality of the track surface, the use 
of various types of railing on the inner track, and the possibility of 
mandating the use of safety reins which are believed to assist jockeys 
in maintaining control of the horse should a rein break.
    In our view, what safety standards should be in place are questions 
best left to state regulators--who have substantial experience and 
expertise--in consultation with the jockeys, the racetracks and the 
horse owners. This is because, in the context of horse racing, there is 
no one-size-fits all solution to safety issues. Rather, risk assessment 
is a highly complex undertaking that requires consideration of a 
multitude of variables including the peculiarities of each particular 
racetrack according to its geographic region and climate. Further, care 
must be taken to ensure that a safety feature intended to avoid one 
danger will not inadvertently introduce other dangers. Thus, a track 
surface that is ideal in an arid part of California might pose problems 
in Louisiana; or a safety rein that might permit a jockey more control 
under one set of circumstances might, during a different incident, 
entangle a horse's legs and, failing to break, cause the horse to fall 
on a fallen jockey. The racing commissions of the individual states 
have an extensive history of regulating horse racing and have the 
expertise and resources to study all relevant factors and develop 
safety standards tailored to the unique needs of the tracks which they 
govern. The individual states, including Kentucky, take their 
obligation to regulate track safety extremely seriously. For example, 
on any given race day at Churchill Downs, there are five to seven 
Kentucky regulators on site monitoring and directing racing activities. 
For these reasons, states are uniquely qualified to assess the 
desirability of implementing a particular safety standard for tracks in 
their jurisdiction.

                            IV. CONCLUSION.

    CDI is committed to continuing to work with all segments of the 
racing industry, including jockeys, horse owners, trainers, and the 
National Thoroughbred Racing Association, to develop a viable, 
comprehensive, and equitable solution to the jockey health and welfare 
issues confronting our sport today.

    Mr. Whitfield. Thank you, Mr. Sexton. At this time we 
recognize Mr. Amos for his 5-minute opening statement.

                      TESTIMONY OF DON AMOS

    Mr. Amos. Chairman Whitfield and distinguished members, it 
is an honor to appear before this subcommittee to help you 
become informed on these matters to the horseracing industry.
    My name is Don Amos and I am the Executive Vice President 
and Chief Operating Officer of Magna Entertainment Corporation. 
I am accompanied by Andrew Staniusz, who is a corporate counsel 
with MEC and has worked closely with me in the development of 
MEC's jockey accident insurance program. At this time I wish to 
speak briefly on some of the points touched upon in my written 
testimony.
    As of June of this year, all jockeys riding at MEC's six 
tracks in non-Workers' Compensation States have been covered 
under a $1 million accident/medical insurance program. The 
implementation of this coverage is a result of the process that 
began with the NTRA, organizing a jockey's medical insurance 
panel in November of last year. MEC's participation in this 
panel led to it working with Churchill Downs and the AIG firm 
in the development of an accident insurance policy that could 
be utilized by all tracks in the United States.
    As outlined in my written testimony, the program being 
implemented by MEC is a co-pay model, with the track paying a 
minimum of 70 percent, owners paying a maximum of 20 percent 
and the Jockey's Guild paying 10 percent of the premium 
required to maintain the $1 million coverage. This translates 
to a mount fee of $5 for the owner and $2,50 for the Guild. MEC 
is attracted to a co-pay model because of MEC's firm belief 
that people have a different attitude to something when they 
pay a portion of it, or as opposed to get something for 
nothing.
    MEC further believes that any program must be designed to 
stand the test of time. Medical care costs will increase over 
time. Today, $1 million of coverage seems appropriate. In the 
future, this is likely to be insufficient. By pre-determining 
the contribution of the 70/20/10 percent basis, MEC believes 
that this is a sustainable model on a long-term basis or until 
such time that an alternate program is developed. It is MEC's 
position that an appropriate level of coverage is only a 
starting point. The key is to use accident experience data for 
frequency and severity to develop comprehensive analyses of 
root causes of accidents, which in turn will develop loss 
control initiatives based on objective facts.
    From the outset, MEC has looked to its insurance carrier, 
AIG, to develop a body of loss experience data to begin this 
process of loss control. As recently as November 10, 2005, Mr. 
Staniusz met with AIG representatives to discuss the status of 
the development of loss control initiatives. These discussions, 
AIG reviewed with MEC the fact that it has been utilizing 
experience data to evaluate safety factors such as starting 
gates, rails, lighting, weather, visibility and jockey 
equipment. AIG will be commencing loss control inspections of 
MEC facilities covered by this insurance program beginning in 
the new year. Accordingly, this program is well on the way of 
becoming a comprehensive risk management program designed to 
enhance the safety of jockeys riding at our facilities.
    Mr. Chairman and distinguished members, in conclusion I 
firmly believe this industry is moving in the right direction 
regarding the specific issue of jockey accident insurance. As 
in any process, industry leaders must show the way. MEC 
believes that it and Churchill took a responsible approach to 
addressing the immediate needs arising from inadequate jockey 
insurance. If all stakeholders are willing, adequate medical 
insurance is affordable for every racetrack.
    MEC encourages all stakeholders to work within the broad 
principles of the approach we developed to obtain a viable 
solution at the local level. MEC firmly believes that the 
stakeholders in this industry will reach an affable solution in 
short order.
    At this time I wish to restrict my oral remarks to the 
issue of jockey accident insurance. As you are aware, my 
written testimony touched upon several issues on which I or Mr. 
Staniusz would be pleased to field any questions that you may 
have. As is clear from my written testimony, I am personally 
passionate about this sport. My passion extends to the 
magnificent animals, the talented trainers and the courageous 
athletes who ride them. This industry has had to face many 
challenges in recent years. It is MEC's belief that by having 
all stakeholders; owners, trainers, jockeys, breeders and the 
tracks working together and balancing their respective 
interests, this industry can meet all of its challenges.
    Thank you, Chairman Whitfield and distinguished members for 
your kind attention.
    [The prepared statement of Don Amos follows:]

  Prepared Statement of Don Amos, Executive Vice-President and Chief 
              Operating Officer, Magna Entertainment Corp.

    Chairman Whitfield and distinguished members, it is an honor to 
appear before this Subcommittee to help you to become informed on these 
important matters to the horse racing industry.
    My name is Don Amos and I am the Executive Vice-President and Chief 
Operating Officer of Magna Entertainment Corp., (``MEC''). As an 
executive officer of a public corporation, my responsibility is to act 
in the best interests of our shareholders. In MEC's judgment, the best 
way to do this is to work with all stakeholders in our industry: 
owners, jockeys, trainers and breeders; to achieve the common good of 
improving horseracing in a very competitive landscape.
    I have been associated with horses since childhood, showing 
Shetland Ponies in county fair competitions in rural Ontario, Canada. 
This evolved into owning and driving standardbred horses as a young 
adult. My association with the thoroughbred industry began in 1977 in 
Toronto, Canada. Currently, I am the owner and breeder of 16 
thoroughbreds. Throughout my association with, and continuing education 
about, horseracing, I have come to admire many individuals. Talented 
trainers, who can develop young horses into high performance athletes 
will always have my greatest admiration. Further, as someone who at one 
time was an aspiring jockey, I must admit to this Subcommittee that I 
consider those who ride these animals to be fine tuned athletes, 
exhibiting great courage and respect for their competitive colleagues.
    In my testimony, I will share with this Subcommittee the approach 
that MEC has taken in working with industry stakeholders to deal with 
the issues being investigated in these hearings. MEC believes that this 
approach is beneficial to the industry, especially to jockeys riding at 
MEC's tracks, and will ultimately be beneficial to our shareholders.
    This testimony will begin with some background of MEC, its history, 
vision and operating principles. This will be followed by a summary of 
the steps taken in developing a one million dollar accident insurance 
program for jockeys. I will use the term ``program'' because this 
testimony will show that an appropriate level of coverage is only the 
starting point in promoting jockey safety. Finally, this testimony will 
briefly provide MEC's perspective on some of the other issues that have 
been raised in these hearings.

                           BACKGROUND OF MEC

    MEC was formed in 1999 as a subsidiary of Magna International Inc. 
(``Magna''), currently the fourth largest manufacturer of automotive 
systems in the world. The Magna story began in 1957 when its founder, 
Frank Stronach, began a tool and die shop out of a garage in Toronto, 
Canada. The Company's revenues in the first year were Cdn $13,000. 
Today, Magna is a US $20 billion company, employing 81,000 employees 
worldwide.
    Over the years, Frank Stronach became a major owner and breeder of 
thoroughbreds. As a businessman and entrepreneur, he saw an opportunity 
to transform thoroughbred racing into a global industry through the 
utilization of satellite and internet communication. This vision led to 
Magna's purchase of Santa Anita Park in 1998.
    MEC became a public company in 2000 with Magna as its controlling 
shareholder. In 2003, Magna spun off its interest in MEC.
    Today, MEC remains a publicly traded company, with Frank Stronach 
as its Chairman. Accordingly, the original vision for MEC continues 
today.

                            MEC'S PRINCIPLES

    The fact that MEC began as a subsidiary of a manufacturing company 
exposed it to approaches not common to the racing industry. The 
foremost of these is a systematic approach to quality control and 
continuous improvement. The manufacturing environment, especially in 
automotive, is driven by measurables and auditing. Out of this 
environment Magna migrated these features into non-production areas 
such as employee relations and environmental management through the 
introduction of: Employee Opinion Surveys; Health and Safety Audits and 
Inspections; and Environmental Audits and Inspections.
    All of these vehicles drove the development of action plans for 
continuous improvement.
    Further, Magna came to a common sense conclusion that success was 
based on balancing the interest of the stakeholders in a business: 
customers, investors and employees. The only way of achieving this 
balance is by respecting each stakeholder through open communications.
    Finally, with its employees and managers, Magna emphasized one 
fundamental point: ``No government, no company, no union can guarantee 
you job security. The best recipe for job security is for employees and 
management to work together in harmony, to provide a better product at 
a better price for our customers.'' This meant fostering collaboration 
and diffusing confrontation. As in the case of any successful 
relationship, whether as spouses, friends, parent--child, maintaining 
this approach is hard, but satisfying, work.
    Mr. Chairman and members of this Subcommittee, this background has 
formed part of this testimony to answer one question. We are all 
products of the values we are taught and the experiences we have in 
life. The same is true in the life of a corporation. Throughout this 
testimony, some of you may wish to ask ``Why did MEC decide to do 
that?'' The answer I believe is found in knowing our background.

                  OPERATING IN TODAY'S RACING INDUSTRY

    Although MEC is confident in its vision to revitalize horseracing, 
the fact remains that this effort costs money.
    As a result of the decline of horseracing over the last two 
decades, the tracks MEC acquired require significant capital 
expenditure. This has caused significant impact to MEC's bottom line. 
But these expenditures are necessary to revitalize racing in our 
markets.
    With respect to the state that horseracing has found itself in as 
an industry, there can be much discussion. The bottom line is there is 
no one cause; there is no one culprit; there is no value in finger 
pointing. We prosper together as an industry, we suffer together as an 
industry. All stakeholders have to bear some burden for the state this 
industry finds itself in.
    The one basic point of the situation the industry finds itself in 
is that horseracing will never achieve greater prosperity if its 
stakeholders are confrontational. The only chance for this industry to 
revitalize itself is if all stakeholders, including ourselves, try to 
work together, balancing our respective interests, for the greater good 
of the industry.
    On this note, the approach MEC has taken with respect to allocating 
our resources is in keeping with this philosophy.
    Currently, MEC has made significant expenditures to modernize 
facilities such as Gulfstream Park to excite the consumer about our 
industry. But no Corporation can modernize all of its facilities at 
once. Accordingly, in our facilities that are not being overhauled, 
MEC's first priority with respect to capital spending is to ensure 
compliance with regulatory requirements. In our industry, this 
primarily centers on environmental issues, such as, the control of 
wastewater from the backstretch.
    The next priority with respect to capital expenditure centers 
around the safety of both the horse and rider, whether it be by 
improvements to track surfaces, starting gates or equipment.
    The fact is that as any corporation, MEC must prioritize its 
capital expenditures. Accordingly, our efforts must be gradual; with 
improvement being implemented on a steady and consistent bases. MEC is 
confident that this approach is ultimately viable and beneficial to 
customers, employees, jockeys, trainers and the horses at our 
facilities.

                             MEC OPERATIONS

    As stated previously in this testimony, MEC has drawn upon its 
roots as a subsidiary of a manufacturing company to implement quality 
control and auditing programs.
    Commencing in 2002, MEC launched a program which included: Employee 
Opinion Surveys; Horsemens' Surveys; Periodic Meetings with Employees 
and Horsemen; Environmental Audits and Inspections; and Health and 
Safety Surveys.
    Just as in the case of the Magna experience, these initiatives 
resulted in the development of action plans to address deficiencies.
    As in the case of any new initiative, there are many challenges to 
achieving successful implementation. But by maintaining our focus, MEC 
is beginning to see the start of a culture of continuous improvement. 
As in all things that achieve lasting effect, these initiatives are 
part of a sustained process of gradual change.
    With respect to our health and safety audits, these are conducted 
by MEC's, workers' compensation carrier, Liberty Mutual, and are 
primarily focused on the safety of our employees. However, the 
sensitivity to safety being cultivated by this process extends to all 
of those at our facilities. As will be discussed in greater detail 
later in the testimony, our Jockey Accident Insurance carrier will be 
conducting loss control inspections commencing in 2006. MEC has every 
expectation that these inspections will have the same effect on 
improving jockey safety as have Health and Safety Audits on employee 
safety.

                       JOCKEY ACCIDENT INSURANCE

    During 2004, the issue of the adequacy of jockey accident insurance 
became one of the key issues of this industry as a result of Gary 
Birzer's tragic accident.
    MEC was invited to the Jockey Accident Insurance Summit organized 
by the National Thoroughbred Racing Association (``NTRA'') which was 
held at Turfway Park outside of Cincinnati on November 22, 2004. Andrew 
Staniusz, Legal Counsel and Director of Employee Relations Programs for 
MEC, attended on the Company's behalf.
    During this summit, a consensus emerged that the appropriate level 
of coverage at this time would be one million dollars. Further, the key 
issue that emerged was not availability of insurance, but how to make 
such coverage affordable. Finally, it was decided to engage the AIG 
firm, which provided workers' compensation coverage to jockeys in 
California, to explore the possibility of developing a program.
    The NTRA held a second meeting in Chicago at Arlington Park in 
January 5, 2005 with representatives from AIG. What came from this 
meeting was an agreement by Churchill Downs Inc. (``CDI'') and MEC to 
work together with AIG in trying to develop a program providing one 
million dollar coverage.
    Over the next weeks, an approach was developed by CDI and MEC that 
was communicated to the NTRA group at Turfway Park on February 25, 
2005. The approach presented provided for a co-pay structure whereby a 
track would pay a minimum of 70% of the total premium of a million 
dollar policy, and with horse owners and the Jockeys' Guild combined 
contributing a maximum of 30% of the cost.
    MEC was attracted to a co-pay model because it is MEC's firm belief 
people have a different attitude to something they have to pay a 
portion for as opposed to something they get for free. By having to 
make a payment each time a horse is raced, the owner is reminded of the 
fact that there is a cost for a lack of safety.
    The thinking behind having the remainder of the cost paid by the 
Guild rather than the Jockey is two-fold. First, there was cognizance 
of the fact that a mount fee would be a hardship to jockeys racing at 
smaller market tracks. Second, the Jockey Guild was receiving a mount 
fee from each track. Historically, these mount fees contributed towards 
the accident coverage that had been discontinued by the Guild.
    From AIG's perspective, it is fair to say that it did not care how 
this policy was funded. It was prepared to provide enhanced coverage to 
all tracks in the U.S.
    Although this is in no way an endorsement of AIG, there are 
distinct advantages in MEC's view of having at this time one major 
player in providing this coverage.
    It is MEC's position that an appropriate level of coverage is only 
a starting point. The key is to use accident experience data, both 
frequency and severity, to develop comprehensive analysis of root 
causes of accidents which will develop loss control initiatives based 
on objective fact, rather than on anecdotal information.
    One of the greatest obstacles to appropriate loss control with 
respect to jockey accidents historically has been the lack of 
appropriate information gathering of loss experience. By having one 
major player at this time, a body of loss experience data can be 
established to begin the process of loss control. Whether such loss 
control measures would be in equipment improvements, track 
modifications or new practices, it is only through objective analysis 
can this industry create a safer racing environment.
    MEC encourages other insurers to enter this field. Afterall, 
competition is healthy. For the time being, however, the relationship 
with AIG is beneficial to the safety of jockeys.
    As stated previously, a joint presentation was given by CDI and MEC 
to the NTRA group at Turfway Park on February 25, 2005. During this 
presentation the co-pay model was brought forward as a near term 
solution. As expected, the approach met resistance from those groups 
who were being asked to contribute. The meeting concluded on the basis 
that additional coverage was available through AIG and that industry 
stakeholders should continue to explore funding approaches.

           MEC'S DECISION REGARDING JOCKEY ACCIDENT INSURANCE

    After further study, MEC decided to implement a one million dollar 
medical coverage policy for jockeys on a co-pay model with the affected 
track paying a minimum 70%, owners paying a maximum 20% and the Guild 
paying a maximum 10% Our analysis determined that a mount fee of $5.00 
for the owner and $2.50 for the Guild would achieve the 20% and 10% 
levels. Any surplus would be applied to next year's contributions of 
owners and the Guild. If there were insufficient mounts at a track to 
realize the appropriate level of co-pay from the owners and the Guild, 
the track would make up the short fall. This is what we mean by a 
minimum contribution of 70% by the track.
    MEC believes that any program must be designed to stand the test of 
time. Medical care costs will only increase over time. Today, one 
million dollars coverage seems appropriate. In the future it is likely 
to be insufficient. By predetermining the contributions on a 70/20/10 
basis, MEC believes this is a sustainable model on a long term basis or 
until such time an alternate program is developed.
    Commencing June 15, 2005, MEC began implementing this policy at 
each of its six (6) tracks in non-workers compensation states as each 
track commenced its live racing meet. As part of this process, MEC has 
sat down with owners and trainers in each affected State to review this 
approach. The goal was to achieve consensus beforehand.
    Where my other responsibilities did not allow me to meet with these 
groups prior to the commencement of the racing meet, MEC decided to 
implement the coverage on a temporary basis without requiring a co-
payment. Accordingly, jockeys at MEC facilities have been riding with 
one million dollar accident coverage at the following locations as of 
the following dates: Great Lakes Downs (MI), June 15, 2005; Thistledown 
(OH), June 15, 2005; Lone Star Park (TX), June 15, 2005; Remington Park 
(OK), August 5, 2005; and Portland Meadows (OR), October 22, 2005.
    The remaining track MEC has in a non-workers' compensation state is 
Gulfstream Park in Florida which will begin its live meet in January 
2006.
    Where state regulations precluded a mount fee approach, MEC has 
agreed to look at alternative mechanisms, such as payment from purse 
accounts, for an equivalent contribution. At the present time, a co-pay 
approach has been established in Michigan and Ohio. Discussions are 
ongoing in Texas and Oregon. MEC will be scheduling discussions with 
Florida Horsemen shortly and with Oklahoma Horsemen in the new year. 
MEC is also currently in discussions with the Jockey's Guild.

                           FUTURE INITIATIVES

    As recently as November 10, 2005, Mr. Staniusz met with AIG 
representatives to discuss the status of the development of loss 
control initiatives. From these discussions, it was apparent that AIG 
has been utilizing its experience data to analyze safety factors such 
as starting gates, rails, lighting, weather, visibility and equipment 
such as helmets and vests. It is anticipated that AIG will commence 
loss control inspections of MEC facilities covered by this program 
beginning in the New Year. Accordingly, the programs is now ready to 
take the next level.

                              OTHER ISSUES

1. Exercise Riders
    At the time of the NTRA summit, there was discussion of a program 
to include exercise riders. The AIG program covers jockeys whether they 
are hurt in a race or exercising a horse in the morning. The policy 
does not cover pure exercise riders.
    At the time this program was being developed, there was simply 
insufficient experience data for the insurance industry to determine 
appropriate costs. Whenever insurers do not have sufficient 
information, they hedge their bets by raising their quotes. Since the 
pressing issue at the time was the situation of jockeys, it was 
determined to exclude exercise riders.
    MEC believes that as insurers become more educated about the risk 
factors associated with exercise riding and as more experience data 
becomes available, this issue of exercise riders could be addressed.

2. Workers' Compensation
    Many believe that workers' compensation is the solution to the 
issue of Jockey Accident Coverage. It well may be.
    I would caution all participants in these hearings that workers' 
compensation is not free. The costs associated with workers' 
compensation regimes in the major racing states are expensive, even 
after one takes account of subsidies, preferred premiums and other 
mechanisms employed to reduce costs.
    The approach tabled jointly by CDI and MEC in February was designed 
to be affordable at every track in the United States. Experience has 
shown that the costs associated with a Workers' Compensation regime, 
whether borne by tracks, trainers or other stakeholders, will be far 
more onerous and quite likely unaffordable in smaller racing markets.

3. The ``Jockey as Employee'' Issue
    The Jockey is licensed by the State Racing Commission. Provided he 
or she has not committed any misconduct, a licensed jockey has access 
to the track, its backstretch and the jockeys' room.
    It is the trainer who retains a jockey to ride a horse. It is the 
trainer who pays the mount fee to the jockey. The jockey receives his / 
her purse money usually on a customary basis of 10% of the purse for a 
win, 7% for place (2nd) and 5% for show (3rd). However, this customary 
basis for purse payment is subject to negotiation between the trainer 
and the jockey.
    If a jockey is not retained to ride by any trainer, would the 
jockey be entitled to payment of the minimum wage from the track? If 
the jockey is an employee, that would be the case.
    But a jockey who cannot get any rides is an underperformer. An 
employer is usually able to discharge an underperforming employee. In 
the case of jockeys, however, it is the state regulator who determines 
qualification.
    Further, what happens if this ``jockey as employee'' is fired by 
the ``track as employer'' for non-performance but is given a mount by a 
trainer the next day? Can the track dictate to a trainer that the 
trainer cannot retain this jockey? Can the track avoid terminating this 
``jockey as employee'' by forcing trainers to give him rides?
    This is simply one hypothetical example that MEC submits should 
cause this Subcommittee, and any other body, such as the NLRB, 
reviewing this issue, to take pause before going too far down the road 
in concluding that ``jockeys as employees'' is the solution to all the 
difficulties jockey face.
4. NIOSH
    As outlined in this testimony, MEC has demonstrated its commitment 
to safety. The issues raised in this Subcommittee's letter to Secretary 
Leavitt , however, involve issues of complexity which are of interest 
to trainers and horse owners, not just only to jockeys and the tracks.
    MEC would encourage NIOSH to seek input from all stakeholders 
groups in conducting any evaluation of standards.

                               CONCLUSION

    Mr. Chairman and distinguished members, in conclusion, I firmly 
believe that this industry is moving in the right direction regarding 
the specific issues of jockey accident insurance. As in any process, 
industry leaders must show the way. MEC believes that it and CDI took a 
responsible approach to addressing the immediate needs arising from 
inadequate jockey accident insurance. Pointing fingers as to how this 
situation arose does not help any injured jockey or his or her family.
    A federal law providing workers' compensation will in all 
likelihood take years; but jockeys will be riding horses tomorrow. What 
is available today should meet the needs of all stakeholders in non-
workers compensation jurisdictions.
    If all stakeholders are willing, adequate medical insurance is 
affordable for every track. MEC encourages all stakeholders to work 
with the broad principles of our approach to obtain a viable solution 
at the local level. MEC believes that the stakeholders in this industry 
will reach an optional solution in short order. To suspend this process 
to await federal legislation will not be in the best interests of the 
jockeys.
    In conclusion and on a personal note, I am sincerely grateful to 
have found myself in a position of responsibility where I could 
contribute to the safety and security of jockeys and their families.

    Mr. Whitfield. Thank you, Mr. Amos. And Mr. Fravel, you are 
recognized for 5 minutes.

                  TESTIMONY OF CRAIG R. FRAVEL

    Mr. Fravel. On July 24, 2004, Alex Solis was riding a mare 
named Golden KK at Del Mar when an apprentice rider cut him off 
along the rail. Golden KK clipped heels with that riders' horse 
and fell. Alex rolled under the safety rail and remained there 
motionless. Within 30 seconds an ambulance following the race, 
with two emergency medical technicians on board, was at Alex's 
side. Alex was immobilized and taken to an onsite medical 
clinic where he was attended by a physician, who ordered that 
Alex be transported to a local hospital. While Alex was being 
transported, the race was resumed with a back-up ambulance 
following the race.
    Under the rules of the California Horseracing Board, Alex 
was covered by a policy of Workman's Compensation and his 
medical expenses were fully covered with no deductible or co-
payment. He was also entitled to temporary Disability Benefits 
and had he been unable to return to work, he would have been 
entitled to permanent Disability Benefits and supplemental Job 
Displacement Benefits.
    Under two programs initiated by horse owners and California 
tracks, the cost of Workers' Comp is subsidized through a 
variety of funds derived from wagering. In addition, every 
California track pays for supplemental catastrophic injury 
insurance through a TRA sponsored group program that pays 
significant benefits in the event of permanent disability or 
death. A program that has been continually funded by the 
tracks, despite the fact that the agreement with the Jockey's 
Guild, which contemplated the additional coverage, lapsed 
several years ago.
    California is 1 of 5 States that mandates Workers' 
Compensation coverage for jockeys and exercise riders and is 
one of two that provides funding to pay for health insurance 
for jockeys and their dependents. California racetracks, 
horsemen and representatives of the riders have worked together 
for years to develop legislative and regulatory standards for 
track safety and to contribute significant funding to the 
Disabled Jockeys Endowment. Del Mar was the first racetrack in 
the United States to install the Fontana safety rail.
    We have also worked with the CHRB and Barry Broad, formerly 
counsel of the Jockey's Guild, to pass AB 1180. That new law 
memorializes a number of safety and health initiatives for the 
benefit of California riders. Including a peer reviewed 
academic, nutritional and health assessment designed to provide 
a scientific basis for future policy decisions concerning the 
jockey's scale of weights, as well as nutrition and health 
weight management programs. We are in the final stages of 
evaluating a proposal from Dr. Dan Benardot of Georgia State 
University to conduct the study. And are working with various 
industry groups, including the TRA, Thoroughbred Owners of 
California, California Thoroughbred Trainers, National HBPA, 
THA, Racing Commissioners International and the NTRA to fund 
the study on a national basis.
    California is the only State in the country to require a 
post-mortem examination of every horse that dies on the grounds 
of a licensed racetrack or auxiliary training center. That 
requirement has enabled us to conduct research into the causes 
of catastrophic injuries to horses, conducted by the University 
of California at Davis. And to implement programs to reduce the 
incidence of injuries amongst racehorses.
    In 2005, Del Mar spent in excess of $1.2 million 
maintaining the quality and consistency of its dirt and turf 
tracks during its 7-week meet. We work with the California 
Thoroughbred Trainers to monitor track conditions from the 
trainer perspective and to sponsor research into new methods of 
evaluating track hardness, surface consistency and base 
conditions, which are being developed by Dr. Mick Peterson of 
the University of Maine and Dr. Wayne McIllwraith of Colorado 
State University. That research has provided us with new 
insights into track maintenance techniques and has assisted in 
the adaptation of diagnostic tools, such as ground penetrating 
radar to evaluate sub-surface conditions. We are also 
evaluating the new polymer coated silica sand surface developed 
in the United Kingdom and presently being used at Turfway Park 
and Keeneland, called Polytrack, which promises to further 
reduce injuries to racehorses.
    I started this testimony with a story of Alex Solis. It has 
a happy ending, as he returned to riding in early 2005. There 
is however one aspect of the story that does not have a happy 
ending. Had Alex suffered similar injuries off the track, it is 
unclear whether his health insurance would have been adequate 
to cover his expenses, which would not be covered by Workers' 
Comp. That inadequacy would not be the result of any failure of 
the California industry to fund health insurance for riders. It 
has done that. But from the fact that the health insurance for 
California riders is part of a national self-insurance program 
managed by the Jockey's Guild, a program whose financial health 
is in serious doubt. I encourage this committee to continue to 
work with the industry to remedy this situation and to ensure 
that racetracks, owners, trainers and regulators have a 
responsible party representing the interests of riders. One 
that will work with us, rather than against us, in addressing 
safety and health constructively. Thank you.
    [The prepared statement of Craig R. Fravel follows:]

 Prepared Statement of Craig R. Fravel, Executive Vice President, Del 
                         Mar Thoroughbred Club

    On July 24, 2004, future Hall of Fame rider Alex Solis was riding a 
dark brown four-year old mare named Golden KK in a $32,000 claiming 
race at Del Mar, the seaside race track built by Bing Crosby and Pat 
O'Brien in 1937. Although Alex's mount was fading from contention in 
the race and in seventh position, an apprentice rider likewise out of 
contention cut Alex off along the rail. Alex's horse clipped heels with 
the apprentice's horse and fell to the ground. While Golden KK got 
immediately to her feet and ran off with the field, Alex rolled under 
the safety rail near the quarter pole and remained there motionless as 
his training and instincts led him to do. In less than 30 seconds, an 
ambulance following the race with two emergency medical technicians on 
board was at Alex's side. Alex was carefully placed onto a board and 
immobilized for transport to an on site medical clinic at Del Mar where 
he was immediately attended by a physician who determined that Alex 
should be transported to a local emergency room for further evaluation. 
While Alex was being transported, the races resumed with a backup 
ambulance following each race.
    Alex was eventually diagnosed with a fractured vertebra and three 
broken ribs and operated on at the University of California, San Diego 
Medical Center. He was unable to return to work for six months yet 
still managed to rank ninth nationally in total purse earnings in 2004 
with $11,554,851. While this is an unfortunate story, the silver lining 
in it is the fact that the trainer of the horse Alex was riding was 
required by the rules and regulations of the California Horse Racing 
Board to maintain a policy of workers compensation insurance. That 
policy covered Alex to the same extent as any other worker in 
California would be covered in the event of a work-related injury. 
Under the terms of that policy and California law, Alex's medical 
expenses were covered to the extent required to cure or relieve the 
effects of the injury with no deductible or co-payments by Alex as the 
injured worker. He was also entitled to temporary disability benefits 
to partially replace lost wages and had he been unable to return to his 
profession he would have been entitled to permanent disability benefits 
and supplemental job displacement benefits. The cost of that workers 
compensation insurance was paid by the trainer of Golden KK and in the 
case of a rider billed to the owner of the horse. Under two programs 
authorized by Sections 19605.73, 19605.75, and 19607.4 of the 
California Horse Racing Law the cost of that insurance is subsidized by 
racetracks and horsemen through a variety of funds derived from 
wagering on California races. In addition, every California track pays 
for supplemental Catastrophic Injury Insurance through a TRA sponsored 
group program that would pay significant benefits in the event of 
permanent disability or death. That program is available only to TRA 
tracks in states where workers compensation is available for injured 
riders and has been continually funded by those tracks despite the fact 
that the agreement with the Jockeys Guild, which contemplated the 
additional coverage, lapsed several years ago.
    As you will hear in more detail later today from Richard Shapiro of 
the California Horse Racing Board, what this story illustrates is the 
leadership role California has assumed in the Thoroughbred racing 
industry with regard to jockey safety and health issues. It is one of 
five states that mandates workers compensation coverage for jockeys and 
exercise riders and one of two that provides funding through wagering 
dollars to pay for health insurance for jockeys and their dependents. 
Racetracks, horsemen and representatives of the riders have worked 
together for years to develop legislative and regulatory standards for 
track safety and to contribute significant funding to the Disabled 
Jockeys Endowment. Del Mar was the first racetrack in the United States 
to install the Fontana safety rail on its dirt racetrack, an innovation 
that has undoubtedly saved lives and prevented serious injury since its 
installation. More recently, we have worked closely with the California 
Horse Racing Board and Barry Broad; formerly counsel to the Jockeys 
Guild, to pass AB 1180, recently signed into law by Governor 
Schwarznegger. That new law memorializes a number of safety and health 
initiatives for the benefit of California riders including a peer 
reviewed academic nutritional and health assessment designed to provide 
a scientific basis for future policy decisions concerning the jockey 
scale of weights and nutrition and weight management programs. We are 
in the final stages of evaluating a proposal from Dr. Dan Benardot, PhD 
of Georgia State University to conduct the study and are working with 
various industry groups including the TRA, Thoroughbred Owners of 
California, California Thoroughbred Trainers, National HBPA, THA, 
Racing Commissioners International and the NTRA to fund the study on a 
national basis.
    Moreover, California is to my knowledge the only state in the 
country to require a postmortem examination of every horse that dies on 
the grounds of a licensed racetrack or auxiliary training center. That 
requirement has enabled the industry to support and benefit from 
research into the causes of catastrophic injuries to horses conducted 
by the University of California at Davis School of Veterinary Medicine. 
That research most recently lead to the adoption of a regulation 
limiting the use of horseshoes with toe grabs on California racing 
surfaces based upon findings that there is a significant correlation 
between the use of medium and high toe grabs and the incidence of 
catastrophic limb failure in horses while racing or training. Similar 
research has and will continue to contribute significantly to our 
ability to increase safety for horses and riders, as we are more able 
to confidently identify the causes of injury and attempt to prevent 
them before they occur.
    It is undoubtedly true that these programs come at a cost. I would 
be remiss if I did not inform you that California operates at a serious 
competitive disadvantage to other states where the cost of owning and 
training horses is significantly less. Simply put, horses are our 
product and the quantity and quality of horses available for racing 
translates into higher wagering activity. For a number of years now 
California has been losing horses to other states where the cost of 
doing business is lower. Nonetheless, I am not aware of any advocate in 
California for reducing or eliminating the level of benefits provided 
riders at present. I firmly believe that when any rider in California 
suffers an injury while riding in a race the industry takes pride in 
the fact that they are assured adequate medical care and disability 
benefits.
    Despite the competitive factors that have affected us in recent 
years, California racetracks continue to invest heavily in track 
maintenance and safety. When I came to work at Del Mar in 1990 after 
spending eight years practicing law, the first thing I did was to spend 
a day with Steve Wood, the track superintendent at Del Mar, Santa Anita 
and Fairplex. Steve's day begins at around 4:30 am and can extend late 
into the evening while tractors; harrows and earthmovers groom and 
maintain the dirt surfaces used for training and racing. In 2005, Del 
Mar spent in excess of $1.2 million maintaining the quality and 
consistency of its dirt and turf tracks to ensure safe riding surfaces 
for horses and jockeys during its seven week meet. We have also worked 
with the California Thoroughbred Trainers to monitor track conditions 
from the trainer perspective and to sponsor research into new methods 
of evaluating track hardness, surface consistency and base conditions 
being developed by Dr. Mick Peterson, PhD of the University of Maine 
working with Dr. Wayne McIlwraith, DVM of Colorado State University 
Veterinary School. That research has provided us with new insights into 
track maintenance techniques and has assisted in the adaptation of 
diagnostic tools such as ground penetrating radar to evaluate 
subsurface conditions. We are also evaluating along with Drs. Peterson 
and McIlwraith and Dr. Sue Stover of the UC Davis Veterinary School a 
new Polymer coated silica sand surface developed in the United Kingdom 
and presently being used at Turfway Park and Keeneland in Kentucky 
called Polytrack. I firmly believe that this surface will eventually 
replace virtually every dirt track in the United States and result in 
dramatic improvements in track safety for both horse and rider. 
Preliminary results from both Keeneland and Turfway Park indicate that 
this prediction can be substantiated both empirically and anecdotally.
    I started this testimony with a description of an unfortunate 
incident that occurred at Del Mar to my friend Alex Solis. Accidents 
seem to go hand in hand with riding horses and some of those incidents, 
like the one experienced by Alex, are difficult if not impossible to 
prevent. We are, however, working hard to do more to prevent injuries 
through scientific research, educational efforts and communication 
within the industry and the industry has an obligation to expend the 
resources to do that, not just in California but everywhere.
     Alex's story has a happy ending as he returned to riding early in 
2005 and currently ranks 14th nationally with purse earnings in excess 
of $8.8 million for the year. There is, however, one aspect of the 
story that does not have a happy ending as of yet. Had Alex Solis 
suffered similar injuries in a car crash, it is unclear whether his 
health insurance would have been adequate to cover his expenses since 
that would not be covered by workers compensation. That inadequacy 
would not be a result of any failure of the California industry to 
adequately fund health insurance for riders--it has--but from the fact 
that health insurance for California riders is part of a national self 
insurance program managed by the Jockeys Guild, a program whose 
financial health is in serious doubt given the pattern of obfuscation 
practiced by the management of the Jockeys Guild in the face of 
inquiries by the California Horse Racing Board and the Thoroughbred 
Owners of California, indeed in the face of inquiries from its own 
members. I would encourage this committee to continue to work with the 
industry to remedy this situation and to ensure that racetracks, 
owners, trainers and regulators have a responsible partner representing 
the interests of riders; one which will work with us rather than 
against us in addressing safety and health issues constructively.

    Mr. Whitfield. I thank you, Mr. Fravel, and thank all of 
you for your testimony. Mr. Fravel, you had mentioned that in 
California there is presently a nutrition and health peer-
reviewed study that has been initiated and you are now working 
with a professor at Georgia State to conduct that. Is that 
correct?
    Mr. Fravel. That is correct. We have been through two 
drafts of a proposal to finalize the terms of that study and 
will be--and have met with a variety of industry participants 
that I mentioned in my comments, to finalize the terms of that 
and then work on funding for the proposal.
    Mr. Whitfield. What funding is available for that? Is there 
anyone out in California, any entity or----
    Mr. Fravel. Well, no one has been asked formally for any 
funding because we haven't had a full budget for the proposal 
at this point.
    Mr. Whitfield. Right.
    Mr. Fravel. But as soon as we have a full budget most of 
the industry participants that we have discussed this with have 
shown an interest in participating and saw the value in the 
project.
    Mr. Whitfield. And why is a study like that important?
    Mr. Fravel. Well, there has been a lot of discussion of the 
jockey's scale of weights, which I suppose you have heard some 
of in your discussions. And we worked very closely with Barry 
Broad, who is counsel of the Jockey's Guild in California, to 
develop a scientific basis for future decisions on matters 
relating to the scale of weights. We felt that there was a lot 
of anecdotal evidence about things that jockeys engage in to 
maintain their weight levels but very little scientific 
evidence. And so we began to search for someone who is capable 
of doing the kind of in-depth academic research that would 
provide a basis for those decisions in the long-term.
    Mr. Whitfield. Is there anyone else on the panel today 
aware of any similar initiative in the area where you operate? 
Mr. Scherf?
    Mr. Scherf. Yes. The initiative that Mr. Fravel is talking 
about has been presented to national groups. So I mean, that is 
moving from a California scope to a national scope.
    Mr. Whitfield. Right.
    Mr. Scherf. The study now contemplates surveying jockeys in 
various jurisdictions and various national groups have been 
brought into those meetings for defining a meaningful study.
    Mr. Whitfield. Mr. Amos, in his testimony, mentioned the 
fact that there was a lack of accident experience data in a 
centralized form. And it seems to me when you talk about safety 
issues relating to racetracks, it would be helpful to know why 
accidents occur. Is it due to a horse failure? Is it due to--
what causes the issue? Is there a centralized data system on 
accidents on racetracks that is available to people at this 
time?
    Mr. Amos. To my knowledge, no. The information we have is 
by racetrack and we keep the records by racetrack because we--
--
    Mr. Whitfield. So Magna, you keep your own records?
    Mr. Amos. Records. It is our initiative.
    Mr. Whitfield. And what categories are covered?
    Mr. Amos. The most immediate one is that if a horse goes 
down where, at what point in the racetrack did that occur? 
Because there is things you can't see as far as the base and 
other factors, as far as composition of the soil.
    Mr. Whitfield. Right.
    Mr. Amos. So if you get more than one or two in that 
particular area, you have got to take a real close look.
    Mr. Whitfield. Right.
    Mr. Amos. Scrape down to the base.
    Mr. Scherf. Mr. Chairman, there is--the TRA policy does 
have loss data and that is what I was referring to when I said 
the importance of having the Jockey's Guild as a co-
policyholder that entitled them to that data. I have every 
accident that has occurred on that policy. Magna has not been 
under that policy. They have been with AIG for several years 
because their corporate group has had an AIG policy. But 
everybody else has been under this and has the same type of 
information, where it occurs. It is evident and when John 
Giovanni was in charge of the Guild, he used to get those 
reports. And we know where problem areas are, for instance the 
start is probably the most dangerous part.
    Mr. Whitfield. The start?
    Mr. Scherf. The start where horses are in a confined area 
and then they are trying to go from zero to 40 in a couple of 
seconds. And they take--you know, they may lunge or may take a 
bad step. That is generally the most dangerous part of a race. 
Solving that is a little more difficult but there is that kind 
of records being kept.
    Mr. Whitfield. And how many racetracks are insured through 
the CIGNA program that you initiated?
    Mr. Scherf. Well, up to this year, almost all of the except 
the Magna tracks over the course of the years. Because the 
jockeys, the reason they came to the TRA was, each track would 
have a different carrier. And a jockey may ride 1 day in 
Kentucky and get injured and then the Kentucky season would end 
and he would go to Florida and injure the same part of the 
body. And Florida had a different carrier and then the jockey 
was stuck between competing carriers disallowing the claim. One 
was saying it was a recurrence of the previous injury and the 
other one saying now, you were completely healed. It is the 
Florida carrier's fault. So that was the reason for a national 
program so that jockeys did not get caught in the switches 
between carriers.
    Mr. Whitfield. But Ms. Williams and Mr. Finamore, you have 
your policies through the CIGNA and TRA?
    Mr. Scherf. All racetracks have then through the TRA 
policy. It is a TRA/Jockey's Guild endorsed policy that was 
sold to the racetracks as a preferred policy.
    Mr. Whitfield. Okay.
    Mr. Scherf. At times during the years there might be one or 
two tracks that would move to a different carrier but generally 
all racetracks in the country had the TRA/Jockey's Guild 
policy.
    Mr. Whitfield. Okay. But Mr. Sexton and Mr. Amos have 
talked about the AIG policy. That is different than the CIGNA 
policy, correct?
    Mr. Sexton. The AIG policy is the one that we stepped 
forward and took out in March 2005.
    Mr. Whitfield. And how many racetracks are covered by the 
AIG policy?
    Mr. Sexton. All of our six tracks in five States.
    Mr. Whitfield. And all of the Magna tracks?
    Mr. Amos. In all non-Workers' Comp States. We are in 
Maryland we are also in California but they are Workers' Comp 
States. So in every one of those other States, they are 
insured.
    Mr. Whitfield. Okay. But from your view, Mr. Scherf, is 
that because of the national policy that has been in effect 
since 1949, that you have all the data you need to determine 
safety issues on----
    Mr. Scherf. I have from 1990 on.
    Mr. Whitfield. And now, California is the only State that 
conducts a necropsy if a horse goes down?
    Mr. Fravel. As far as I am aware, California is the only 
State that----
    Mr. Whitfield. Are there any other States that conduct 
necropsy exams? DO you view that as important to do or not 
important to do or not important to do? Or would you all 
respond to that? Ms. Williams?
    Ms. Williams. I mean, I think it is something that we will 
look at as an industry.
    Mr. Whitfield. Now, what would be the reason that you would 
not do that? Would it be cost or would it be unproductive? I 
mean, what I have read in California for example, these toe 
grabs or I don't know what the proper term is. But they have 
basically banned certain kinds of shoes because there are 
studies at U.C. Davis indicates that many horses go down that 
have them above a certain height. So why would you not have a 
necropsy policy in effect?
    Ms. Williams. Well, those issues are regulated by the West 
Virginia Racing Commission. They actually dictate to us what 
type of shoes are able to be used.
    Mr. Whitfield. But they would have to decide about 
necropsy? You would not be able to implement that on your own?
    Ms. Williams. Right. We could take it to them but they 
would have to decide.
    Mr. Whitfield. You cannot implement it on your own?
    Ms. Williams. No. In fact, when--we just changed our turf 
shoes and we had to have a representative from the West 
Virginia Racing Commission in that meeting.
    Mr. Whitfield. Okay.
    Ms. Williams. And it was agreed to.
    Mr. Whitfield. Mr. Finamore?
    Mr. Finamore. No, I have nothing to add to that, Mr. 
Chairman. That is correct. The Commission would mandate that.
    Mr. Whitfield. Mr. Sexton?
    Mr. Sexton. We would certainly support a Kentucky Racing 
Authority initiative to make that occur in Kentucky because 
that would be of interest to us.
    Mr. Whitfield. Yes. If a horse goes down on your track 
right now, how is it disposed of? I mean, it is incinerated? Do 
you take it to a landfill? Does it go for--what happens?
    Mr. Finamore. At our racetrack in Charlestown a renderer 
removes the horse.
    Mr. Whitfield. A renderer? Okay.
    Ms. Williams. At our racetrack in Mountaineer, actually the 
State vet examines the horse and then it is removed to, I 
believe, a landfill.
    Mr. Whitfield. Yes, okay. And then----
    Mr. Sexton. Similar efforts at Churchill Downs and Ellis 
Park. I am not as familiar to our other racetracks.
    Mr. Whitfield. Yes. Magna?
    Mr. Amos. California is the same as what Craig said.
    Mr. Whitfield. Right.
    Mr. Amos. And the others, the same procedure.
    Mr. Whitfield. Now, you had mentioned this Workman's Comp 
Program out in California and one of the ways-I may be wrong in 
this. But it is my understanding that one of the ways that is 
financed is through uncashed tickets. Is that true or is that 
not true?
    Mr. Fravel. That is not actually accurate. The history of 
the Workman's Comp dates back to the 1950's when there was a 
court decision that determined that for Workman's Comp 
purposes, jockeys were employees of the trainer, who instructed 
them on how to ride the race essentially. And that was the 
basis of that decision. And since that time, the Workman's Comp 
insurance has always been carried on the trainer's insurance 
policy.
    Mr. Whitfield. Okay.
    Mr. Fravel. The last 3 years, as you have probably read 
about in the newspaper reports, there has been a dramatic 
increase in the cost levels of Workman's Comp and the State of 
California.
    Mr. Whitfield. All right.
    Mr. Fravel. And in order to try and really stop the outflow 
of horses from California because it was becoming prohibitively 
expensive to train horses there. We got together with the 
horsemen and passed some legislation that set up two different 
funds that would help to offset the cost of insurance, one of 
which was used to basically form a captive insurance company, 
which is then re-insured through AIG. And then a second fund 
that is really a direct subsidy and it is kind of complicated 
where those come from but they are essentially functions of the 
wagering dollars, the different funds that have been created to 
subsidize rates.
    Mr. Whitfield. Now, the HBPA does not represent the 
horsemen in California. Is that correct?
    Mr. Fravel. California is a little different than most 
places. We now have an organization called the Thoroughbred 
Owners of California that is responsible for most of the 
negotiating issues with racetracks in California.
    Mr. Whitfield. Okay.
    Mr. Fravel. And a second organization called the California 
Thoroughbred Trainers that represents the trainers' interests.
    Mr. Whitfield. Okay. And well, my time is expired and we 
will probably have a second round so at this time, I would 
recognize Mr. Stupak.
    Mr. Stupak. Thank you, Mr. Chairman. Mr. Scherf, when you 
have your testimony here you said that jockeys rode in races 
worth $1.2 billion in 2004?
    Mr. Scherf. Yes.
    Mr. Stupak. How much did the industry take in that year?
    Mr. Scherf. The industry?
    Mr. Stupak. $26 billion or something?
    Mr. Scherf. Well, no. I don't know where that figure came 
from. I have heard it here but it--the handle is $15 billion. 
That is the transaction figure. Of that take-out, which is what 
funds the industry, the horse industry, is about on average 20 
percent.
    Mr. Stupak. Well, if it is $15 billion, they take in $1 
billion so that is about one fifteenth.
    Mr. Scherf. They would take in--I would say average, it 
would take in about $3 billion and then you pay the States 
commissions out of that.
    Mr. Stupak. Now, wait a minute now.
    Mr. Scherf. You would take a percent of----
    Mr. Stupak. What do you mean, average? Jockeys rode in 
races worth almost $1.2 billion.
    Mr. Scherf. The way the take-out works, you would have $15 
billion, you have 20 percent take-out and----
    Mr. Stupak. What is 20 percent for?
    Mr. Scherf. That is actually, the 80 percent of that figure 
is re-circulated among the bettors.
    Mr. Stupak. Okay. What--okay. So 20 percent left. So you--
--
    Mr. Scherf. There is 20 percent left. That goes to fund the 
industry and the States.
    Mr. Stupak. And that is about $3 billion?
    Mr. Scherf. That would be about $3 billion. This is very 
rough math.
    Mr. Stupak. Okay.
    Mr. Scherf. And then you would figure that the--I am not 
sure exactly what the State figures would be but I would guess 
probably about $400,000,000. I am not sure really what the 
taxes would be. But the horsemen's share of it, which is 
generally on a 50/50 split with the racetracks and that is a 
very rough thing but it is close enough.
    Mr. Stupak. Okay. Well, if I am understanding, you said 
total jockey----
    Mr. Scherf. At one point----
    Mr. Stupak. [continuing] earnings were between $88 and $94 
million.
    Mr. Scherf. Yes.
    Mr. Stupak. So that is about 10 percent?
    Mr. Scherf. That is based on 7.5 to 8 percent.
    Mr. Stupak. Okay. And then you put down what these jockeys 
earn. Now, that is their gross amount, right?
    Mr. Scherf. That is their gross amount.
    Mr. Stupak. Okay. So do you have to take an agent fee out 
of that?
    Mr. Scherf. You have to take a 25 percent agent fee out of 
that.
    Mr. Stupak. Okay. So let us use $90,000. It might be a 
little easier for me. So that $90,000, you have got minus 25 
percent, right, for the agent?
    Mr. Scherf. Right.
    Mr. Stupak. And then they have to pay other people?
    Mr. Scherf. They pay a valet.
    Mr. Stupak. How much? What percentage is that?
    Mr. Scherf. I believe it is 10 percent but I--they could 
answer that better than I could.
    Mr. Stupak. And then they have got to pay their taxes, 
right?
    Mr. Scherf. Yes. I don't know what their tax--they are 
independent contractors so they do have----
    Mr. Stupak. They pay taxes themselves. No one pays it for 
them. There is no contribution from anyone else?
    Mr. Scherf. Oh, correct. Yes.
    Mr. Stupak. Okay. And let us see. What else? Don't they 
have to pay their Guild something?
    Mr. Scherf. If they belong to the Guild, they do.
    Mr. Stupak. Okay. So this--use the $90,000 figure. By the 
time you get done with 25, 10, taxes probably about 28 percent. 
I will be generous. Say 28 percent. They don't have a heck of a 
lot. At least over 50, almost 60 percent of that money is 
already eaten up before a jockey ever sees it, right?
    Mr. Scherf. If that is what you are figuring out. Now, I am 
also talking about jockeys--that was based on only 100 mounts a 
year, which is two a week.
    Mr. Stupak. Okay.
    Mr. Scherf. That is most--you know, jockeys who ride----
    Mr. Stupak. Sure.
    Mr. Scherf. [continuing] 400 mounts account for 80 percent 
of the rides.
    Mr. Stupak. Well, let me ask you this. What is your salary?
    Mr. Scherf. My salary is $205,000.
    Mr. Stupak. Do they pay your health insurance?
    Mr. Scherf. Yes, they do, partially.
    Mr. Stupak. Pay your disability insurance?
    Mr. Scherf. Yes.
    Mr. Stupak. Pay your Workers' Compensation?
    Mr. Scherf. Yes, they do.
    Mr. Stupak. Are you part of a union?
    Mr. Scherf. No.
    Mr. Stupak. Okay. Is your job inherently risky?
    Mr. Scherf. I don't think so other than at this moment.
    Mr. Stupak. I was going to say, in light of the last 
hearing, maybe after this hearing. The point I am trying to 
make, and I am not trying to--I am glad you do well. But it 
appears from research we have seen, they make at most about 
$35,000 a year and they have all the risk and they have all the 
danger. And what I said in my opening, if you would only 
increase a little bit more money, we could have had a million-
dollar policy, as opposed to a $100,000 policy. It just doesn't 
seem fair to us, at least to me, that the jockeys are having 
all this difficulty. And I agree, you said that the average 
injury was only about $7,000 but you have had what, five in the 
last year that have been well over that.
    Mr. Scherf. In excess, yes.
    Mr. Stupak. What is Gary Birzer's medical, do you know?
    Mr. Scherf. I heard him say $800,000, I believe.
    Mr. Stupak. Okay. Ms. Williams, I said in my opening that 
the profits for Charlestown is 1.7--I am sorry. Not profits. 
Revenue is 1.7 million a day and profit is about $414,000? Is 
that correct?
    Ms. Williams. I would have no idea about Charlestown.
    Mr. Stupak. I am sorry. I am sorry. You are?
    Ms. Williams. Mountaineer.
    Mr. Stupak. Mountaineer, okay. Do you know what is your 
gross revenue a day at Mountaineer?
    Ms. Williams. On horse racing? I can tell you for the year.
    Mr. Stupak. Oh, no. I want slots and everything. That is 
all tied in, isn't it?
    Ms. Williams. No, I wouldn't--no, I am actually just 
Director of Racing, over the racing end of it.
    Mr. Stupak. Okay. You are just Director of Racing.
    Ms. Williams Yes, sir.
    Mr. Stupak. Right. Mr. Finamore is with them. Let me ask 
you then, Mr. Finamore, $1.7 million? Is that your gross per 
day?
    Mr. Finamore. I believe your number.
    Mr. Stupak. Pardon?
    Mr. Finamore. I am not sure.
    Mr. Stupak. Okay. So beyond the $100,000 insurance policy, 
how much has your track then contributed to the Birzer family 
rehab bills and living expenses since the accident? Do you 
know?
    Mr. Finamore. Wrong track.
    Mr. Stupak. Yes, I know. Sorry. Ms. Williams? Besides the 
$100,000 policy, how much has Mountaineer contributed to the 
Birzer family?
    Ms. Williams. Offhand, I can't tell you because I know we 
have done numerous fundraisers with the horsemen and the 
jockeys. I do know that when the accident first happened I 
talked to his agent, Jimmy Isabelle, and we did make his house 
available, you know, with ramps and handicapped accessible.
    Mr. Stupak. Okay. And in your position, do you get health 
insurance from your employer?
    Ms. Williams. Yes, I do.
    Mr. Stupak. Do you get Workers' Comp?
    Ms. Williams. Yes, I do.
    Mr. Stupak. Do you get disability insurance?
    Ms. Williams. No, sir.
    Mr. Stupak. Not quite equal benefits between the jockeys 
and management then?
    Ms. Williams. Well, I can't say that because like I said, 
they were covered with $100,000 under our policy and it was 
assumed that the Guild had the policy in place for the 
catastrophic accident.
    Mr. Stupak. How much is your disability policy, do you 
know?
    Ms. Williams. I don't have one, sir.
    Mr. Stupak. Okay. You have health insurance, though?
    Ms. Williams. Yes, I do.
    Mr. Stupak. Okay. Didn't Mountaineer turn down the 
insurance policy from AIG, was my understanding from the 
testimony earlier?
    Ms. Williams. No, sir.
    Mr. Stupak. As $100,000 being too expensive?
    Ms. Williams. No, sir. We have $100,000.
    Mr. Stupak. Okay. But did you--the offer was to go to $1 
million and you guys turned that down?
    Ms. Williams. We actually went back to our broker and asked 
for them to look at that and they would not quote us on that.
    Mr. Stupak. Was that AIG?
    Ms. Williams. No, it wasn't.
    Mr. Stupak. Mr. Scherf, how many--you said you had 40 some 
tracks with you, in your umbrella organization?
    Mr. Scherf. Yes.
    Mr. Stupak. How many tracks are there in the United States?
    Mr. Scherf. Roughly 100.
    Mr. Stupak. About 40 percent of them then?
    Mr. Scherf. Yes, I have most of the major racetracks as 
members.
    Mr. Stupak. Okay. Mr. Finamore, in your testimony you 
stated that like any other individual that is self-employed, 
jockeys are responsible for addressing their own insurance 
need. Is this what you told Shannon Campbell, the jockey that 
became quadriplegic on your track?
    Mr. Finamore. I haven't had a conversation with her, 
Congressman.
    Mr. Stupak. Okay. You provide the jockeys $100,000 maximum 
benefit toward medical expenses if they are injured while 
riding, right?
    Mr. Finamore. Correct.
    Mr. Stupak. You state that this is long established policy 
that was entered into after discussions with the TRA and the 
Jockey's Guild. Exactly whom did you talk to at TRA and the 
Guild that you are implying that you have this agreement with?
    Mr. Finamore. That would pre-date my time with the company, 
Congressman. But in addition to the $100,000, we also continue 
to pay the mount fees to the Guild. The money that was 
earmarked for the additional insurance.
    Mr. Stupak. How much is a mount fee, $8?
    Mr. Finamore. It is--from Charlestown races on an annual 
basis, it is about $90,000 a year and from Penn National Race 
Racecourse it is about $70,000. So it is $160,000 combined 
between the two tracks per year and we have continued to pay 
that through the current invoice statement, which was 
September.
    Mr. Stupak. So you paid $160,000?
    Mr. Finamore. Per year.
    Mr. Stupak. Per year. Right. I think you said in your 
testimony you spend $200 million upgrading your facilities, 
right?
    Mr. Finamore. That is correct. Um-hum.
    Mr. Stupak. I have never been there but it sounds like it 
must be a pretty nice facility.
    Mr. Finamore. It is.
    Mr. Stupak. Did you make those improvements because you 
needed to make an old track safer, cleaner and more appealing 
for your visitors?
    Mr. Finamore. Well, a portion--I did mention also, a 
portion on that $200 million went into the track directly. 
Approximately $8 million most recently, last summer, to put in 
a new track surface, new safety rail, new riding system. So the 
commitment is there to make the racetrack safe.
    Mr. Stupak. But most of the $200 million went into the 
gaming operation, right?
    Mr. Finamore. Most of it. Um-hum.
    Mr. Stupak. Okay. How many race days per year are run at 
Charlestown?
    Mr. Finamore. This year there will be 245.
    Mr. Stupak. Two hundred forty-five?
    Mr. Finamore. Um-hum.
    Mr. Stupak. Okay. Somewhere I thought I saw in there about 
210 to 235, is that about right, what you try to do each year 
in races?
    Mr. Finamore. It is 245 this year. It will be 220 next 
year.
    Mr. Stupak. Okay. So if I am doing my math right and I am 
not math major. But with a conservative estimate of $357 
million per year, that is sort of what I come up with, don't 
you think you could afford an additional $189,000? I am taking 
210 days times $900 more and I am going with $900. Maybe the 
testimony was $600 to $900, to get to that million policy, 
$189,000 it would cost you. And don't you think you could 
afford that?
    Mr. Finamore. Congressman, I think the point is we thought 
we had that and we have continued to pay to that level of 
insurance. In retrospect, we tried to do the right thing and 
that is not to hurt the Guild.
    Mr. Stupak. So starting today, you are going to do the 
right thing? You are going to pay that extra money?
    Mr. Finamore. If you will let me finish, Congressman?
    Mr. Stupak. Sure.
    Mr. Finamore. We felt we were doing the right thing in that 
we continued to make the payments to the Guild. We didn't want 
to damage or hurt the Guild in any way. In retrospect, as we 
learn about what happened with Dr. G., we question whether we 
made the right decision. And apparently some of the other 
tracks went in a different direction but the point is, we have 
continued to pay that money to get the $1 million policy.
    Mr. Stupak. Okay. But the point was, they got Dr. G., 
because they said they could no longer afford insurance and my 
impression and maybe the Chairman's too at the last hearing 
was, they are disappointed because they had no health insurance 
so here comes this guy who offered all kinds of other policies 
that didn't work out. You all know that. And we also know that, 
like last night, we lost another apprentice jockey but you lost 
another jockey. Don't you think with the amount of profit, the 
amount of money you make, you invest heavily to get the gaming 
in there and I have nothing against gaming. But I would think 
for just a little bit more, you could help out these people and 
you guys all seem to be taken care of in your jobs with health 
insurance and everything. And without the jockeys, you have no 
racing and I would think you would be able to do it. So if you 
want to do the right thing you could start today by putting in 
that extra $189,000 over the next year and take care of this.
    Mr. Finamore. According to the Guild, this $1 million 
policy costs approximately $450,000 a year.
    Mr. Stupak. Don't hide behind the Guild. You are the one 
who said you want to do the right thing. We are up here giving 
you this opportunity to do the right thing. We would hope you 
would take our hint and do the right thing. Would you be 
opposed to the jockeys coming together and collectively 
bargaining with the tracks to get some benefits?
    Mr. Finamore. That is a decision between them and their 
employers.
    Mr. Stupak. Okay. Well, would you object to the--you claim 
they were an independent contractor. If they got together, they 
would join in a union or an association or whatever and they 
would collectively bargain with you. Would you be in favor of 
allowing them to do that?
    Mr. Finamore. Congressman, it is a decision between them 
and their employers. We really don't have an opinion. We are 
not their employers.
    Mr. Stupak. Okay. Mr. Chairman, it looks like my time is 
over. Thank you for your courtesy.
    Mr. Whitfield. At this time I will recognize the gentleman 
from Washington, Mr. Inslee, for questions.
    Mr. Inslee. Thank you. My name is Jay Inslee. I am from the 
State of Washington. I am not an expert in your industry. I 
have only been to the track one time where I did not place a 
bet on a horse called Praise ``J'' in the Longacre's mile and 
it held the record for 30 years in the Longacre's mile. So I am 
not an expert in your industry. So I do have some kind of 
general questions. To me, looking at this, it just seems 
astounding to me that we have Americans who are working in a 
very high-risk industry, committing their professional lives to 
a situation, who really don't have tremendous bargaining power 
and are naked in the face of these tremendous risks. You know, 
I think of folks in other industries, choker setters in the 
woods, fisherman, people in the hazardous agricultural 
industries. They all have coverage. They have protection. It is 
just such a fundamental American concept. And yet, this small 
group of people are just bare of--it is just amazing to me. So 
I wanted to ask for questions of you of why you perceive that 
is the case. Now, I understand this archaic common law 
considered them ``independent contractors'', which is just--I 
don't think of them as contractors like Halliburton or Bechtel, 
issuing these big contracts. You know, they just don't have 
much bargaining authority and they are scattered about various 
tracks. So I guess the first question I have is, there are four 
States that have, has I understand it, some meaning Workers' 
Comp system. California, Maryland, New York and one other? You 
will be familiar with that? New Jersey? The first question, has 
the adoption of some system of that mechanism, has that damaged 
the sport or the industry in any way in those four States? Has 
it disadvantaged them, vis-`-vis West Virginia or other States 
at all? That is the first question. Any takers on that one? Can 
anybody posit a suggestion why those States have been----
    Mr. Fravel. I wouldn't suggest that those States have been 
damaged directly. I mean, I think it is a positive for us that 
people are covered by Workman's Comp and it puts a lot of 
issues aside when somebody gets hurt. You don't have to worry 
about a lot of things, like how somebody is going to get taken 
care of. It has been, particularly in recent years--I would say 
10 years ago it probably wasn't much of an issue because the 
cost of Workman's Comp in California was relatively consistent 
with costs across the country. And the incremental inclusion of 
jockeys in those policies was not that prohibitive. Within the 
last 5 years, it became a serious competitive issue and the 
industry had to get together and find ways to help pay for it 
because the people who were paying the bills directly, were 
simply unable to afford it. It was putting them out of 
business. And I would say that there are other organizations 
sitting at this table who own tracks in California who were 
parts of those solutions, as well. So you know, it is both a 
disadvantage and an advantage. I think a rider recently came to 
California from Kentucky and said that he didn't know why 
anybody would ride anywhere else because the benefits to riders 
in California were so great. And 3 months later, he left 
because he could get more mounts in other States so sometimes 
it doesn't make all that much sense but it cuts both ways.
    Mr. Inslee. Well, I guess a fair statement is the adoption 
of this basic American safety mechanism certainly hasn't 
destroyed the industry in any of those four States. That is a 
fair statement. Everybody agree with that?
    Mr. Fravel. Yes.
    Mr. Inslee. I see everybody shaking hands. Second question, 
is there anything about the transient nature of the business, 
where jockeys are going from State to State, track to track. 
Does that argue for a national system in any way or as a State, 
if you are going to go to a Workers' Compensation model, can it 
be maintained on a State to State basis? Or is there something 
intrinsic about the nature of the industry that suggests we 
ought to have a national system of one sort or another?
    Mr. Van Clief. Congressman, I believe I will take a shot at 
that. I don't know that there is anything intrinsic about the 
establishment of Workers' Comp Programs on State to State basis 
that would be inhibitive in our industry's ability to continue 
doing business as it does. Obviously, those programs, as Mr. 
Fravel just suggested, are very beneficial where they work. As 
they rise in expense to the individual operators, they become 
somewhat inhibitive in terms of their ability to compete. But I 
would like top point out that what we think we are experiencing 
today as an industry is frankly, an aberration. We had a system 
with the Jockey's Guild where these riders, as transients, were 
covered under the Jockey's Guild's policy up until Mr. 
Gertmenien's management and it seems to have fallen apart 
during the past 4 years. So as our task force identified, we 
think there are ways, both short-term and long-term, to provide 
adequate coverage. The AIG solution has been adopted by 67 
percent of our tracks representing 67 percent of the days they 
run within our membership. That at least is a short-term 
solution and I think with a credible Jockey's Guild with which 
to work, we can reestablish the sort of framework that protects 
these individuals, that was in place previously.
    Mr. Inslee. Anyone else like to address that?
    Mr. Scherf. I would, Congressman. National Workers' 
Compensation, I think one of the problems would be that there 
is a huge dichotomy of scale in the horse and racing business. 
To get one-size fits all solution would be extremely difficult 
and could be damaging in certain States. What we are talking 
about here today is we have in essence, major league and minor 
league racing and we are trying to take care of everybody 
equally. That is the system we had in place previously with the 
insurance with working with the Jockey's Guild. That is a 
system we can put in place together but to put an enduring 
comprehensive plan that will take care of large and small 
tracks and get everybody under one umbrella so we can afford 
the basic coverage--and we hear what you are saying. And we 
agree with you that, you know, we need to take care of injuries 
completely and totally. That can be done. But putting it under 
a national program, a mandate, I think my fear would be you 
would simply use some racetracks and lose thousands of jobs, 
including the jobs of some jockeys and I just don't think it is 
the best way of going.
    Mr. Inslee. Well, just one person talking, I would just 
tell you my reaction to this, it is just absolutely incredible 
that these people in this high-risk situation don't have a 
fundamental statutory protection. I respect all of your efforts 
to try to solve this on a voluntary basis but I think this 
sorry situation and others leads to the conclusion that it is 
just not close enough. And I don't know what the solution is. I 
am asking honest questions here. But it appears to me that 
these ought to be perhaps the first people in the country to 
have some assured statutory protection and right now they 
appear to be the last. And maybe they shouldn't be first. Maybe 
choker setters and fireman and policeman should be the first. 
Maybe they should be fourth. But having this group unprotected 
is just incredible to me and I hope that some of you may give 
us ideas on how to move forward. Thank you. Thank you, Mr. 
Chair, for holding this hearing.
    Mr. Whitfield. Thank you, Mr. Inslee. And I think all of us 
feel a lot of frustration as it relates to jockeys because in 
many senses, jockeys do move around the country a lot. They 
really don't have a base of operation, per se and they really 
don't have strong advocates. Now, I want to just toss something 
out here and I would just like to get your all's reaction to it 
because this really is an exploratory hearing. And when the 
Interstate Horseracing Act was passed in 1978, it said that a 
horsemen's group would negotiate with the tracks for the 
simulcasting issue and the horsemen's group had veto power over 
that agreement. And I know that this is not a totally accurate 
statement but the perception is, among many people, that the 
horsemen's group represents owners and trainers. Maybe some 
groups represent more owners, some groups represent more 
trainers. And as a result of their negotiating under the 
Interstate Horseracing Act, they get 1.5 percent or 2 percent 
or whatever the figure is of the purse. And that is generally 
the HBPA or it is the Thoroughbred Owners and Breeders Group or 
it is some other group that represents horsemen in a particular 
state. Why would jockeys, the Jockey's Guild as their entity, 
why would they not be included in that and why would they not 
have a right to negotiate on that, as well? What would be the 
arguments against that and sharing that 1.5 or 2 percent fee, 
for example? Anybody have any comments on that or thoughts on 
it?
    Mr. Scherf. Mr. Chairman, it is my understanding when the 
Interstate Horseracing Act first was passed, it was to address 
a problem that there be fair compensation from the place that 
took the bet to the place that produced the race. And it 
stemmed from taking bets on the Kentucky Derby without any 
compensation to that industry. The investors in that industry 
in every instance are the racetracks and the horsemen. The 
horsemen ran for about $1.2 billion in purses last year but 
they spent probably twice that amount. So the figure you always 
hear is 90 percent of all horsemen lose. So that was to ensure 
that people were fairly compensated of the two main groups that 
had to then put on the show, so to speak. That requires hiring 
a lot of people to put that show on, from mutuel clerks to 
administrative people, to assistant starters to tractor 
drivers, to jockeys to trainers to grooms.
    Mr. Whitfield. What I am talking about, I am not talking 
about interfering with the tracks' percentage of that. I am 
talking about the horsemen's group, that percentage, which is 
different for different entities, I--I notice that Mr. Maline 
in his testimony said that the fee of the Kentucky HBPA is like 
1.5 percent of the purse that they negotiate the simulcasting 
rights for. And so my question is, what would be the argument 
against allowing jockeys to participate in that 1.5 percent?
    Mr. Scherf. Well, they do participate in that. That goes to 
fund purses and that is where the jockeys make their money. The 
jockeys, you know, right now 87 percent of all handle is coming 
through simulcasting.
    Mr. Whitfield. Eighty-seven percent?
    Mr. Scherf. Right.
    Mr. Whitfield. Okay.
    Mr. Scherf. That is why purses in--I have the figure--in 
1991 before simulcasting really took off was $699 million.
    Mr. Whitfield. Six hundred ninety-nine?
    Mr. Scherf. Yes. In 2004, it was $1.1 billion.
    Mr. Whitfield. Okay.
    Mr. Scherf. That is a 56 percent increase in purses in this 
country. Jockeys ride for a set percentage of that so they 
should have the same increase from that growth and business so 
they are cut in for a share of that growth.
    Mr. Whitfield. Okay. Anybody else have any comments on it? 
Okay. Okay. Let us see here. Do you have anything else, Bart, 
of this panel?
    Mr. Stupak. Okay. Jockeys may have picked up more in light 
of there is a larger purse so they may get a little bit more 
but they have expenses that are not picked up by anybody but 
themselves, right?
    Mr. Scherf. As independent contractors, which is their 
choice, as well.
    Mr. Stupak. I don't think it is their choice. NRLB made 
that decision 30 years ago for them.
    Mr. Scherf. No, they are pretty quick to remind you that 
they are independent contractors. They don't work for you.
    Mr. Stupak. That is not what our hearing showed us last 
week, or last month. Excuse me. Ms. Williams or Mr. Finamore, 
how much money does the State of West Virginia receive from all 
this gaming? Do you know, like in a year?
    Mr. Finamore. From the total lottery?
    Mr. Stupak. Sure.
    Mr. Finamore. Last year it was about $500 million.
    Mr. Stupak. That is the total lottery and not just horse?
    Mr. Finamore. That is lottery. That is the slot machines. 
That is limited lottery. That is the total number.
    Mr. Stupak. You don't know how much just from the 
horseracing?
    Mr. Finamore. I don't know the answer to that. Sorry.
    Mr. Stupak. I am just trying to find another pot of money. 
It is more money on the table.
    Mr. Finamore. Rose Mary may know but I don't know that.
    Ms. Williams. Offhand, I do not know. We could get those 
figures for you.
    Mr. Stupak. Ms. Williams, Mr. Finamore testified before 
that they paid the mount fees of like it was $160,000, I think 
he said.
    Mr. Finamore. Between the two racetracks, Penn National and 
Charlestown, right.
    Mr. Stupak. Yes. Does your track pay your mount fees?
    Ms. Williams. No, they currently do not.
    Mr. Stupak. Okay. And your track was the one where Gary 
Bitzer got hurt, right?
    Ms. Williams. Gary Birzer, yes.
    Mr. Stupak. Birzer. How come you don't pay the mount fees 
if a competitor track in West Virginia does?
    Ms. Williams. From what I understand, legal looked into 
that and we do not have a contract covering that.
    Mr. Stupak. SO if the Guild would offer you a contract, you 
are going to cover it?
    Ms. Williams. I am not the legal representative but----
    Mr. Stupak. Was your track, if you know, was your track 
ever contacted and said hey, would you pay the mount fees? If 
you know.
    Ms. Williams. I know they have received invoices but there 
is no agreement in place to pay those invoices.
    Mr. Stupak. So you received the invoice but since there is 
no agreement, they didn't pay them?
    Ms. Williams. That is correct.
    Mr. Stupak. Mr. Finamore, do you got a written contract to 
force the mount fees or you guys just do it when you get your 
invoice?
    Mr. Finamore. Congressman, I don't know of a written 
contract that exists. We are invoiced each month at both of our 
tracks.
    Mr. Stupak. Right.
    Mr. Finamore. We have continued to pay those fees. And as I 
said earlier, we are current through September and that has 
been going on since, as far as I can tell, 1997, if not before.
    Mr. Stupak. Can anyone tell me why one track would pay and 
another doesn't then, if there is no formal agreement? Trying 
to do the right thing?
    Mr. Finamore. I was saying earlier that we made the 
decision to keep paying. I can't speak for the other tracks.
    Mr. Stupak. Mr. Scherf, if you have got 40 some tracks, do 
they all pay their mount fees when they come in? When they get 
their bill?
    Mr. Scherf. I am not sure if they have in the past year or 
year and a half.
    Mr. Stupak. How about 2 years ago, did they?
    Mr. Scherf. Yes, they did. Then the TRA sent a letter to 
Dr. Gertmenien----
    Mr. Stupak. Right.
    Mr. Scherf. [continuing] asking for an accounting when it 
was brought to our attention by jockeys and agents who were 
concerned about what was happening with the money. We asked 
what is being done with this and we never did receive a 
response. That was conveyed back to the member racetracks and 
then each racetrack then makes its own decision whether they 
were pouring money down a sinkhole or not.
    Mr. Stupak. If anyone can answer this, do jockeys move 
around? Do they try to follow the more lucrative races? The 
better jockeys obviously do.
    Mr. Scherf. Yes, they do.
    Mr. Stupak. So some of the testimony we have had about 
getting hurt in one State and then saying well, that was an 
injury you received in another state, really sort of begs for 
like some kind of national or interstate solution to this thing 
then, if jockeys are having these problems. Saying well, that 
is an aggravation of a previous injury you did in Florida.
    Mr. Scherf. But that hasn't happened since 1949.
    Mr. Stupak. Since 1949?
    Mr. Scherf. Right, when the TRA then worked with the 
Jockey's Guild and formed a national program and got everybody 
onto a single insurance program so the jockeys didn't run into 
that program. Working together, we have had that problem solved 
for more than 50 years.
    Mr. Stupak. So you are saying that problem doesn't happen 
at all now?
    Mr. Scherf. I am not aware of any instances.
    Mr. Stupak. Okay. So you don't know or you are just not 
aware of any?
    Mr. Scherf. Well, I am pretty certain. I would hear.
    Mr. Stupak. Okay. Okay. Mr. Fravel, you were talking about 
California and the problem with Workers' Comp there. Were you 
talking about that or was it Mr. Amos?
    Mr. Fravel. I discussed the cost problems in California.
    Mr. Stupak. And is that unique just to the jockeys or is it 
to other----
    Mr. Fravel. No. That is a statewide issue related to 
runaway medical costs, essentially. And there were a number of 
legislative efforts at the end of the Davis administration, 
beginning of the Schwarzenegger administration to address the 
problems on a statewide basis. And I think on a statewide basis 
it is coming back, slowly but you know, when we were trying to 
place insurance for Workers' Comp, including jockeys, as of 2 
years ago there was only one carrier that would actually write 
insurance in the State in that category. And that is true in a 
number of other construction areas, as well but that is a 
statewide problem. We just--because of the mobility of the 
horse industry, I guess.
    Mr. Stupak. Sure.
    Mr. Fravel. There are trainers and jockeys and everybody 
else. It becomes more pronounced because it is easier to pick 
up and go.
    Mr. Stupak. Okay. Ms. Williams, just two more questions, 
ma'am. Do you think Mountaineer should have a $1 million policy 
for jockeys? Do you think they should?
    Ms. Williams. As I said before and in my testimony, I have 
said that we went to the broker and asked them about the 
million dollars and they won't quote us on that.
    Mr. Stupak. Why wouldn't they quote you on that?
    Ms. Williams. I can't answer that. I don't know.
    Mr. Stupak. Okay. As the track manager, could you get back 
with us and tell us why? Get us back in writing because we 
would like to know that.
    Ms. Williams. I will. Absolutely.
    Mr. Stupak. Is it because of accidents? Is it because of 
cost? What is it?
    Ms. Williams. I will ask the broker to send something to us 
on that.
    Mr. Stupak. You operate, what, 210, 235 days? Something 
like that?
    Ms. Williams. This year, we will have 232 days of racing.
    Mr. Stupak. Is this year a good day in racing, I take it? 
You get more days in? Weather-wise or----
    Mr. Finamore. It fluctuates, based on different factors. We 
are required by the State to race 220 days.
    Mr. Stupak. Okay.
    Mr. Scherf. Mr. Stupak?
    Mr. Stupak. Yes.
    Mr. Scherf. If I can help on this issue of the insurance?
    Mr. Stupak. Sure.
    Mr. Scherf. Because I deal with this a lot. When you are 
talking about a million dollar pay-out at one track, an 
insurance company tends to look at that and say that is my risk 
and, you know, I can lose this and how much premium am I going 
to charge when I can lost a million? It is one reason a group 
program where you have shared risk among 100 tracks where you 
can control that and you share the risk. And the insurer comes 
in and knows good experience is going to balance out bad 
experience, is what is going to preserve a long-term insurance 
program.
    Mr. Stupak. But any track can give you a $1 million claim, 
right?
    Mr. Scherf. Any track but if you have, for instance, you 
have 70 tracks or 100 tracks and they are paying a combined 
premium of ``X'' million dollars----
    Mr. Stupak. Sure. Sure.
    Mr. Scherf. [continuing] the insurance industry is much 
more interested in that.
    Mr. Scherf. Absolutely. That is why we should put you all 
together and make you provide health insurance, Workers' 
Compensation, off-duty/on-duty insurance. And if you all came 
together at 100 tracks and did it, it would be a lot cheaper 
for everybody, right?
    Mr. Scherf. Well, I would agree with you on the accident 
insurance.
    Mr. Stupak. Well, health insurance, too. The more people 
you have in a health insurance policy usually, right?
    Mr. Scherf. That is true. I think we still have the 
independent contractor question that we probably differ on.
    Mr. Stupak. That is true but you know, even if they are 
independent contractors, if you wanted to you could still do 
it. You could still provide that as a benefit for riding at the 
tracks. California does it, Maryland, some of the other States 
we mentioned here today. So I think it could be done if there 
was a willingness and I think the independent contractor is 
just----
    Mr. Scherf. Maryland doesn't provide health benefits.
    Mr. Stupak. Right. But they do provide Workers' Comp and 
others.
    Mr. Scherf. Right, which is accident coverage.
    Mr. Stupak. Right. Right. Mr. Van Clief? Is that how you 
say it?
    Mr. Van Clief. Van Clief. Yes, sir.
    Mr. Stupak. Van Clief. You are the one who talked about AIG 
insurance, right?
    Mr. Van Clief. That is correct, sir.
    Mr. Stupak. You know of any reason why they won't insure 
Mountaineer?
    Mr. Van Clief. I don't know what their reasons would be.
    Mr. Stupak. Yes. Is that unusual or----
    Mr. Van Clief. Well, as I mentioned, our member tracks----
    Mr. Stupak. How many tracks do you have, sir?
    Mr. Van Clief. We have about 70 tracks that are members.
    Mr. Stupak. Seventy and there is forty. One hundred twenty 
tracks.
    Mr. Scherf. They are the same. Our 40 are in their 70.
    Mr. Stupak. Okay.
    Mr. Van Clief. That would probably be a near complete 
overlap.
    Mr. Stupak. Okay.
    Mr. Van Clief. As I mentioned, our member tracks, if you 
look at it as race days----
    Mr. Stupak. Yes.
    Mr. Van Clief. [continuing] are 67 percent covered by the 
AIG coverage that came out of our working group study in late 
2004.
    Mr. Stupak. Sure. So just a curiosity, why would a track be 
turned down? Why would a track be turned down and now----
    Mr. Van Clief. Why would a track be turned down?
    Mr. Stupak. Yes, for this million dollar policy?
    Mr. Van Clief. I am not aware of any that are turned down. 
Tracks would certainly be rated differently based on their 
accident experience.
    Mr. Stupak. Accidents and things like that. Sure.
    Mr. Van Clief. So obviously, the experience would create 
different ratings depending on higher or lower accident rates. 
So I am aware that the cost may vary from track to track but I 
am not aware of any track that has been excluded from taking 
the policy if they could afford it and so desired.
    Mr. Stupak. Okay. Thank you.
    Mr. Whitfield. Let me follow up on these uncashed tickets. 
Of course, in Kentucky they go to the Kentucky Health and 
Welfare Fund, uncashed tickets. In California, where does it 
go?
    Mr. Fravel. You know, Mr. Chairman, there are so many 
different recipients of various funds in California from 
different parts of the take-out. Uncashed refunds, uncashed 
tickets. I can precisely remember where those go.
    Mr. Whitfield. Okay.
    Mr. Fravel. I mean, every one of them has a home somewhere.
    Mr. Whitfield. What about in West Virginia?
    Ms. Williams. The uncashed tickets go to the Breeder's 
Association. They have a 10/10/10 program, which they are part 
of that. And then if there is uncashed tickets, it goes to the 
racetracks for capital improvements and it also goes to the 
jockeys if there is any funds available. I think $250,000 goes 
into that fund, if available Mr. Whitfield. From uncashed 
tickets?
    Ms. Williams. Uncashed pari-mutual tickets.
    Mr. Whitfield. And I guess Kentucky, would it be fair to 
say Kentucky would have one of the largest amounts of money 
from uncashed tickets? I mean, that is around $2 million or so.
    Mr. Sexton. Mr. Chairman, it is between $2- and $2.5 
million a year, primarily related around the Kentucky Derby.
    Mr. Whitfield. So people just don't cash those Derby 
tickets? They just keep them?
    Mr. Sexton. They may keep them as souvenirs or they may be 
unaware that an inquiry light was posted and the result was 
changed.
    Mr. Whitfield. Yes.
    Mr. Fravel. Mr. Chairman, if I could, Mr. Shapiro has told 
me that the uncashed refunds in California are what fund the 
health insurance program for riders. A lot of these----
    Mr. Whitfield. What, it funds----
    Mr. Fravel. I am sorry?
    Mr. Whitfield. It funds the health insurance for riders?
    Mr. Fravel. It funds the health insurance program.
    Mr. Whitfield. Okay.
    Mr. Fravel. A lot of these funds like uncashed tickets, 
uncashed refunds, were things that used to escheat to the State 
of California after a period of time.
    Mr. Whitfield. Okay.
    Mr. Fravel. And what happened was, when times were better 
and there weren't massive State deficits, I think the industry 
managed to convince the--along with the Guild, to convince the 
State that those uncashed tickets or refunds could be used for 
more productive sources within the industry.
    Mr. Whitfield. Right.
    Mr. Fravel. So we managed to keep those at home but I am 
not sure we could do that again.
    Mr. Whitfield. Okay. Okay. Well, I want to thank you all 
very much for your time today and we look forward to continuing 
to talk with you about this issue. I might just say for your 
information that Mr. Gertmenien still has not responded to 
subpoenas and other efforts of our committee relating to Matrix 
and so we may be taking up additional maybe Contempt 
proceedings against Matrix and him personally. But that is 
something that we haven't decided completely yet. But your 
testimony has been quite helpful and thank you very much for 
your input. The panel is dismissed.
    At this time we will call up the second panel. Mr. Metzger, 
who is the President of the Thoroughbred Owners and Breeders 
Association. We have Mr. John Roark, who is the President and 
Chairman of the National Horsemen's Benevolent and Protective 
Association. We have Mr. Marty Maline, who is the Executive 
Director of the Kentucky Horsemen's Benevolent and Protective 
Association. We have Mr. Richard Riedel, who is the Executive 
Director of the Kentucky Racing Health and Welfare Fund. We 
have Mr. John Giovanni, who is the former National Manager of 
the Jockey's Guild. And we have Mr. Richard Violette, who is 
Chairman of the Board of Directors of the New York Jockey 
Injury Compensation Fund. We have Mr. Bernard Daney, Chairman 
of the Delaware Thoroughbred Racing Commission. Mr. Richard 
Shapiro, Commissioner of California Horse Racing Board. Mr. 
Dick Monahan, who is the Director and Racing Council Chairman 
for the American Quarter Horse Association. And we have Mr. 
Darrell Haire, who is the Interim National Manager of the 
Jockey's Guild.
    So welcome all of you and I would ask you--okay. Okay. We 
will give you time to set up here. Okay, great. I guess it is a 
little crowded but everybody is in anyway. Is Mr. Roark here?
    Mr. Metzger. He is on his way, Mr. Chairman.
    Mr. Whitfield. Okay. Thanks. We will wait for Mr. Roark and 
then we will just swear everybody in at once.
    Mr. Roark. Excuse me, Mr. Chairman.
    Mr. Whitfield. That is all right, Mr. Roark. Thank you for 
being with us today. Well, all of you are aware that this is an 
investigative hearing and when doing so, we have the practice 
of taking testimony under oath. Do any of you object to 
testifying under oath? Okay. Under the rules of the House and 
the rules of the committee, you are entitled to be advised by 
legal counsel. Do any of you desire to be apprised by legal 
counsel today?
    Mr. Violette. I have counsel with me.
    Mr. Whitfield. Okay. And what is his name or her name?
    Mr. Violette. Robert P. Benson, Jr.
    Mr. Whitfield. And will Mr. Benson be testifying?
    Mr. Violette. No.
    Mr. Whitfield. Okay. All right. In that case--oh, yes, sir.
    Mr. Riedel. I have also legal counsel, Mr. Frank Becker. He 
will not----
    Mr. Whitfield. Frank Becker, okay. Okay. And what is the 
name? Okay. But he will not be testifying? Okay.
    [Witnesses sworn]
    Mr. Whitfield. Okay. You are now under oath and each of you 
will be called upon to give your 5-minute summary of your 
written statement. And the first opening statement will be 
given by Daniel Metzger, President of the Thoroughbred Owners 
and Breeders Association and, Mr. Metzger, thank you for being 
with us. You are recognized for 5 minutes.

TESTIMONY OF DANIEL J. METZGER, PRESIDENT, THOROUGHBRED OWNERS 
    AND BREEDERS ASSOCIATION; JOHN O. ROARK, PRESIDENT AND 
    CHAIRMAN, NATIONAL HORSEMEN'S BENEVOLENT AND PROTECTIVE 
  ASSOCIATION; MARTIN A. MALINE, EXECUTIVE DIRECTOR, KENTUCKY 
HORSEMEN'S BENEVOLENT AND PROTECTIVE ASSOCIATION, INC.; RICHARD 
RIEDEL, EXECUTIVE DIRECTOR, KENTUCKY RACING HEALTH AND WELFARE 
  FUND; JOHN GIOVANNI, FORMER NATIONAL MANAGER, THE JOCKEYS' 
   GUILD; RICHARD A. VIOLETTE, JR., CHAIRMAN OF THE BOARD OF 
DIRECTORS, NEW YORK JOCKEY INJURY COMPENSATION FUND; BERNARD J. 
   DANEY, CHAIRMAN, DELAWARE THOROUGHBRED RACING COMMISSION; 
   RICHARD B. SHAPIRO, COMMISSIONER, CALIFORNIA HORSE RACING 
  BOARD; DICK MONAHAN, DIRECTOR AND RACING COUNCIL CHAIRMAN, 
AMERICAN QUARTER HORSE ASSOCIATION; AND DARRELL HAIRE, REGIONAL 
           MEMBER REPRESENTATIVE, THE JOCKEYS' GUILD

                 TESTIMONY OF DANIEL J. METZGER

    Mr. Metzger. Thank you, Chairman Whitfield and 
distinguished members of the subcommittee. I am honored to have 
the opportunity to appear before you and try to address some of 
these important issues and challenges facing our sport of 
horseracing.
    I have been the President of TOBA for the last 6 years. 
TOBA is a national trade association that represents owners and 
breeders, with a mission to improve the economics, the 
integrity and the pleasure of the sport, on behalf of owners 
and breeders. TOBA oversees a number of important industry 
programs, the most known being the American Graded Stakes 
Committee. TOBA has also been a leader in the industry in the 
areas of integrity, both at the racetrack and at the public 
auctions.
    However, TOBA is not a recognized horsemen's association in 
any State and has not been directly involved in the independent 
contractor accident insurance issue. We do, however, have a 
direct interest in the safety and well-being of the jockeys and 
other workers. Owners recognize the vital contribution made by 
these individuals, as they are part of a team that will 
hopefully lead to the Winners Circle.
    We would like to preface our remarks by stating a 
fundamental belief of our organization. Jockeys are independent 
contractors. They are free to choose at what track they will 
ride, what day they will ride, what race they will ride and 
what horse they will ride. A majority of jockeys retain agents 
to line up their business. This is not a status unduly imposed 
by others. Jockeys have fought to maintain their independent 
contractor status, especially when it comes to advertising.
    In the spring of 2004, prior to the Kentucky Derby, 
racing's most popular day, jockeys sued the Kentucky Horse 
Racing Authority and took the position that they were 
independent contractors with the right to exhibit commercial 
advertising on their pants during the running of the race.
    The industry is here today because of a decision by the 
management of the Jockey's Guild to not renew its $1 million 
accident insurance policy it carried for its members. The Guild 
claimed that it could not afford the annual premium. Yet the 
Thoroughbred Racing Association, as you heard earlier, the TRA, 
under agreement with the Guild, continued to pay the Guild $2.2 
million per year so that it could buy the additional accident 
insurance and supplement its medical insurance coverage.
    TOBA participated in the Jockey Accident Insurance Summit 
organized by the National Thoroughbred Racing Association in 
response to the Guild created crisis and the Gary Birzer 
tragedy. That 33-person panel, comprised of representatives 
from each industry stakeholder group, recommended accident 
insurance level of $1 million and endorsed the minimum level of 
a half million dollars.
    With the additional coverage comes additional cost and all 
participants on the panel, with the noted exception of the 
Jockey's Guild, agreed to help pay for the increased insurance 
coverage. While jockeys are independent contractors, horse 
racing has been very supportive of their insurance needs, from 
Workers' Compensation programs in five States to the 
recommended $1 million accident insurance coverage at many of 
our racetracks. Thoroughbred owners, trainers and breeders 
should have adequate injury coverage for their full-time 
employees and most racing States mandate, and most employees 
are provided, with such coverage.
    Jockeys are independent contractors and, as mentioned, have 
fought to maintain that status. As an independent contractor, 
it is up to the individual to provide their accident insurance. 
We had a framework in place through the Guild with the 
financial assistance of the TRA to provide individuals accident 
insurance until the Guild chose not to renew it. Despite its 
belief that this issue has been created by the Guild, TOBA will 
continue to work with other industry organizations to find an 
equitable, long-term and comprehensive solution in the near 
future.
    TOBA has been at the forefront of the sport in its support 
of enhanced drug testing and research and will continue to do 
so. The health and safety of our human and equine athletes are 
of paramount importance to all owners.
    I would like to thank Chairman Whitfield and the entire 
subcommittee for its time and efforts on this very important 
issue of insurance and safety. All segments of our sport, 
including owners, tracks, trainers, jockeys and the State 
regulatory agencies will work together to bring a solution to 
this issue.
    [The prepared statement of Daniel J. Metzger follows:]

Prepared Statement of Daniel J. Metzger, President, Thoroughbred Owners 
                        and Breeders Association

    The Thoroughbred Owners and Breeders Association is a trade 
organization of owners and breeders and is concerned with common 
national business interests and issues of its 3,000 members. TOBA is a 
service organization and has no authority to mandate participation in 
any insurance program. Because TOBA is not a recognized horsemen's 
association in any state, it has not been directly involved in the 
independent contractor and backstretch worker accident insurance issue.
    We would like to preface our remarks by stating a fundamental 
belief of our organization. Jockeys are independent contractors. 
Jockeys are free to choose at what track they will ride, what day they 
will ride, what race they will ride, and what horse they will ride. 
Most jockeys retain agents to line up business for them and will often 
break a commitment to an owner at a moments notice if a better mount 
becomes available in a race. Independent contractors in Thoroughbred 
racing, like in all other industries, are responsible for their own 
insurance.
    On the other hand, most Thoroughbred racing states require trainers 
or owners to carry accident insurance for their full-time employees. 
TOBA fully supports enforcement of this requirement to ensure employees 
are protected.
    The industry is here today because of a unilateral decision by the 
management of the Jockeys' Guild to not renew the $1,000,000 accident 
insurance policy it carried for its members. The Guild claimed it could 
not afford the annual premium of approximately $450,000 per year, yet 
the Thoroughbred Racing Association (TRA), under an agreement with the 
Guild, was paying the Guild $2.2 million per year so that it could 
purchase additional accident insurance and supplement its medical 
insurance coverage. Because of the Guild's apparent mismanagement 
leaving its members underinsured, other industry stakeholders, 
including owners, now have to step in and find a solution to the 
problem they created.
    In states where jockeys are not covered by workers' compensation 
insurance, racetracks carry accident insurance typically with a 
$100,000 cap on medical benefits. With the Guild choosing not to renew 
its policy for additional coverage, we have the heartbreaking story of 
Gary Birzer. To cover this deficiency, 17 tracks over the past year 
have voluntarily increased the coverage on medical benefits to 
$1,000,000. In the five states where jockeys are covered by workers' 
compensation insurance, TRA-member racetracks provide additional 
coverage of up to $1.4 million. This coverage costs the member tracks 
$1 million per year and this is in addition to the $7 million per year 
horsemen pay in workers' compensation premiums.
    In the fall of 2004, the National Thoroughbred Racing Association 
formed its Jockey Medical Insurance Panel to determine if additional 
solutions to this problem exist. As a member of the panel, TOBA 
supported the recommendations made, but because of the difference in 
the size of the industry from state to state, any solutions will have 
to be tailored to the economic structure in each Thoroughbred racing 
state.
    Thoroughbred owners, trainers, and breeders should have adequate 
injury coverage for their full-time employees. Most Thoroughbred racing 
states require workers' compensation insurance to cover backstretch 
employees of trainers and owners. Jockeys are independent contractors 
and have fought to maintain that status. For example, when the 
advertising issue arose in the spring of 2004 prior to the Kentucky 
Derby, the jockeys took the position that they were independent 
contractors with the right to exhibit commercial advertising on their 
pants for compensation during the running of the race. A benefit of the 
independent contractor status is the ability to maximize one's earnings 
and set one's own hours. One perceived drawback to self employment is 
the individual is responsible for their own health and accident 
insurance. The jockeys, and more specifically the Guild, have abdicated 
their responsibility. Despite its belief that this problem has been 
created by the Guild and should be solved by the Guild, TOBA will 
continue to work with other industry organizations to find an equitable 
solution in the near future.
    TOBA has been at the forefront of the sport in its support of 
enhanced drug testing and research. TOBA is a founding member of the 
Racing Medication and Testing Consortium, an industry-wide effort to 
promote a safe and uniform medication policy across the United States. 
The health and safety of both the horse and jockey are of critical 
importance to all owners.
    We thank you for your interest in our industry and concern on this 
issue.

    Mr. Whitfield. Thank you, Mr. Metzger. At this time, Mr. 
Roark, you are recognized for your 5-minute opening statement.

                   TESTIMONY OF JOHN O. ROARK

    Mr. Roark. Thank you, Mr. Chairman and members of the 
subcommittee. The National Horsemen's Benevolent and Protective 
Association appreciates this opportunity to address this 
subcommittee on safety insurance and other problems related to 
jockeys.
    The National HBPA represents about 48,000 licensed 
thoroughbred and quarter horse owners and trainers, their 
employees and families, by way of 33 affiliated offices in 
various States and Canada. The National HBPA horsemen and 
horsewomen run over 325,000 horses over 4,500 cumulative racing 
days each year. And through our local affiliates, provide 
between $5 and $6 million in benevolence programs to those 
folks that work on the back side of the racetrack, in the form 
of low cost or free medical care, dental coverage, mobile 
dental clinics. We have substance abuse programs on the 
backside of racetracks. We support the Chaplaincy organizations 
and we also do scholarships, housing and funeral assistance and 
have backstretch recreational programs around the country. We 
also have, in two of our state, we have daycare centers for the 
folks and their families and for racetrack employees.
    As this committee has heard, jockeys have historically been 
treated as independent contractors, a position supported by the 
National HBPA. As a member of the NTRA's Task Force on jockey 
accident insurance, the HBPA has reviewed a number of different 
insurance programs for riders. We also produced our own 
Workers' Compensation white paper in 2003. And based upon that 
and the research we have done, we believe a self-insured or 
captive approach is the most viable and incentive industry 
members to control their costs and loss and enforce compliance.
    California admitted a partially self-insured program known 
as the California Horsemen's Safety Alliance in December 2002, 
which as Mr. Fravel commented, covers all the backstretch 
workers with some fairly generous benefit levels. Their 
approach came after several years of trying to find a solution 
to rising Workers' Compensation costs and a similar program is 
just being enacted as we speak in Louisiana that is much like 
that program. It is going to be a captive. Insurance coverage 
should transcend from State to State and track to track to the 
benefit of racetracks and horsemen. The National HBPA 
therefore, calls for injury protection coverage for all 
jockeys, exercise riders, backside workers and we ask all the 
industry stakeholders to join us in pursuit of that reform.
    The best manner of achieving that reform is not to 
nationalize Workers' Compensation, nor to reverse the NLRB's 
longstanding policy regarding independent contractors and their 
position regarding the racing industry. Congress has long 
recognized the primacy of State regulatory authorities over our 
industry. The Interstate Horseracing Acts' indirect mode of 
regulating interstate commerce with respect to horseracing is 
the best methodology of addressing Congress' limited national 
interest concerning our industry. The Interstate Horseracing 
Act preserves States primacy in the area and encourages 
stakeholders to cooperate with each other to reach industry-
wide agreements to resolve vital issues, such as those now 
facing jockeys, exercise riders, et cetera.
    The Interstate Horseracing Act, for example, would provide 
a ready mechanism to encourage States and industry stakeholders 
to reach appropriate voluntary efforts to resolve issues of 
safety and health hazards within the industry. As well as to 
induce stakeholders to address the adequacy of injury insurance 
against unavoidable risk, inherent to the sport of horseracing, 
for jockeys and exercise riders.
    Pursuant to the IHA, owners and trainers by and through 
their horsemen's groups, have the authority to negotiate with 
racetracks on a periodic basis, to reach agreements addressing 
a number of issues between them, including racetrack safety and 
backside safety conditions. Many of the national HBPA 
affiliates around this country routinely contract with their 
racetracks about such conditions, along with a host of other 
terms and condition that go into the regular contractual 
process between tracks and between horsemen's groups. And these 
agreements ultimately contain the grant of horseman statutorily 
required consent to interstate off-track wagering. These 
racetrack horsemen's groups agreements are customary in the 
industry and are required by the IHA and ultimately, are 
overseen and approved by State racing commissions, whose 
consent to interstate off-track wagering is statutorily 
required, as well.
    The National HBPA firmly believes that working together 
with State regulators, the racing industry is clearly best 
suited to develop the best practices needed to make racetrack 
facilities as safe as possible for fans and participants. 
Through State racing commissions and other local controls, a 
ready mechanism already exists for encouraging industry 
stakeholders to establish and enforce health and safety 
standards.
    The National HBPA is involved in numerous programs to 
encourage safety and raise the level of professionalism among 
horsemen. We are very proud that we were the founder of the 
Groom Elite Program, which educates grooms and odd workers on 
the backside of race tracks as to horse safety and horse 
conditions, as well as other safety benefits. The Groom Elite 
Program provides a continuous equine education for backstretch 
licensees and also provides training in barn safety, first aid 
and life skills.
    The National HBPA is also an active participant and Board 
member of the North American Racing Academy, which is a 
national racing school for jockeys being developed by industry 
leaders and led by retired Hall of Fame jockey, Chris McCaren. 
Working within the Kentucky Community and Technical College 
system, NARA sees its role as providing the racing industry 
with a national accredited vocational program designed to 
provide students with coursework in various racing industry 
fields, in addition to race riding.
    We believe that the racing industry is best served by 
increased education for its members and voluntary programs 
designed to ensure the health and safety of racing 
participants.
    Thank you for allowing me to address this committee and I 
will invite any questions.
    [The prepared statement of John O. Roark follows:]

 Prepared Statement of John O. Roark, President and Chairman, National 
         Horsemen's Benevolent and Protective Association, Inc.

    Thank you for the opportunity to address the Subcommittee on 
Oversight and Investigations of the House Committee on Energy and 
Commerce regarding issues of jockey safety, adequate injury insurance 
protection for horseracing participants and other current issues facing 
the horseracing industry. As a part of, or perhaps a result of this 
Subcommittee's investigations and hearings, it has come to the 
attention of the National Horsemen's Benevolent and Protective 
Association, Inc., (NHBPA) that some members of this Subcommittee have 
called upon the National Labor Relations Board (NLRB) to reconsider the 
NLRB's policy decision, pursuant to Section 14(c) of the National Labor 
Relations Act (NLRA), 29 U.S.C.  164(c)(1), to decline asserting 
jurisdiction over labor disputes involving the horseracing and dog 
racing industries. See 29 C.F.R.  103.3. The NHBPA wishes to submit 
this testimony to Congress pertaining to the issues of jockey safety, 
insurance protection, and the potential for federal governmental 
involvement in the horseracing industry.
    As background, the NHBPA is a service organization founded in 1940 
which represents the interests of over 48,000 licensed thoroughbred and 
quarter horse owners and trainers, their employees and families via 33 
affiliated offices across the U.S. and Canada. Among other things, the 
NHBPA assists its affiliated offices and member horsemen by 
disseminating and communicating vital information on critical issues; 
representing horsemen at industry gatherings and on national boards and 
committees; organizing bi-annual conventions to promote an exchange of 
ideas and information and to provide national fire and disaster and 
owner/trainer liability insurance programs.
    NHBPA horsemen and horsewomen run over 324,000 horses over 4,500 
cumulative racing days each year and, through their local offices, 
provide approximately $4 million--taken from a percentage of their 
purses--in benevolence programs which assist over 5,000 licensees with 
medical and dental coverage; substance abuse prevention and chaplaincy 
programs; scholarship, housing and funeral assistance and backstretch 
recreational programs. The NHBPA also provides a national voice for 
horsemen on matters of national policy and of national interest and 
promotes the preservation and enhancement of live racing in North 
America. Thus, the NHBPA submits the following.
    Since 1950 and earlier, the NLRB has declined to assert 
jurisdiction over labor disputes in the horseracing industry. In re Los 
Angeles Turf Club, 90 NLRB 20 (1950). The rationale was that the 
operations of the racing industry, ``While not unrelated to commerce, 
are essentially local in character.'' Id. at 20. This same rationale 
was re-iterated again by the NLRB after Congress enacted Section 
14(c)'s specific provisions authorizing the NLRB discretion to decline 
jurisdiction over certain classes of employers. See In re Hialeah Race 
Course, Inc., 125 NLRB 388, 391 (1959) (``racetrack operations are 
essentially local in nature''). The NLRB added another significant 
point to its rationale in the Hialeah case, ``[g]iven the character of 
racetrack operations, which are permitted to operate by special State 
dispensation, and are subject to detailed regulation by the States, we 
can assume that the States involved will be quick to assert their 
authority to effectuate such regulation as is consonant with their 
basic policy.'' Id.
    In 1979, the NLRB re-affirmed its longstanding policy, after formal 
promulgation of the rule set out in 29 C.F.R.  103.3 (1973) and after 
Congress enacted the Interstate Horseracing Act of 1978, 15 U.S.C.  
3001 et seq. See In re American Totalisator, Inc., et al, 43 NLRB 314 
(1979). The NLRB's majority observed: ``Congress is well aware of the 
Board's historic stance of declining to assert jurisdiction over 
horseracing'', and if Congress had wished to modify this it could 
easily have done so by using less restrictive language in enacting the 
``Interstate Horseracing Act of 1978 . . .'' Id. at 314. The NLRB's 
minority opinion looked at the legislative history to the Interstate 
Horseracing Act and concluded Congress itself considered the 
horseracing industry to have significant impact upon interstate 
commerce because thousands were employed in the industry and they 
could/should be subjected to NLRB jurisdiction. Id. at 315.
    The Interstate Horseracing Act (IHA) contains a succinctly stated 
and restricted role for the federal government in the horseracing and 
off-track betting industries. The majority in American Totalisator 
quoted from these congressional findings in the IHA reciting the 
confined interests of the federal government with respect to 
horseracing as follows:
    (1) The States should have the primary responsibility for 
determining what forms of gambling may legally take place within their 
borders;
    (2) The Federal Government should prevent interference by one State 
with the gambling policies of another, and should act to protect 
identifiable national interests; and
    (3) In the limited area of interstate off-track wagering on horse 
races, there is a need for Federal action to ensure States will 
continue to cooperate with one another in the acceptance of legal 
interstate wagers.
243 NLRB at 314, quoting 15 U.S.C.  3001(a)(1)-(3).
    The IHA's stated findings and restricted policy role for the 
federal government in the horseracing industry was founded upon the 
findings of the Commission on the Review of the National Policy on 
Gambling, a Commission that rendered its report to Congress in the mid-
1970's. See S. Rept. No. 95-1117, 95th Cong., 2nd Sess. 6, reprinted in 
1978 U.S. Code Cong. & Admin. News 4144, 4149. This Commission warned 
that passage of legislation at the national level concerning 
horseracing and legalized gambling thereon, unless carefully 
structured, could amount to ``an unwarranted intrusion by the Federal 
Government into an area of regulation better left to the States.'' S. 
Rept. No. 95-554, 95th Cong., 1st Sess. 14 (1977), reprinted in 1978 
U.S. Code Cong. & Admin. News 4132, 4142 (Views of Mssrs. Cannon & 
Stevenson), quoting from the Commission on the Review of the National 
Policy on Gambling.
    Section 4 of the IHA, 15 U.S.C.  3003, outlaws all forms of 
interstate off-track wagering on horseracing without the consent of 
each of the following: (1) The ``host racing association'' (which 
cannot give its consent without having the consent of its horsemen/
women via an agreement with their representative ``horsemen's group''); 
(2) The ``host racing commission;'' and (3) The ``off-track racing 
commission.'' 15 U.S.C.  3004(a). Accordingly, the IHA gives a 
prominent role to the affected States (i.e., two of the three requisite 
consents) in regulating the horseracing industry. Without State 
regulatory oversight and consent, there would be absolutely no 
interstate simulcasting in this country. The IHA gives civil damage 
remedies for the violation of its provisions, and grants those remedies 
to, among others, the ``host State.'' 15 U.S.C.  3005. The IHA, 
therefore, embodies a significant, indeed, plenary role for the States 
over the horseracing industry and preserves their traditional and 
significant regulatory authority over the industry.
    Pursuant to States' plenary authority over horseracing, the NLRB's 
observation in its decision in Hialeah Race Course, Inc., 125 NLRB 388 
(1959), is still accurate today: ``[R]acetrack operations . . . are 
permitted to operate by special State dispensation, and are subject to 
detailed regulation by the States.'' Id. at 391. Unquestionably, the 
horseracing industry has significant impact on interstate commerce. 
However, the NLRB's policy in 29 C.F.R.  103.3 is informed by more 
than just the industry's impact on commerce. The NLRB's policy embodies 
Congress' national policy toward gambling, to wit: That the primary 
regulators of horseracing should be the States which in fact control 
all aspects of the industry including the licensing of all its 
personnel such as owners, trainers, jockeys, exercise riders, grooms, 
veterinarians, etc., and which possess a significant revenue interest 
in the industry's success sufficient to ensure labor stability under 
state laws.
    By virtue of their plenary authority over horseracing, some States 
have taken dead level aim at resolving labor disputes before they ever 
erupt into a disruption of commerce. For example, the State of 
California passed specific legislation concerning the labor relations 
of backstretch workers. See Cal. Bus. & Prof. Code, Div. 8, Ch. 4, Art. 
2.5  19455-19455.4. Under the California Code, specific rights and 
responsibilities are delineated for workers, employers, and unions. 
Section 19455(b) provides the basis for enacting these labor relations 
laws: ``The Legislature finds that the National Labor Relations Board 
has formally declined to assert jurisdiction over horseracing because 
of extensive state control over the industry, the dominant pattern of 
sporadic short-term employment which poses problems for effective 
enforcement of the National Labor Relations Act, and a unique and 
special relationship that has developed between the states and the 
industry.'' The Code further sets out the State's interest in such 
laws: ``It is the intent of the Legislature to establish an orderly 
procedure for backstretch employees. . .to organize a labor union, in 
order to reduce the prospect of any strikes, disruptions, or economic 
action that would interfere with the operation of horseracing meetings 
in California.'' Id. at  19455(c).
    State law initiatives such as California's to deal with potential 
labor disputes before they arise in the horseracing industry are 
authorized under federal law pursuant to Section 14(c)(2) of the NLRA 
(29 U.S.C.  164(c)(2)). These state law initiatives, however, will be 
completely preempted and rendered nugatory if the NLRB were to reverse 
its policy in 29 C.F.R.  103.3. See San Diego Building Trades Council 
v. Garmon, 359 U.S. 236 (1959) (the so-called ``Garmon preemption'' 
doctrine which prohibits states from regulating activities protected by 
 7 or prohibited by  8 of the NLRA, 29 U.S.C. 157 & 158).
    The industry itself is working with State regulators to address the 
concerns of jockeys about insurance protection afforded to injured 
jockeys and/or exercise riders, etc. The NHBPA is keenly interested in 
jockeys (as a group and as a constituency) attaining a level of 
proactive involvement in the industry. Furthermore, jockeys should have 
and have been accorded the utmost respect of the industry. Jockeys and 
their immediate families should have no reason to worry about their 
well-being and should not have to concern themselves each time they 
ride with an issue of health coverage which might affect their 
livelihood and their ability to take care of those families. Presently, 
only California, New York, New Jersey, and Maryland have workers' 
compensation benefits for jockeys with varying levels of work benefits. 
Jockeys are automatically covered in these States and pay no fees as 
they are considered employees for workers' compensation purposes. All 
jockeys qualify.
    In other states, jockeys are considered independent contractors--
not employees--and are covered by an accident and health (A&H) policy 
offering, in most cases, $500,000 to $1,000,000 worth of on-track 
accident insurance. Our research also indicates that insurers have 
approached jockeys' representatives about offering excess coverage, 
which could easily be made available to individual jockeys for a very 
reasonable premium at racetracks that purchased the full $1,000,000 
limit. To date, current jockeys' representation has not shown a 
willingness to put in place an excess coverage plan.
    Nationally, on-track A&H coverage ranges from $100,000 to 
$1,000,000 with the vast majority of tracks in the $500,000-$1,000,000 
range. This coverage is first dollar, no deductible applies. All 
jockeys qualify.
    There are pros and cons to either the workers' compensation or on-
track A&H approaches. Key factors include cost to tracks and horsemen, 
compliance, and protection against future increases. The NHBPA, in its 
2003 Workers' Compensation White Paper, cites the self-insured or 
captive approach as being most sensible in the long-run (pp. 18-19), in 
that industry stakeholders, by investing or having a stake in their 
coverage program, would be incentivized to control costs and loss and 
enforce compliance. California implemented a partially self-insured 
program, known as the California Horsemen's' Safety Alliance (CHSA) in 
December of 2002 which covers all of its backstretch workers (jockeys 
and exercise riders included) at relatively generous benefit levels. 
The CHSA approach came after several years of trying to find a solution 
to rising workers' compensation costs and a similar program is also 
being considered in Louisiana.
    By partially self-insuring, industry stakeholders could, in a 
sense, ``inoculate'' themselves against future dramatic price hikes as 
was evidenced in California. Key to any successful program, however, 
will be strict maintenance of valid workers' compensation certificates 
of insurance for all racing stables; improved payroll reporting 
systems; better training and higher licensing standards of licensees 
and the creation of a national on-track accident database modeled after 
the national highway patrol system.
    It is respectfully submitted, therefore, that the NLRB's 
longstanding policy under Section 14(c)(1) of the NLRA, 29 U.S.C.  
164(c)(1), embodied in 29 C.F.R.  103.3, is a correct exercise of 
discretion with respect to the horseracing industry. If Congress were 
nonetheless to direct the NLRB to overrule its policy, what continuing 
authority will States play in the regulation of labor disputes 
attendant to their plenary regulation of the horseracing industry? Will 
States such as California have to completely forfeit their carefully 
balanced statutory provisions that regulate labor relations for 
backstretch workers, racetracks, unions, and employers (including horse 
owners and trainers)? Furthermore, what gaps in regulatory authority 
over the industry might be created by virtue of the NLRA's preemption 
of States' plenary authority? As this body knows, the NLRA does not 
extend to employees ``employed as an agricultural laborer'' (29 U.S.C. 
 152(3)), nor to ``any individual having the status of an independent 
contractor'' (id.).
    The legal relationship between racetracks and jockeys is considered 
by many authorities not to be that of employer/employee, but rather 
independent contractor. See, e.g., Thompson v. Travelers Indemnity Co., 
789 S.W.2d 277 (Tex. 1990); Simmons v. Kansas City Jockey Club, 334 Mo. 
99, 66 S.W.2d 119 (1933); Haggard v. Industrial Comm'n, 71 Ariz. 91, 
223 P.2d 915 (1950); Munday v. Churchill Downs, Inc., 600 S.W.2d 487 
(Ky. Ct. App. 1980). In a number of jurisdictions, however, jockeys 
have been found to be employees of the horse owner, e.g., Biger v. 
Erwin, 57 NJ. 95, 270 A.2d 12 (1970); Drillon v. Industrial Accident 
Comm'n, 17 Cal.2d 346, 110 P.2d 64 (1941), although some jurisdictions 
draw a distinction between ``contract jockeys'' and ``freelance 
jockeys,'' e.g., Munday v. Churchill Downs, 600 S.W.2d at 487.
    If Congress were to direct the NLRB to reverse its policy in 29 
C.F.R.  103.3, then the first question that arises is whose 
``employees'' are the jockeys? If jockeys are permitted to unionize, 
they will gain exempt status under the antitrust laws and can 
``strike,'' but against what ``employer'' may they strike? Do they 
strike against racetracks (by most accounts not considered their 
``employers''), against horse owners or trainers (in some jurisdictions 
considered their ``employers,'' but not in all circumstances) or 
against their State's regulatory authorities? A major disruption in the 
delicate balance that now exists between racetracks, horsemen's groups 
and State regulatory authorities will be affected by any reversal in 
the NLRB policy.
    Furthermore, the NLRA's broad exemption for ``agricultural 
laborer[s]'' is likely to leave a large regulatory gap and fail to 
benefit many of the individuals whom this Subcommittee may, at first 
blush, think would be benefited by a reversal of 29 C.F.R.  103.3. 
Congress has long defined ``agricultural laborer'' for purposes of the 
NLRA the same as the ``agriculture'' exemption under the Fair Labor 
Standards Act, 29 U.S.C.  203(f). See Holly Farms Corp. v. NLRB, 517 
U.S. 392, 397 (1996) (since 1946). The Department of Labor has issued 
regulatory guidance on the agricultural exemption for the horseracing 
industry, at 29 C.F.R.  780.122: ``Employees engaged in the breeding, 
raising, and training of horses on farms for racing purposes are 
considered agricultural employees.''
    While Congress can clearly direct the NLRB to reconsider its policy 
toward the horseracing industry, the NLRB will nonetheless be 
prohibited from exercising jurisdiction over numerous workers in the 
industry as ``agricultural laborers.'' True, some ``employees engaged 
in the racing, training, and care of horses and other activities 
performed off the farm in connection with commercial racing'' may not 
qualify as ``agricultural'' (see 29 C.F.R.  780.122), but thousands of 
workers such as grooms, hot walkers, or exercise riders who are 
employed on breeding or training farms will remain out of reach of the 
NLRB despite performing some of their work at racetracks because they 
are employed by racehorse ``farmers.'' Cf. Baldwin v. Iowa Select 
Farms, L.P., 6 F. Supp.2d 831 (N.D. Iowa 1998) (employees in the hog 
raising business are ``agricultural'' even though some operations do 
not occur on a farm); see Holly Farms Corp. v. NLRB, 517 U.S. 392 
(1996) (discussing two-part test of what is ``agricultural'' 
activities, some of which may occur on or off the farm); Farmers 
Reservoir & Irrigation Co. v. McComb, 337 U.S. 755 (1949) (establishing 
the two-part test for ``agriculture''); see also 29 C.F.R.  780.105(b) 
& (c) (same); 29 C.F.R.  780.122 (raising racehorses is 
``agriculture'').
    On balance, given the significant legal ramifications that would 
occur if the NLRB reversed its policy in 29 C.F.R.  103.3, it would be 
very disruptive to interstate commerce for the NLRB to start asserting 
jurisdiction over the horseracing industry. States that have utilized 
their plenary regulatory authority over the industry (usually through 
state racing commissions) will have to forfeit significant control in 
the regulation of the industry in favor of the NLRB, a federal 
bureaucracy, which will have exclusive oversight of labor relations 
issues in horseracing. Regulatory gaps will emerge due to the NLRA 
exemptions, but such gaps do not currently exist in state regulators' 
ability to reach and protect workers in the industry.
    The status quo need not be tolerated, however, given the 
significant problems that have surfaced with respect to the Jockeys' 
Guild's failure to continue carrying adequate insurance for injured 
jockeys. Indeed, this Subcommittee may have requested the NLRB to 
reconsider its policy with respect to the horseracing industry, in 
part, because of frustration with the Jockeys' Guild and its assertions 
that it is not legally answerable to member- (or non-member-) jockeys 
pursuant to the statutorily derived ``duty of fair representation'' 
that attaches to ``labor organizations'' authorized pursuant to the 
NLRA.
    The Jockeys' Guild has defended lawsuits brought against it by 
injured jockeys claiming the Guild inappropriately failed to protect 
their interests while purporting to exclusively negotiate away their 
``publicity'' rights vis-a-vis racetracks on the technical ground that 
the Guild is not a labor organization within the meaning of the federal 
labor laws (in part due to the policy of 29 C.F.R.  103.3). See Brief 
for Defendant-Appellee Jockeys' Guild, Inc. in Sidney Underwood v. 
Atlantic City Racing Ass'n, 3rd Cir.Ct. App. No. 96-5578, at pp. 14-15, 
found at 1997 WL 33554410 (submitted Sept. 9, 1997). While the Jockeys' 
Guild's legal position in the Sidney Underwood case (and similar cases) 
is regrettable for the injureds' sake, the answer is not to reverse the 
NLRB's longstanding policy in 29 C.F.R.  103.3. The remedy of 
extending NLRB oversight into the horseracing industry raises far more 
concerns than it solves.
    The day-in and day-out working conditions at racetracks at which 
jockeys as well as grooms, hot walkers, exercise riders and the like 
perform their work, are matters better left to state regulators and the 
industry as a whole, and which are currently being addressed in a 
concerted effort.
    Moreover, with the advent of video lottery machines and other forms 
of gaming at racetracks, small-market tracks are able to compete with 
large-market tracks in areas of purse distribution and stakes events. 
With that dynamic in place, it is now more meaningful than ever that 
jockeys be able to participate across state lines and around the 
nation. It is in the interest of all industry stakeholders to support 
jockeys in this new paradigm. Insurance coverage should transcend from 
track-to-track and state-to-state to the benefit of racetracks and 
horsemen. The NHBPA, therefore, calls for injury protection coverage 
for all jockeys, exercise riders and backside workers. It is vitally 
important that the industry support this cause and we ask all the 
industry stakeholders to join us in pursuit of this reform.
    The best manner of achieving this reform is not to nationalize 
workers' compensation, nor to reverse the NLRB's longstanding policy in 
29 C.F.R.  103.3. Congress has long recognized the primacy of State 
regulatory authorities over the industry. This State primacy is far 
preferable to the federal government asserting a direct regulatory 
oversight role over the industry, or a federal bureaucratic agency's 
assertion of jurisdiction over it. The IHA's indirect mode of 
regulating interstate commerce with respect to horseracing is the best 
methodology of addressing Congress' limited national interests 
concerning the industry. The IHA preserves States' primacy in the area 
and encourages stakeholders to cooperate with each other to reach 
industry-wide agreements to resolve vital issues such as those now 
facing jockeys, exercise riders, etc.
    This body certainly has the authority under the Interstate Commerce 
Clause to legislate concerning the horseracing industry, but to do so, 
would usurp the States' traditional and longstanding plenary role over 
the industry. It is respectfully submitted that this body should not, 
therefore, encourage the NLRB or any other federal agency to assume the 
States' primacy over horseracing, and instead, encourage State 
regulators to work with racetracks, horsemen/women, jockeys, and 
backside personnel to find acceptable solutions to the issues about 
which this Subcommittee is concerned. Encouragement from this 
Subcommittee will go a long way toward catalyzing the industry and 
their State regulators to promptly reach a resolution to the vital 
issue of adequate injury protection insurance for jockeys, exercise 
riders, etc.
Safety & Health of Jockeys, Exercise Riders, and Backstretch Workers
    The Subcommittee has also called upon the Secretary of Health and 
Human Services, and in particular the Occupational Safety and Health 
Administration (OSHA) to look into doing a comprehensive inventory of 
safety hazards in the horseracing industry, and for the National 
Institute of Occupational Safety and Health (NIOSH) to provide a set of 
recommended standards under which racetracks should operate. The NHBPA 
agrees that a comprehensive study into what steps can be taken to 
minimize safety hazards in the horseracing industry is advisable. The 
NHBPA would encourage all its affiliates to work with any such 
investigation and inventory, and welcome the opportunity to give input 
into the development of recommended standards of safety.
    Pursuant to the authority of the Secretary under Section 21(d) of 
the Occupational Safety and Health Act of 1970, 29 U.S.C.  670(d), the 
Secretary is to establish and support ``cooperative agreements with the 
States under which employers subject to [the Act] may consult with 
State personnel with respect to--(A) The application of occupational 
safety and health requirements under [the Act] . . .; and (B) Voluntary 
efforts that employers may undertake to establish and maintain safe and 
healthful employment and places of employment.'' Id. The Secretary may 
furthermore ``condition [] receiving funds under such [cooperative] 
agreements, for contributions by States towards meeting the costs of 
such agreements.'' Id.
    This Subcommittee can and should encourage the Secretary to enter 
into ``cooperative agreements'' with state regulators of the 
horseracing industry with respect to occupational safety and health 
issues, as referred to in Section 21(d) of the Act, 29 U.S.C.  270(d). 
Funding for ``voluntary efforts'' as referred to in the Act could be 
provided for by the Secretary and the Secretary could condition receipt 
of funds upon contributions by the States in meeting the costs of such 
agreements. The Interstate Horseracing Act (IHA), 15 U.S.C.  3001 et 
seq., would provide a ready mechanism to encourage States and industry 
stakeholders to reach appropriate ``voluntary efforts'' to resolve the 
issues of safety and health hazards within the industry as well as 
induce stakeholders to address the adequacy of injury insurance against 
unavoidable risks inherent in the sport of horseracing for jockeys, 
exercise riders, etc.
    Specific areas of safety and/or potential hazards in the sport may 
be of concern to this Subcommittee. Limitations in the structure of the 
horseracing industry make safety issues a challenge to address. For 
instance, OSHA is directed toward ``employers'' and requires them to 
provide a safe work environment. Of course, racetracks do not generally 
``employ'' jockeys or exercise riders, etc. Small businesspersons, 
i.e., the owners and trainers of the athletes in the sport (the 
horses), are frequently considered either the employer or contractor of 
workers on the backside of the racetrack. Owners and trainers do not 
control the safety hazards of a racetrack or its backside.
    Pursuant to the IHA, owners and trainers by and through their 
``horsemen's groups'' have the authority to negotiate with racetracks 
on a periodic basis to reach agreements addressing a number of issues 
between them, including racetrack safety and backside safety 
conditions. Many of the NHBPA affiliates around the country routinely 
contract with their racetracks about such conditions along with a host 
of other ``terms and conditions'' that go into the ``regular 
contractual process'' between tracks and horsemen/women, and which 
agreements ultimately contain the grant of horsemen's statutorily 
required consent to interstate off-track wagering. See 15 U.S.C.  
3002(21), (22) &  3004(a)(1). These racetrack-horsemen's group's 
agreements are customary in the industry, required by the IHA, and 
ultimately overseen and approved by State racing commissions whose 
consent to interstate off-track wagering is statutorily required as 
well. See 15 U.S.C.  3004(b) & (c).
    A ready mechanism already exists for encouraging industry 
stakeholders to comply with occupational safety and health standards 
that may be appropriately developed by NIOSH. The NHBPA applauds this 
Subcommittee's efforts to encourage the Secretary of Health and Human 
Services and NIOSH to develop such standards, and suggests that such 
might be accomplished pursuant to the Secretary's authority under 
Section 21(d) of the Act, 29 U.S.C.  670(d)'s authorization of 
``cooperative agreements'' between the States and industry 
stakeholders.
    As to specific issues of occupational safety and health, an 
appropriate investigation and analysis of the industry needs to be 
conducted by NIOSH. Many unsupported safety concern allegations abound 
and unfounded safety ``fixes'' have been circulated in the industry. A 
thorough and scientifically based investigation and analysis of safety 
concerns and hazards, looking toward the development of sound 
occupational safety and health standards, is indeed warranted. While 
other industries akin to horseracing involving similar ``track'' type 
hazards (such as drag racing or stock car racing) have not apparently 
been extensively regulated heretofore by OSHA, the dearth of safety and 
health oversight in these industries does not mean that the 
investigation and recommendation of safety standards in this industry 
is unwelcome.
    As a starting point with regard to some of the specific safety 
concerns alleged to exist in the horseracing industry, the NHBPA offers 
the following:

Weights and Body Fat of Riders
    The issue of maintaining minimum weight levels is primarily 
centered on the professional jockeys. Exercise riders are not required 
to maintain a minimum weight, although those who ``work'' horses (full 
speed maintenance exercise) are generally expected to weigh a more 
lenient 125-135 lbs.
    During the past two years, the Jockeys' Guild has presented a 
proposal to raise the minimum weight--in some cases up to 126 lbs. from 
the existing generally accepted average minimum of 112 lbs.--and to put 
tighter restrictions on minimum body fat standards for riders. Using 
body fat measurements could also be misleading in that an otherwise 
healthy jockey could have virtually the same body fat index as an 
unhealthy jockey. Most horsemen will agree that, due to better living 
conditions and nutrition, today's jockeys are generally bigger than 20 
or 30 years ago. It is, of course, in the horsemen's best interests 
that the jockeys they hire are in the best possible physical condition.
    However, there are equally as many licensed, competent and skillful 
jockeys who DO NOT have to engage in extreme weight loss techniques and 
have been able to apply the necessary dietary and nutritional practices 
they need to perform. Being a professional jockey, like being a 
professional racecar driver, is a specialized profession limited to 
certain individuals who possess the necessary physical and mental 
skills and who readily assume the related risks.
    The California horse racing industry (owners, breeders, horsemen 
and track operators), led by Del Mar Thoroughbred Club Vice President 
Craig Fravel, proposed a well researched alternative to the Jockeys' 
Guild plan which was approved by the California Horse Racing Board \1\ 
In general, the California plan would mandate a minimum weight of 118 
(a more reasonable 6-8 lbs. above the current minimum) as compared to 
the 126 lb. minimum proposed by the Jockeys' Guild. In our view, a 126 
lb. minimum would negatively impact the health and safety of horses at 
full (race) speed.
---------------------------------------------------------------------------
    \1\ Blood-Horse Magazine; CHRB Rejects Increase in Jockey Weights 
by Jack Shinar; April 28, 2005
---------------------------------------------------------------------------
    Furthermore, Mr. Fravel has taken the lead, along with other 
industry stakeholders including the NHBPA, in considering a proposal 
for research titled ``Athletic Performance in Jockeys: A Baseline Study 
of Physiological and Nutritional Factors''. If funded, this study would 
be led by noted researcher, Dan Benardot, PhD, who heads the Laboratory 
for Elite Athlete Performance at Georgia State University.
    In order to make more informed long-term decisions with regard to 
jockey weights, the NHBPA would encourage a.) That our affiliate 
leadership endorse the compromise minimum weight proposal adopted by 
the California racing industry and; b.) To support Dr. Benardot's 
comprehensive research proposal cited earlier.

Track Conditions
    The maintenance of a horse racing surface is very specialized and 
can vary greatly from state to state and region to region. While there 
may be instances where heavy rains, temperature changes and other 
situations have impacted the safety of a racing surface, we feel the 
best way of effectively dealing with track safety is through regular 
communication.
    We endorse the common (and successful) practice used by the vast 
majority of racetrack operators (typically through their Director of 
Racing and Track Superintendent) and representatives of the local 
horsemen and jockeys, which is to a.) Keep in constant communication 
with the track superintendent regarding track conditions on a day-to-
day basis and; b.) In the event of severe weather, to meet prior to the 
start of a racing card and physically inspect the surface and make a 
unified decision of whether to race or not.
    The racing industry, during the past 20 years, has invested heavily 
in proven safety measures, most notably the Fontana Safety Rail system 
which is now in place throughout the large majority of tracks and many 
major training centers. This rail system forms a trampoline surface, 
which directs a falling rider away from dangerous rail posts toward the 
infield. Likewise, the multi-million dollar research and development 
into new and improved racing surfaces is on-going and can best be 
evidenced with the launch of Polytrack, a revolutionary new synthetic 
surface which blends fibers and recycled rubber and wax covered silica 
on top of a vertical drainage system and which recently replaced 
Northern Kentucky's Turfway Park Racetrack's conventional one-mile dirt 
track and received rave reviews.\2\gT1,\3\
---------------------------------------------------------------------------
    \2\ Blood-Horse Magazine; Early Returns: Polytrack Experience Pays 
Off by Tom LaMarra; September 7, 2005
    \3\ Blood-Horse Magazine; Turfway Park First to Install Polytrack 
on Main Track by Amy Whitfield; April 27, 2005
---------------------------------------------------------------------------
    Keeneland Race Course, which co-owns Turfway Park began using 
Polytrack on its five-eighths-mile training track in September 2004 as 
a test. Keeneland has partnered with Martin Collins International as 
the North American distributor of the product.

Safety Equipment
    Jockey and exercise riders' helmets and safety vests are required 
to be SEI (Safety Equipment Institute) certified and to meet specific 
ASTM (American Society for Testing and Materials) standards (F-1163 in 
the case of safety equipment).
    The development of safety gear for jockeys and exercise riders, 
which has only been mandatory since in the early 1950's, mirrors 
similar safety advances in professional football--which did not require 
solid helmets in the early years of the sport. Thanks to government 
urging in the early years, both sports have taken it upon themselves to 
aid in the development (through proper testing and research) and then 
require the use of ever-improving safety equipment for its athletes. 
Despite the relative danger of both sports, industry efforts at 
improving safety gear have clearly resulted in countless lives being 
saved.
    In recent years, a company by the name of Sure Lines, Inc. has been 
promoting the mandatory use of a new type of safety rein. The safety 
reins are reinforced by a wire and designed to hook on to the horse's 
bridle and have a breaking point of 360 pounds over nine minutes (vs. 
300 for regular leather or nylon reins).
    Ultimately, the added cost of new safety reins would be borne by 
horsemen. It has been estimated that Sure Lines reins would cost an 
additional $15-$20 more than standard reins.
    Standard leather reins are normally $70 and nylon approximately 
$20. Refitting an entire racing stable of 30 horses would cost horsemen 
an additional $1,200 to $2,700--a substantial financial burden for the 
small to midsize market racing operation without clear evidence that 
doing so would have the hoped for safety improvement.
    No current regulations or model rules have been enacted by industry 
regulators such as the Association of Racing Commissioners 
International (ARCI) and the North American Pari-Mutuel Regulators 
Association (NAPRA). NHBPA agrees with regulators that rein failure (or 
failure of other critical equipment such as saddles, stirrups, stirrup 
leathers and girths) should be properly researched and, if indicated by 
independent data, be upgraded first on racing bridles (used during the 
actual running of races) and then phased in over time on training 
equipment.
    Certainly, riders would be well within their rights to provide 
their own reins to the trainer if they so desired. However, in the end, 
clear research is needed. For example, what is the ratio of broken 
reins to the 350,000 horses that NHBPA horsemen run each year? What are 
the failure rates between leather reins and the often used nylon reins? 
Is the critical need more for racing conditions versus morning 
exercising (which would require trainers to purchase fewer sets of 
reins)? This also begs the question: Is the Federal Government going to 
also regulate the equipment being used by nearly 2 million horse owners 
across the U.S. who own and ride the 3.9 million horses used in 
recreational activities across the U.S.?

Conditions of the Horses
    The NHBPA supports the industry-wide efforts currently underway at 
enhancing current state-by-state medication regulations into uniform 
national medication policies being undertaken by the Racing Medication 
and Testing Consortium (RMTC) whose mission is to develop, promote and 
coordinate, at the national level, policies, research, and educational 
programs which seek to ensure the fairness and integrity of racing and 
the health and welfare of racehorses and participants, and protect the 
interests of the betting public.
    The RMTC currently includes representatives of all major 
horseracing and breeding organizations--including the NHBPA--from the 
Thoroughbred, Quarter Horse and Standardbred industries including: 
Track operators, regulatory bodies, horsemen's associations, breeders' 
associations, breed registries, jockeys and other key stakeholders.
    The NHBPA membership agrees that more effective regulation must 
start by ``leveling the playing field'' and arriving at agreeable 
national uniform standards that do not penalize responsible use of 
therapeutic medication. Testing lab accreditation, specific regulatory 
levels and withdrawal time guidelines are just a few of the critical 
areas currently being developed through the RMTC, which has recently 
circulated a set of proposed model rules to state racing regulators 
(many have already adopted the rules into their racing statutes).

Track Work Rules
    As previously addressed (pp. 9-12) the NHBPA firmly believes that 
working together with state regulators, the racing industry is clearly 
best suited to developing ``best practices'' needed to make racetrack 
facilities as safe as possible for fans and participants.
    For example, the issue of limiting field sizes is regularly 
addressed and most racing departments limit field size in turf races 
due to the tighter turns involved. Churchill Downs implemented a limit 
to 20 horses in the Kentucky Derby due to safety concerns after 23 
runners participated in the 1974 Kentucky Derby. Does OSHA limit the 
size of the field of racecars in the Indianapolis 500?
    The mandatory use of multiple cameras (front stretch head-on; 
backstretch head-on and pan angles) at every licensed racetrack is 
further evidence that racing is the most regulated sport in the U.S. 
Every step of every race is caught on video and available to a board of 
stewards one of whom is, typically, a retired jockey.
    Adding additional $30,000 video cameras will not solve the problem 
of reckless riding. Better education, training and stiffer licensing 
standards will. The NHBPA was a founding member of the Groom Elite 
Program (GEP) whose mission is to provide horsemen an opportunity for 
professional and personal growth, by increasing their understanding of 
the horse with which they work and enhancing their professional skills 
(www.thehorsemeneliteprogram.com). GEP goes from state to state and 
track to track providing continuing equine education for backstretch 
licensees while also providing training in barn safety, first aid and 
life skills (i.e. substance abuse prevention) in cooperation with 
industry support groups such as the Winners' Foundation and the Race 
Track Chaplaincy of America.
    The NHBPA is also an active participant and Board member of the 
North American Racing Academy (NARA) (www.naracingacademy.com)--a 
national racing school for jockeys being developed by industry leaders 
and led by retired Hall of Fame jockey Chris McCarron. NARA's mission--
``to develop and operate a world-class racing school which will provide 
students with the education, training and experience needed to become 
expert horsemen skilled in the art of riding racehorses and 
knowledgeable in the workings of the racing industry as a whole''--fits 
well within our view that better safety begins with better training and 
higher standards. NARA would be in the business of preparing better 
jockeys and horsemen. Working within the Kentucky Community and 
Technical College System, NARA sees its role as providing the racing 
industry with a national accredited vocational program designed to 
provide students with coursework in various racing industry fields such 
as: Regulation and officiating, track management, and life skills (i.e. 
substance abuse prevention, nutrition and exercise, etc. . . .) in 
addition to race riding.
    While some might believe that mandatory drug and alcohol testing 
programs might be the answer, we believe that education is the key.
    The NHBPA would work with the ARCI and NAPRA in developing uniform 
national model rules which would mandate higher licensing 
requirements--including training in barn safety, first aid and 
substance abuse prevention--for all critical licensees such as jockeys, 
exercise riders and grooms. This approach would have the most immediate 
effect on track safety and help to reduce accident/workers' 
compensation insurance costs.

On-Track Injury Insurance/Workers' Compensation
    As indicated in our May 19, 2005 written response to Rep. 
Whitfield's request for information (see attached) and as cited 
previously (pp. 5-6), the NHBPA has spent a great deal of time 
researching the issue of on-track injury / workers' compensation 
insurance, forming an industry task force in 2002--2003 designed to 
study possible solutions. We encourage the committee to review NHBPA's 
attached December, 2003 Report entitled ``Workers' Compensation 
Mechanisms for Jockeys'' and our Workers' Compensation White Paper and 
Task Force Report which are available on NHBPA's web site: 
www.nationalhbpa.com.
    The NHBPA Workers' Compensation Task Force outlined the findings of 
the three task force groups that were formed to investigate solutions 
to the crisis in workers' compensation. The common goal was to ensure 
the long-run stability and affordability of insurance in the racing 
industry. These groups believe insurance rates can be reduced by (1) 
Increasing the use of effective plans to cover athletic participants, 
namely jockeys and exercise riders; (2) Forming self-insured or 
partially self-insured ``captive'' plans to make the industry more 
attractive to insurers; (3) Developing a national database for 
reporting on-track accidents and injuries; (4) Enforcing better 
compliance and reporting practices and loss controls among horsemen 
and; (5) Establishing better education and testing requirements for 
licensees on the backstretch to promote a safer, more competent 
workplace.
    California was able to implement a well-designed partially self-
insured program while Louisiana is looking to follow suit. Other 
states, such as New York, New Jersey and Maryland have already 
implemented workers' compensation plans and Kentucky, pending 
legislative approval, should have a similar plan in place shortly. This 
notwithstanding, the large majority of racetracks has $500,000-
$1,000,000 on-track injury coverages in place. The key here is that 
state racing industries may have differing needs and therefore might 
have differing, yet effective, approaches to the issue of on-track 
accident coverage.
    We feel that the federal government's most useful role would be in 
assisting and encouraging states in getting the local enabling 
legislation needed in order to ``lay the groundwork'' on which they can 
build an affordable program that is fair to all racing industry 
stakeholders.

    Mr. Whitfield. Thank you, Mr. Roark. Mr. Maline, you are 
recognized for 5 minutes.

                  TESTIMONY OF MARTIN A. MALINE

    Mr. Maline. Thank you, Mr. Chairman and members of the 
committee. My name is Martin Maline. I am the Executive 
Director of the Kentucky Horsemen's Benevolent and Protective 
Association, a position I have held since February 1976. The 
KHBPA is a trade association representing the interests of 
approximately 6,000 owners and trainers of thoroughbred horse 
racing in Kentucky. In addition, we also administer to the 
needs of thousands of stable workers.
    Susan Bunning is the current President of the KHBPA and 
she, along with the ten-member Board of Directors, is elected 
by a vote of the entire membership every 3 years. Susan, 
incidentally, is the daughter-in-law of Senator Jim Bunning of 
Kentucky. The KHBPA is an affiliate of the National HBPA, which 
as John mentioned, represents approximately 48,000 horsemen in 
the United States and Canada.
    The KHBPA negotiates contracts with various racing 
associations to assure that an equitable share of wagering 
revenue adequately funds purses so that the racing industry 
will thrive for horsemen in the State of Kentucky. One and a 
half percent of the horsemen's share of wagering revenue is 
allocated for the funding of the KHBPA. The organization is 
audited on an annual basis by the accounting firm of Deming and 
Malone.
    In addition, the contracts specifically address myriad 
issues that confront workers at racetracks. They include the 
basic living needs of workers at the tracks and matters to make 
a difficult and strenuous work environment a bit more 
tolerable. These are issues of great importance to these 
tireless workers and except for the efforts of the HBPA, may be 
neglected.
    Through our affiliation with the National HBPA, the KHBPA 
provides free fire and disaster insurance. This has been 
especially important to the horsemen stabled at Ellis Park in 
Henderson, Kentucky, where a tornado touched down on November 
6. Fortunately, there was no loss of human life at the 
racetrack but several horses were killed or severely injured 
and horsemen workers living at the track lost everything. As is 
the custom of an organization that was built on the adage of 
horsemen helping horsemen, we were there to support and offer 
secure to the horsemen in need.
    The havoc wreaked by the tornado occurred as the KHBPA was 
in the midst of helping other horsemen afflicted by hardship. 
There was a tragic trailer fire that killed four small children 
of stable employees at Churchill. This loss, combined with the 
damages at Ellis Park, gave a hastily planned fundraiser a new 
sense of urgency. Horsemen struggled to come to terms with 
losses that their fellow horsemen were being forced to endure.
    The KHBPA provided benevolence to horsemen and stable 
workers in need. In addition to medical benefits, housing, 
emergency travel and legal advice, the HBPA employs a Hispanic 
service coordinator to help our large Spanish-speaking 
workforce navigate through barriers that at times can be 
somewhat overwhelming. In many ways the backstretch community 
is a microcosm of society where work conditions are hard and 
living comfortably can be a challenge. As often, where these 
types of conditions exist in society, drug and alcohol problems 
are perhaps exacerbated. While the KHBPA has championed 
recreation and social programs and provides financial support 
for full-time Chaplains at each racetrack, there are still 
people that struggle with addictive behavior.
    For this reason the KHBPA, in conjunction with the Kentucky 
Racing Health and Welfare Fund, developed the Thoroughbred 
Addiction Counsel of Kentucky in an effort to arrive at a 
solution that fits the unique problems of the sometimes nomadic 
existence of the racetrack community. TACK has been recognized 
by former President George Bush's Thousand Points of Light 
program and received the Governor's Aware of Excellence. The 
only expenditure of TACK are for the counselors, a bookkeeper 
and maintenance of the Concord House, a halfway facility for 
recovering racetrack workers. The rest of us volunteer our time 
to this worthwhile project.
    The KHBPA has actively lobbied for legislation advantageous 
to the racing industry. The Backstretch Improvement Commission, 
developed by legislation and spearheaded by the KHBPA, assures 
that improvements that address living conditions for backside 
workers remain a priority. The KHBPA has taken a firm stance on 
the horseracing industry's efforts to address the health and 
welfare of the sport's jockeys, exercise riders and backstretch 
workers, including the issue of on-track injury insurance and 
Workers' Compensation and other health and welfare issues faced 
by the industry's workers.
    The KHBPA supports the requirement that trainers carry 
Workers' Compensation on their employees. Unfortunately, many 
trainers in compliance with the regulation requiring Workers' 
Compensation insurance have been caught in the web of the 
Associated Industries of Kentucky insurance collapse. The 
dilemma concerns independent contractors working in various 
capacities at racetracks and training centers in Kentucky and 
throughout the United States. This includes jockeys, freelance 
exercise riders, pony people, horse trainers, veterinarians, 
blacksmiths, feed suppliers and other workers in various 
capacities on no one's particular payroll. Workers' 
Compensation coverage applies only to actual employees and not 
to the various independent contractors working at the 
racetracks.
    The KHBPA understands and appreciates the committee's 
interest in addressing what is perceived as a tremendous 
oversight on the part of the racing industry, allowing jockeys 
to ride without adequate insurance. We listened to Gary 
Birzer's testimony in front of this committee and we are deeply 
saddened by his plight. His story is a tragic one but horse 
trainers who are likewise usually self-employed share this 
problem. Let me share with you the stories of two horse 
trainers, both of whom were severely injured in riding 
accidents this past year.
    The first individual licensed as a horse trainer was 
exercising a horse. The rein broke and the horse veered into 
the rail. The trainer lost his arm due to the accident. Another 
trainer was injured while astride one of her own horses when 
the horse unexpectedly stumbled. She is now confined to a 
wheelchair and will never walk again. Trainers are expected to 
carry their own insurance. One did have limited coverage but 
the other did not.
    There are no easy answers but one consideration would be to 
have the Racing Authority, the regulatory arm of the racing in 
Kentucky, require everyone working as an independent contractor 
to show proof of accident and disability insurance prior to 
receiving a license. This approach would help to alleviate an 
obvious deficiency and would assure that everyone working on 
the backstretch of racetracks are receiving adequate coverage.
    I have appreciated the opportunity to address you and I 
thank you for your interest and concern.
    [The prepared statement of Martin A. Maline follows:]

 Prepared Statement of Martin A. Maline, Executive Director, Kentucky 
            Horsemen's Benevolent and Protective Association

    My name is Martin Maline. I am the Executive Director of the 
Kentucky Horsemen's Benevolent and Protective Association (KHBPA), a 
position I have held since February, 1976. The KHBPA is a trade 
association representing the interests of approximately 6,000 owners 
and trainers of thoroughbred horses racing in Kentucky. In addition, we 
also administer to the needs of thousands of stable workers.
    Susan Bunning is the current President of the KHBPA and she, along 
with the ten-member Board of Directors, is elected by a vote of the 
entire membership every three years. Susan, incidentally, is the 
daughter-on-law of Senator Jim Bunning from Kentucky.
    The KHBPA is an affiliate of the National HBPA, which represents 
approximately 40,000 horsemen in the United States and Canada. For a 
three year period during the 1980s, in addition to my duties as the 
KHBPA Executive Director, I served as the interim Executive Director of 
the National HBPA.
    The KHBPA negotiates contracts with the various racing associations 
to assure that an equitable share of wagering revenue adequately funds 
purses so that the racing industry will thrive in the state of 
Kentucky. The agreements, which vary from racetrack to racetrack, 
include provisions addressing the split of sponsorship revenues, 
potential media rights, and revenue generated from the simulcasting of 
and wagering on Kentucky's races in other locations outside the state. 
One and one half percent of the horsemen's share of wagering revenue is 
allocated for the funding of the KHBPA. The organization is audited on 
an annual basis by the accounting firm of Deming, Malone, Livesay and 
Ostroff.
    In addition, the contracts provide for the implementation of funded 
horsemen's committees that specifically address myriad issues that 
confront workers at racetracks. These committees address the basic 
living needs of workers at the track, and matters to make a difficult 
and strenuous work environment a bit more tolerable. The committees 
address such needs and lifestyle issues as housing, shower and restroom 
facilities, cable television, recreation and social programs, and the 
overall maintenance of the backstretch community and the racing 
surface. These are issues of great importance to the tireless workers, 
and except for the efforts of the HBPA, may be neglected.
    The main office of the KHBPA is in Louisville, Kentucky in 
proximity to Churchill Downs. The KHBPA also maintains satellite 
offices at each of the five thoroughbred racetracks in Kentucky and at 
the two largest training centers in Lexington and Louisville. This 
allows us to have very hands-on and day-to-day contact with our 
constituency and the racing workforce.
    Through our affiliation with the National HBPA, the KHBPA provides 
free fire and disaster insurance. This has been especially important to 
the horsemen stabled at Ellis Park in Henderson, Kentucky, where a 
large section of the barn area was obliterated by the tornado that hit 
on November 6. Fortunately, there was no loss of human life at the 
racetrack, but several horses were killed or severely injured and 
horsemen and workers living at the track lost everything. As is the 
custom of an organization that was built on the adage ``Horsemen 
helping Horsemen,'' we were there to offer support and succor to the 
horsemen in need. We provided housing to everyone displaced and began 
the tedious process of assisting horsemen with the information required 
by the insurance company. In addition to the fire and disaster 
insurance coverage, as a member of the National HBPA Emergency 
Assistance Committee I plan to apply to the committee, on behalf of the 
Ellis Park horsemen, for financial help for the unfortunate victims of 
this natural disaster.
    The havoc wreaked by the tornado occurred as the KHBPA was in the 
midst of helping other horsemen afflicted by hardship; we held a 
fundraiser on Monday, November 7 that was originally scheduled to 
assist the Louisiana horsemen displaced by Hurricane Katrina. While we 
were arranging this event there was a tragic trailer fire that killed 
four small children of stable employees at Churchill. This loss, 
combined with the damage at Ellis Park, gave the fundraiser a new sense 
of urgency. Horsemen struggled to come to terms with the losses that 
their fellow horsemen were being forced to endure.
    The KHBPA provides benevolence to horsemen and stable workers in 
need. We work closely with the Kentucky Racing Health and Welfare Fund 
(KRH&WF) to assure that assistance is provided when there is need. In 
addition to medical benefits, housing, emergency travel and legal 
advice, the KHBPA employs a Hispanic Services Coordinator to help our 
large Spanish-speaking workforce navigate through barriers that at 
times can be somewhat overwhelming. We are proud to say that hundreds 
have been assisted in obtaining H-2 work visas and the process 
continues daily.
    In many ways the backstretch community is a microcosm of society, 
where work conditions are hard and living comfortably can be a 
challenge. Workers are usually transients, and the place they and their 
family must call home often consists of one small room. The restroom 
and shower facilities are, in some instances, a long walk from the 
living quarters. As often where these types of conditions exist in 
society, drug and alcohol problems are perhaps exacerbated. While the 
KHBPA has championed recreation and social programs and provides 
financial support for full-time chaplains at each racetrack, there are 
still people that struggle with addictive behavior. For this reason, 
the KHBPA, in conjunction with the KRH&WF, developed the Thoroughbred 
Addiction Council of Kentucky (TACK). KRH&WF Chairman Don Ball 
challenged me and KRH&WF Executive Director Richard Riedel to explore 
various options in an effort to arrive at a solution that fits the 
unique problems of the sometimes nomadic existence of the racetrack 
community. We accessed the local communities surrounding the various 
racetracks to locate counselors familiar with the in-patient treatment 
centers in that specific region. As a horseman moves from track to 
track, the counselors communicate, informing each other of the special 
needs of the individual.
    TACK has been recognized by former President George Bush's Thousand 
Points of Light program and received the Governor's Award of 
Excellence. The majority of funding for TACK is through a generous 
contribution from the KRH&WF. TACK is a 501-C3 non-profit program and 
is audited annually. The only expenditures of TACK are for the 
counselors, a bookkeeper, and maintenance of the Concord House, a 
halfway facility for recovering racetrack workers. The rest of us 
volunteer our time to this worthwhile project.
    The KHBPA has actively lobbied for legislation advantageous to the 
racing industry. The Backstretch Improvement Commission, developed by 
legislation and spearheaded by the KHBPA, assures that improvements 
that address living conditions for backside workers remain a priority. 
Stabling and shipping expenses and purse enhancements are also KHBPA 
legislative initiatives designed to assist horsemen.
    The KHBPA has taken a firm stance on the horse racing industry's 
efforts to address the health and welfare of the sport's jockeys, 
exercise riders, and backstretch workers, including the issue of on-
track injury insurance and workers' compensation, and other health and 
welfare issues faced by the industry's workers. The KHBPA supports the 
requirement that trainers carry workers' compensation insurance on 
their employees, and we facilitate that process by providing the names 
of carriers that specialize in the equine industry.
    The dilemma concerns independent contractors working in various 
capacities at racetracks and training centers in Kentucky and 
throughout the United States. This includes jockeys, free lance 
exercise riders, pony people (individuals who exercise horses while 
astride another horse), horse trainers, veterinarians, blacksmiths, 
feed suppliers, and others working in various capacities on no one's 
particular payroll.
    The KHBPA understands and appreciates the committee's interest in 
addressing what is perceived as a tremendous oversight on the part of 
the racing industry: allowing jockeys to ride without adequate 
insurance. We listened to Gary Birzer's testimony in front of this 
committee and we are deeply saddened by his plight. I had the 
opportunity to observe Gary earlier in his career at racetracks in Ohio 
and Kentucky, it was obvious that he loved being a jockey. His story is 
a tragic one, but horse trainers, who are likewise usually self-
employed, have similar problems. Let me share with you the stories of 
two horse trainers, both of whom were severally injured in riding 
accidents.
    The first individual, licensed as a horse trainer, was exercising a 
horse for a friend and fellow horse trainer. The rein broke and the 
horse veered into the rail. The trainer lost his arm due to the 
accident. Another trainer, an accomplished horsewoman and horse 
trainer, was injured while astride one of her own horses when the horse 
unexpectedly stumbled. She is now confined to a wheelchair and will 
never walk again. The KHBPA is in the process of purchasing a motorized 
wheelchair for her, but it has been a tremendous emotional struggle for 
her to accept.
    Trainers are expected to carry their own insurance. One did have 
limited coverage, but the other did not.
    There are no easy answers, but one consideration would be to have 
the Kentucky Racing Authority, the regulatory arm of racing in 
Kentucky, require everyone working as an independent contractor in 
Kentucky to show proof of insurance prior to receiving a license. 
Currently, trainers are required to have workers' compensation at time 
of licensing, but this is not strictly enforced. In addition, workers' 
compensation coverage applies only to actual employees, and not to the 
various independent contractors working at racetracks.

    Mr. Whitfield. Thank you. Mr. Riedel, you are recognized 
for 5 minutes.

                   TESTIMONY OF RICHARD RIEDEL

    Mr. Riedel. Thank you, Mr. Chairman. Obviously the focus of 
these hearings is on jockey's on-track insurance. As you will 
hear from my testimony, the Kentucky Racing Health and Welfare 
Fund is specifically excluded by statute from making payment on 
those types of claims. However, this hearing is also about 
other health and welfare issues faced by the industry's 
workers.
    I have been asked to testify how the Kentucky Racing Health 
and Welfare Fund assists backstretch workers, including 
jockeys, working in Kentucky. The payment of revenue from 
Kentucky thoroughbred uncashed pari-mutuel tickets for the 
Health and Welfare Fund was established by the Kentucky General 
Assembly in 1978 to provide health and welfare benefits for 
Kentucky's thoroughbred racing industry. We are not a State 
agency. However, we do function within the perimeters of 
Kentucky Revised Statute 230.374. We have an annual audit, 
which is sent to the Kentucky Horse Racing Authority. We 
maintain minutes, have open Board meetings and are responsive 
to all public and private inquiries.
    I am going to paraphrase from the Statute, which will 
explain how we are funded and what we can provide and to whom. 
One, All net uncashed thoroughbred racing tickets reported to 
the Kentucky Horse Racing Authority shall be paid to the 
Kentucky Racing Health and Welfare Fund, Inc. Two, the Kentucky 
Racing Health and Welfare Fund is a non-profit, charitable 
corporation. Three, it is organized for the benefit, aid, 
assistance and relief of thoroughbred owners, trainers, 
jockeys, valets, exercise riders, grooms, stable attendants, 
pari-mutuel clerks and other thoroughbred racing personnel 
employed in connection with racing and their spouses and 
children.
    Four, These individuals must demonstrate their need for 
financial assistance connected with death, illness or off-the 
job- injury. Five, the assistance that these individuals 
receive may not be otherwise covered by union health and 
welfare plans, Workers' Compensation, Social Security, public 
welfare or any type of health, medical, death or accident 
insurance. Six, the Fund shall receive payment on or before 
December 31, provided that the Kentucky horse Racing Authority 
and the Kentucky State Auditor's office are satisfied that the 
Fund is, in all respects, being operated for the charitable and 
benevolent purposes set forth in this section. The Fund has 
always received the annual payment provided in the Statute.
    Under the leadership of our Board of Directors, whose 
members generously donate their expertise and time, the Fund 
has developed a number of innovative health and welfare 
benefits. We do much more than just pay medical bills. Our 
staff is made up of dedicated individuals who execute their 
duties with respect, dignity and humanity, while attending to 
the needs of our clients, medical providers and other agencies. 
We have a presence at Kentucky Thoroughbred Race Tracks and at 
the major training centers.
    Our staff assists in completing the application. They 
assist in making appointments with a variety of medical 
professionals and are involved in arranging after-care and 
prescription medication. Generally, the client is seen by the 
medical professional at no charge to them, as the provider 
invoices the Fund directly.
    Currently our annual maximum benefit is up to $20,000 with 
most medical charges under that amount being paid at 100 
percent. I have an exhibit that shows every disbursement for a 
health related benefit made in 2004. Here you will find the 
approved requests of approximately 1,024 individuals who 
contacted us over 4,400 times, while submitting approximately 
10,000 invoices for payment. Of those 4,400 approved and paid 
contacts, approximately 3,700 or 83 percent were stable 
employees, the largest working class and those in the greatest 
need at any racetrack.
    For fiscal year 2004, the Fund received $2.7 million. 
During that year, the Fund spent $2.2 million in health-related 
benefits, granted $500,000 for the Kentucky Racetrack 
Retirement Plan, while spending $534,000 on the Fund's 
administration and an additional $17,000 for the retirement 
plan administration. In total, the Fund spent $3.6 million, 
primarily for health-related and retirement benefits. In 
addition, staff was able to negotiate down or redirect and 
additional $587,000 in medical charges that would have been 
otherwise paid by the Fund and $178,000 that would have been 
the responsibility of our clients for payment.
    In addition to our popular health and retirement program, 
we participate in several other programs. The Fund provides 
majority funding for the drug and alcohol counseling program, 
the Thoroughbred Addiction Council of Kentucky or TACK. The Old 
School Apartments, this was the conversion of a 100-year old 
elementary school into 40 apartments for racetrack workers and 
others who are low-income, who are at least 55 years of age or 
disabled. The facility also contains office space for the Fund, 
the TACK office, the Kentucky HBPA and our health service 
center.
    The Kentucky Racing Health Service Center is a joint 
venture with the University of Louisville Schools of Nursing 
and Medicine. This is a program that we hope to duplicate at 
other Kentucky racing centers in an effort to promote healthier 
living and control medical related expenses.
    The redirection of a portion of our funding source to 
finance a part of the jockey's Workers' Compensation insurance 
cost in Kentucky has been discussed lately. I feel that this 
would be unwise and very damaging to backside employees, who 
are at the bottom of racing's economic scale. Our funding is 
already threatened. We already live paycheck to paycheck. For 
the Fund to be able to perpetuate our mission of helping the 
most economically challenged of Kentucky's thoroughbred 
racetrack workers, we must stay focused on soaring medical 
costs, diverse demands for our services, modulations in the 
workforce on Kentucky's backstretches, changing State and 
Federal laws and the tightening budgets of other charities and 
public and private agencies.
    We monitor with uncertainty the unpredictable revenue 
source from which we operate. Fueled by reports of substantial 
declines in the pari-mutuel wagering in Kentucky, advancements 
in electronic wagering, slots and/or casino gambling in Indiana 
and West Virginia and the speculation of alternative forms of 
gambling in Kentucky, all of which may further reduce our 
source of revenue.
    Thank you for this opportunity.
    [The prepared statement of Richard Riedel follows:]

  Prepared Statement of Richard Riedel, Executive Director, Kentucky 
                  Racing Health and Welfare Fund, Inc.

    I am Richard Riedel, Executive Director of the Kentucky Racing 
Health and Welfare Fund, Inc. I have been asked to explain how the Fund 
receives it funding, how our income is dispensed, to whom, and the 
methods by which the Fund is administrated, as well as our relationship 
with the Kentucky H.B.P.A. and other racing associations in Kentucky.
    I would like to start by explaining our funding mechanism and 
advance from there.
    The payment of revenue from Kentucky Thoroughbred uncashed pari-
mutuel tickets to the Kentucky Racing Health and Welfare Fund, Inc. was 
established by the Kentucky General Assembly in 1978 to provide health 
and welfare benefits to Kentucky's Thoroughbred industry. We are not a 
state agency; however we do function within the perimeters of Kentucky 
Revised Statute 230.374. We are limited by the scope of this statute 
and strive on a daily basis to uphold the letter and intent of the law.
    I am going to paraphrase from the statute; which will explain how 
we are funded and what we can provide and to whom.
    1. All net uncashed Thoroughbred racing tickets reported to the 
Kentucky Horse Racing Authority shall be paid to the Kentucky Racing 
Health and Welfare Fund, Inc.
    2. The Kentucky Racing Health and Welfare Fund is a non-profit 
charitable corporation.
    3. It is organized for the benefit, aid, assistance and relief of 
Thoroughbred owners, trainers, jockeys, valets, exercise riders, 
grooms, stable attendants, pari-mutuel clerks, and other thoroughbred 
racing personnel employed in connection with racing, and their spouses 
and children.
    4. These individuals must demonstrate their need for financial 
assistance connected with death, illness, or off-the-job injury.
    5. The assistance that these individuals receive may not be 
otherwise covered by union health and welfare plans, worker's 
compensation, Social Security, public welfare, or any type of health, 
medical, death, or accident insurance.
    6. The Fund shall receive payment on or before December 31 provided 
that the Kentucky Horse Racing Authority and the Kentucky State 
Auditor's office are satisfied that the Fund is in all respects being 
operated for the charitable and benevolent purposes set forth in this 
section.
    The Fund has always received the annual payment provided in the 
statute.
    As stated earlier, we are a Kentucky non-profit charitable 
corporation and under the leadership of our Board of Directors, whose 
members generously donate their expertise and time, the Fund has 
developed a number of innovative health and welfare benefits and a 
compassionate set of guidelines by which they are administered.
    Currently the make up of the Board is:
    Mr. Don Ball, Chairman. Mr. Ball is the appointee of the Chairman 
of the Kentucky Horse Racing Authority. He is a successful Lexington 
homebuilder, long time racehorse owner and breeder, and philanthropist. 
He has been on the Board 17 years.
    Mrs. Susan Bunning, Vice Chairman. Mrs. Bunning serves on the Board 
via her position as the President of the Kentucky H.B.P.A. She is a 
lawyer for a large regional bank dealing in equine related matters, and 
is a third generation horsewoman. She has been on the Board since June 
2002.
    Mr. Dale Romans, Treasurer. Mr. Romans serves on the Board via his 
position as the Vice President of the Kentucky H.B.P.A. He is a second 
generation horseman and as of the end of October was the 9th leading 
trainer in purses earned in the United States. He also has been on the 
Board since June 2002.
    Mrs. Carol Hebel, Secretary. Mrs. Hebel is the Governor of 
Kentucky's appointment to our Board. She is a prominent Louisville 
realtor, 2nd generation owner and breeder, and past president of the 
Louisville Orchestra and Kentucky Derby Festival. She has been on the 
Board since June 2002.
    Dr. Randy Scheen, Member. Dr. Scheen is a prominent Louisville 
Dermatologist and long time race horse owner who regularly donates his 
time at the health fairs held on the backstretches of Kentucky's 
racetracks each year. He joined the Board in 2004.
    The organization strives to be transparent while leaving a lengthy 
paper trail of its activities. The Board meets at least four times a 
year, minutes of each meeting are taken and submitted to Board members 
prior to the next meeting. They are then reviewed and voted on at the 
next meeting. The minutes are open for public review and are kept in 
the top drawer of a file cabinet on the right as you enter my office. 
Each year's minutes are bound in black binders.
    We are as financially prudent as possible. We have a check signing 
policy. Board members are sent copies of monthly bank statements, 
monthly activity reports and quarterly activity reports. They are also 
sent case summaries every two weeks.
    We are audited annually by an independent auditor and submit our 
audit to the Kentucky Horse Racing Authority.
    We have a policy of sending out an RFP every five years to various 
investment firms to determine who will manage our accounts. We meet 
regularly with the regional Director of Investments of our portfolios. 
We also retain an independent financial advisor to monitor our 
investment's performance on an annual basis.
    Over the years the Board has developed a guideline manual that 
contains all of the standards of eligibility and benefit allowances and 
limitations. This manual is referred to on a daily basis by staff to 
determine eligibility for requests for assistance.
    We do much more than just pay medical bills. Our staff is 
compassionate and dedicated, two of whom are bi-lingual. All execute 
their duties with respect, dignity and humanity while attending to the 
needs of our clients, medical providers, and other agencies. We have 
offices located at Kentucky's racetracks, namely: Churchill Downs, 
Keeneland, Ellis Park, Turfway Park, and The Thoroughbred Center, a 
large training center which is owned by Keeneland.
    Our staff assists with the completion of the application process 
and authenticates the client's participation in racing by verifying 
their Kentucky racing license and compensation. Once satisfied that the 
individual is eligible, staff then makes an appointment with the 
medical professional that is needed, be it the client's own medical 
professional or a Fund referred professional. Our staff is involved in 
arranging aftercare and prescription medication for the clients. In 
most cases, the patient receives treatment and pays nothing, with the 
medical provider invoicing the Fund. We generally pay providers within 
two weeks of being invoiced.
    The Fund also assists those who have already incurred medical 
charges but do not have the resources for payment. We also reimburse 
the clients who have used medical services that demanded payment at the 
time of service. Any request for assistance that exceeds $4,500 is 
reviewed by the Board prior to payment being made. Our policy is to 
return all phone calls the same day that they are received and to 
respond to written letters within five working days.
    I have been a lifelong fan of horseracing, attending the races for 
the first time when I was eight years old. I have been the Executive 
Director of the Fund for 18 years, following a career of five years as 
a full time stable employee, five years as a Thoroughbred race horse 
trainer, and five years as an administrative assistant with the 
Kentucky H.B.P.A. Along the way I earned an ABA in Business 
Administration, have been happily married for 29 years, and raised a 
lovely daughter who worked her way through college while working in the 
racing industry.
    When I was asked to serve as the Executive Director of the Fund in 
1987 the maximum benefit available for any one individual on an annual 
basis was 50% of the medical charges up to $4,000. At the time we did 
not assist in making doctor and dental appointments for the clients. 
All prescriptions had to be purchased by the client, who then sought 
reimbursement.
    Currently our annual maximum benefit is up to $20,000, with up to 
an additional $5,000 for continuing medication in chronic cases. Most 
incurred medical charges under that amount are paid at 100 percent. It 
has been personally fulfilling to witness this organization mature and 
bring to fruition the promise for which the Fund was created.
    For Fiscal Year 2004 the Fund received $2.7 million in uncashed 
tickets. During that year the Fund spent $2.2 million dollars in health 
related benefits, granted $500,000 for the Kentucky Race Track 
Retirement Trust, while spending $522,000 for the Fund's administration 
and an additional $17,000 for the Retirement Plan administration.
    In total, the Fund spent $3.6 million, primarily for health related 
and retirement benefits. In addition, staff was able to negotiate down 
or redirect an additional $587,000 in medical charges that would have 
otherwise been paid out by the Fund and $178,000 that would have been 
the responsibility of our clients for payment.
    I have an exhibit that shows every disbursement for a health 
related benefit made in 2004. Here you will find the approved requests 
of approximately 1,024 individuals who contacted us over 4,400 times 
while submitting approximately10,000 invoices for payment. Of those 
4,400 approved and paid contacts, 3,700 or 83 percent were stable 
employees, the largest working class and those in the greatest need at 
any race track. Staying in compliance with HIPAA requirements, the 
names of all individuals and their Social Security numbers have been 
blacked out.
    In addition to our popular health and retirement programs, we 
participate in several other programs:
    * The Fund provides majority funding for a drug and alcohol 
counseling program, the Thoroughbred Addiction Council of Kentucky or 
otherwise known as TACK. It owns its own sober living facility, the 
Concord House, located within a two minute walk of Churchill Downs. The 
Fund's Board of Directors was the originator of this project and the 
Fund has been the main financial supporter of TACK since 1989.
    * Six years ago we began a project in which we were the sponsors of 
what was to become The Old School Apartments. This was the conversion 
of a 100 year old elementary school into forty apartments for racetrack 
workers and others who are low income and who are at least 55 years of 
age or disabled. The facility also provides office space for the Fund, 
the Thoroughbred Addiction Council of Kentucky, the Kentucky H.B.P.A., 
and our Health Service Center. The site is located one block from 
Churchill Downs. In 2004 the building earned the Ida B. Willis Award, 
Kentucky's most prestigious historical preservation award.
    * Six years ago the Kentucky Race Track Retirement Plan was 
established by the Kentucky General Assembly. It is a defined 
contribution plan which is designed to benefit long term full time 
trainers, assistant trainers, and stable employees in Kentucky's 
Thoroughbred racing industry. As of December 31, 2004 the plan had 894 
active members.
    * The Kentucky Racing Health Service Center, which is a joint 
venture with the University of Louisville Schools of Nursing and 
Medicine and the Kentucky Racing Health and Welfare Fund, Inc. The 
Health Service Center is a clinical setting of approximately 3,000 
square feet where medical services are provided for free, with a 
minimum of paperwork to the client, by medical professionals and 
students. This program averaged 8.8 clients per session during it first 
6 months of operation. It is open three days a week. This is a program 
that we hope to duplicate at other Kentucky racing centers in an effort 
to promote healthier living and control medical related spending.
    * We have an ongoing outreach program in which we provide bi-
lingual newsletters delivered to all workers in each barn three times a 
year. We also publish a bi-lingual guideline summary and resource 
manual booklet that is distributed throughout each stable area and we 
provide bi-lingual signage of upcoming Fund sponsored events in each 
barn. We maintain an up-to-date website.
    The Fund is also working, in conjunction with the chaplain at 
Keeneland, on a curriculum that would serve as an orientation program 
that will be held at the beginning of each race meet in Kentucky to 
acquaint new stable employees and horsemen to the various agencies and 
departments that are available at each particular track and the 
benefits that are available. This will also serve to reacquaint 
ourselves to those who have been on the track for a while. To my 
knowledge this will be the first such program of its kind in the 
country.
    We have ongoing relationships with several organizations and 
associations in Kentucky racing such as:
    * Kentucky Horse Racing Authority--We submit our annual audits to 
the Authority, I attend their monthly meetings and have made several 
presentations to this body concerning the Fund. We have had Authority 
members and representatives attend our meetings, which are always open 
to the public. We are in communication with the Authority's staff to 
verify current Kentucky license information and once a year they 
provide a complete list of the prior year's license information for 
trainers, assistant trainers, and stable employees which is vital in 
administrating the Kentucky Race Track Retirement Plan.
    * Kentucky H.B.P.A.--We have a close working relationship with this 
organization whose initials are well known throughout the entire racing 
community for their assistance to backstretch personnel and trainers. 
When a client reaches his maximum benefit with the Fund or for some 
reason is not eligible for benefits with the Fund his or her request is 
often referred to the H.B.P.A. They also provide assistance that the 
Fund does not provide such as: emergency housing, travel, and food 
assistance. We also work with other H.B.P.A. affiliates in our region 
to co-ordinate benefits for traveling clients who incur large medical 
invoices or have ongoing prescription medication needs when they are 
racing outside of Kentucky.
    * The Kentucky Race Track Chaplaincy--There are four track 
chaplains in Kentucky and between them, the Fund's staff is in 
communication with one or more of them on a near daily basis. They walk 
the stable area everyday; they know the people and see their problems. 
They can often encourage a reluctant or unknowing individual to utilize 
our services with a heartfelt referral. In addition to spreading God's 
Word, they spread information regarding the Health and Welfare Fund.
    * The Kentucky Thoroughbred Association--The KTA is one of two 
horsemen's organizations in Kentucky with whom we work closely and also 
has an interest in seeing that the Health and Welfare Fund benefits the 
backstretch workers for whom it is intended. Representatives of the KTA 
attend our Board meetings, display our brochures and newsletters in 
their field office, and their Executive Director is the vice-chairman 
of the Thoroughbred Addiction Council of Kentucky.
    What follows are four abridged vignettes of how these organizations 
interfaced within the last four weeks:
    * A tornado touched down at Ellis Park at 2:00 a.m. on Sunday, 
November 6, it destroyed 10 barns, part of the grandstand, and the 
joint office we share with the Kentucky H.B.P.A. I learned of the 
disaster about 8:30 a.m. I contacted Mr. Marty Maline, Executive 
Director of the Kentucky H.B.P.A., who was already in route to Ellis 
Park from his home in Northern Kentucky, about a 4 hour drive away. I 
asked him to contact me if there was an immediate need that the Fund 
could fulfill. Fortunately, only one stable employee living at the 
track was injured. The next day he called me from Ellis Park. He was 
standing with a stable employee who had been working at the track. He 
was in need of regular prescription medications that the Fund had been 
purchasing for him for the past several years. Mr. Maline told me that 
the gentleman wanted to come to Louisville and he was arranging 
transportation for him. He had enough medication left to last him for a 
couple of days. While the Red Cross provided food and water, the 
H.B.P.A. provided a hotel room for the gentleman. The next day the 
chaplain from Ellis Park drove him to Churchill Downs, about a two hour 
drive. He came to our office and we authorized payment for his 
prescriptions which were filled at a nearby pharmacy. He has friends in 
Louisville that he is staying with and it is my understanding that he 
is now at Churchill Downs seeking employment. The Fund's representative 
at Ellis Park is now working out of the track kitchen on an as needed 
basis to help the displaced horsemen who are now training at Henderson, 
Kentucky area training centers.
    * On October 25, a fire in a mobile home killed four children in 
Louisville. The parents, two separate families, of all four children 
were stable employees at Churchill Downs. The chaplain at Churchill 
Downs, representatives from the Kentucky H.B.P.A. and the Churchill 
Downs Racing Committee, as well as others from the racing community and 
the Louisville area, worked with the families, medical personnel, the 
coroner's office, and emergency authorities in translating and 
providing whatever assistance was needed. The Health and Welfare Fund 
staff stayed in communication throughout with the chaplain and the 
H.B.P.A. Local horsemen and business owners provided free hotel space 
for the families and then a free apartment with donations of furniture, 
clothing and food. A local funeral home donated its services, as did a 
cemetery for three of the children. The body of the fourth child was 
flown to Mexico for burial. The Fund's staff assisted in making 
international arrangements and guaranteed payment for the remains to be 
flown home and a headstone. We will assist with the funeral charges in 
Mexico. The Kentucky H.B.P.A. arranged for roundtrip airfare for the 
parents.
    * During the last week of October, a former jockey, and now very 
experienced exercise rider, was thrown hard from a horse she was 
exercising at The Thoroughbred Center. She was galloping the horse on 
which she was injured in a ``free lance'' capacity. She was in and of 
consciousness for several days. One concerned horseman contacted me and 
asked if the Fund could provide assistance. Since it was work related 
the Fund could not. One of his concerns was that the trainer of the 
horse did not have worker's compensation and that the trainer had 
shipped his horses out of Kentucky immediately after the accident. I 
told this horseman that I would try to find out if there was insurance. 
With the assistance of the Kentucky Horse Racing Authority and 
Keeneland's chaplain we were able to verify that the trainer did have 
insurance and secured the name of the company. This information was 
passed along to family members. The lady is now out of the hospital and 
in a Lexington rehabilitation center where she is relearning to walk.
    * On October 20, a groom at Keeneland was about to be barred and 
ejected from the track for his inappropriate behavior when abusing 
alcohol. Working with track security, the chaplain, the TACK counselor 
at Keeneland, and the TACK counselor from Louisville, the gentleman 
elected to enter the TACK counseling program, a 13 month program of 
total abstinence. This arrangement was agreeable with track security 
and they sought no further action. The gentleman was allowed to retain 
his Kentucky racing license. The TACK counselor from Louisville 
transported him from Lexington to Louisville where he entered a 
detoxification program for 15 days. He was then enrolled in an 
Intensive Outpatient Program and became a resident at the Concord 
House, our transitional sober living facility. Two days after entering 
the Concord House he secured employment at Churchill Downs while 
continuing IOP classes and AA meetings. This was all done at no cost to 
the client.
    The backstretch of a racetrack is a magical and complex place. It 
is a highly dangerous workplace for both the skilled and the unskilled 
worker while being an active community which provides living quarters 
for many who cannot afford housing or would otherwise be homeless and 
unemployed as they cannot afford to travel with their jobs.
    The redirection of a portion of our funding source to finance a 
part of the jockey's workers compensation insurance costs in Kentucky 
has been discussed lately. I feel that this would be unwise and very 
damaging to the backside employees, who are at the bottom or racing's 
economic scale. Our funding is threatened already.
    For the Fund to be able to perpetuate our mission of helping the 
most economically challenged of Kentucky's Thoroughbred racetrack 
worker with a variety of programs that increase their standard of 
living and quality of life, which ultimately provides an established 
and healthy workforce, the administration of the Fund must stay focused 
on soaring medical costs, diverse demands for our services through 
changing medical technology, modulations in the work force on 
Kentucky's backstretches, changing state and federal laws, and the 
tightening budgets of other charities and public and private agencies.
    We monitor with uncertainty the unpredictable revenue source from 
which we operate; fueled by reports of substantial declines in the 
pari-mutuel wagering in Kentucky, advancements in electronic wagering, 
slots and/or casino gambling in Indiana, and West Virginia; and the 
speculation of alternative forms of gambling in Kentucky, all of which 
may further reduce our source of revenue.
    Thank you for this opportunity.

    Mr. Whitfield. Thank you. Mr. Giovanni, you are recognized 
for 5 minutes and welcome back.

                   TESTIMONY OF JOHN GIOVANNI

    Mr. Giovanni. Thank you, Mr. Chairman. Good afternoon, Mr. 
Chairman, distinguished members of the subcommittee. My name is 
John Giovanni. I am the former National Manager and Secretary 
of the Jockey's Guild and I would like to thank you for 
inviting me here again today to testify on these matters of 
importance to the racing industry.
    For over 40 years, I have dealt with Workers' Compensation 
and racetrack accident insurance for jockeys and exercise 
riders. I have done so both as a jockey subject to the benefits 
of these very programs and also as the administrator of a 
national organization charged with negotiating and providing 
benefits for its members. I am experienced with these programs 
as they relate to the racing industry, not as an expert on 
Workers' Compensation. I was, however, substantially involved 
with crafting the New York Workers' Compensation for jockeys, a 
very successful solution to the problem. And so I shall 
endeavor to render my opinion regarding both the programs 
presently in place and those proposed.
    Four States provide definitive Workers' Compensation plans 
to cover jockeys. The other 34 racing States use a patchwork of 
different insurance policies based upon an on-track accident 
program that was once traditionally negotiated between the 
Guild and the Thoroughbred Racing Associations, the TRA. I am 
not referring to the $1 million supplemental on-track insurance 
that the Guild used to have, but rather the basic on-track 
insurance that the racetracks purchased. To the best of my 
knowledge, the last of these Guild/TRA contracts was signed in 
1999 and expired in 2002. The failure to renew this contract 
left what had been at best an antiquated system in total 
disarray. I do not believe there presently exists a data base 
that can provide a list of tracks that are insured, companies 
with which they are insured, eligibility for coverage or 
exactly what the benefits are provided. This is truly a system 
in need of major repair and overhaul.
    The four States, which provide Workers' Compensation 
Benefits for jockeys each approached the matter in a different 
manner. California's plan is the oldest and most traditional in 
that trainers are considered to be the employers of jockeys and 
responsible for providing the Workers' Compensation Benefits. 
The plan is extremely expensive and if I am not mistaken, in 
recent years it began receiving some form of State subsidy.
    The Maryland plan was enacted by the State Legislature in 
1985 as a program originally designed to cover jockeys while 
riding races and exercising horses during training hours. The 
plan was capitalized by owners, who made contributions to a 
special fund each time they started a horse in a race. Any 
owner from any state, even a part owner, must pay a flat fee to 
the program in order to race in the state. Through the intense 
lobbying efforts of the Maryland Horsemen's Benevolent and 
Protective Association, the plan was later amended to exclude 
coverage for jockeys during training hours. Hence, jockeys are 
covered by owners through their fund while riding in races but 
horse trainers are obliged to pay for individual plans to cover 
injuries to those same jockeys during training hours. In short, 
the plan is inexpensive for horse owners, expensive for horse 
trainers and to my knowledge, there is no mechanism in place to 
guarantee that every trainer provides the required coverage.
    New Jersey has a Workers' Compensation program that 
combines features from the Maryland plan and traditional 
Workers' Compensation. Basically, both owners and trainers must 
contribute to the New Jersey fund. That is, the money in the 
fund comes out of purses unless they can show employee coverage 
for their employees though another business or Workers' 
Compensation plan. The New Jersey plan left open for 
interpretation the eligibility of jockeys under certain other 
compensation plans that cover employees performing in a 
different capacity and they were accepted in lieu of 
contributions to the New Jersey Fund. I do not know if this 
problem has ever been addressed or rectified.
    The Commonwealth of Kentucky is considering a program of 
Workers' Compensation in the racing industry. From the news 
accounts that I have read and from a jockey's perspective, the 
proposal is seriously flawed. Traditionally, employers pay for 
the insurance and employees accept the benefits as the 
exclusive remedy for an occupational injury. The Kentucky 
proposal would have jockeys, horse owners and track operators 
share the expense. Track operators would contribute a set 
amount, relatively close to what they now pay for an on-track 
accident policy. Horse owners would contribute $20 per starter 
and jockeys would pay 10 percent of what they earn from a 
winning ride.
    By assessing only the winning rider, the plan penalizes 
excellence and could lead to jockeys considering a move to 
other States where they are more fairly compensated for their 
work. As an example, the Kentucky Derby carries a $2 million 
purse with 60 percent paid to the owner of the winning horse. 
Ten percent of that sum is paid to the winning jockey. Under 
this proposed scheme, the winning owner would pay $20 to the 
insurance fund and the winning jockey would pay $12,000. This 
huge disparity plays out through the entire purse structure. 
Equally unfair to the jockeys is being force to pay a premium 
for their own coverage and then forfeiting the right to 
litigation over an injury that may well be the responsibility 
of an owner, trainer or racetrack operator. There are several 
other problems inherent in this plan and in my humble opinion, 
it needs more study.
    The New York plan was an effort during my tenure leading 
the Jockey's Guild to provide Workers' Compensation coverage to 
all licensed jockeys, apprentice jockeys and exercise riders in 
the State of New York. The object was to provide benefits at 
the lowest cost, close all the loopholes and eliminate 
litigation. And this was accomplished by legislation providing 
for a fund that for insurance purposes is the employer of all 
licensed jockeys, apprentice jockeys and exercise riders, with 
all licensed owners and trainers contributing to the fund. 
Anyone who rides, no matter who they are actually employed by, 
are covered under this plan, even exercise riders who are 
freelance and considered independent contractors. In lieu of 
the hundreds of individual policies, the fund purchases one 
policy at considerable savings and by virtue of the occupations 
of those covered under the plan, it isolates the greatest risk. 
Certainly, trainers and stable employees receive injuries. It 
is inherent in the business. But when an ambulance leaves the 
racetrack, far more often than not the occupant is a rider.
    The program in New York is called the New York Jockey 
Injury Compensation Fund and I am very proud of my work in 
initiating the plan. The ultimate goal was to see this plan 
become a flagship for the entire industry covering not just 
riders but all backstretch employees. Several years after its 
adoption in New York, Dan Fick, who are the time was Executive 
Director of the American Quarter Horse Association, and I 
brought a proposed Federal plan based on the New York model to 
Washington. However, we couldn't generate enough interest to 
see it through to fruition.
    It was and still is my belief that by amending the 
Longshoremen and Harbor Workers Act, a national Workers' 
Compensation plan can be put in place to best serve the needs 
of the racing industry. I know it can be done at a reasonable 
expense. Regional offices already exist around the country to 
handle claims and the licensing data bases of Racing 
Commissioners International and the North American Pari-Mutuel 
Regulators Association would provide excellent weapons to deter 
fraud and abuse.
    In closing, Mr. Chairman, I respectfully recommend that 
this subcommittee review the proposed national plan. It may be 
of assistance to this committee in finding a viable solution to 
the varied and woefully inadequate circumstances that exist 
today.
    Thank you for your time and your patience. If you have any 
questions, I will be more than happy to answer them.
    [The prepared statement of John Giovanni follows:]

   Prepared Statement of John Giovanni, former National Manager and 
                    Secretary, Jockeys' Guild, Inc.

    Good afternoon Mr. Chairman and distinguished members of the 
Subcommittee. My name is John Giovanni, I am the former National 
Manager and Secretary of the Jockeys' Guild, Inc. And I would like to 
thank you for inviting me here again today to testify on these matters 
of great importance to the racing industry.
    For over 40 years I have dealt with workers' compensation and race 
track accident insurance for jockeys and exercise riders. I have done 
so both as a jockey subject to the benefits of these varied programs, 
and also as the administrator of a national organization charged with 
negotiating and providing benefits for its members. I am experienced 
with these programs as they relate to the racing industry, not as an 
expert on workers' compensation. I was, however, substantially involved 
with the crafting of New York's workers' compensation for jockeys--a 
very successful solution to the problem--and so, I shall endeavor to 
render my opinion regarding both the programs presently in place and 
those being proposed.
    Four states provide definitive workers' compensation plans to cover 
jockeys, and the other thirty-four racing states use a patchwork of 
insurance policies based upon an ontrack accident program that was once 
traditionally negotiated between the Guild and the Thoroughbred Racing 
Associations (TRA). I am not referring to the $1 million supplemental 
on-track insurance that the Guild used to have, but rather the basic 
on-track insurance that the race tracks purchased. To the best of my 
knowledge, the last of these Guild/TRA contracts was signed in 1999 and 
expired in 2002. The failure to renew this contract left what had been 
at best an antiquated system in total disarray. I do not believe that 
presently there exists a database that can provide a list of tracks 
that are insured, companies with which they are insured, eligibility 
for coverage, or exactly what benefits are provided. This is truly a 
system in need of major repair and overhaul.
    The four states which provide workers' compensation benefits for 
jockeys each approach the matter in a different manner. California's 
plan is the oldest and most traditional, in that trainers are 
considered to be the employers of jockeys and are responsible for 
providing workers' compensation benefits. The plan is extremely 
expensive, and my understanding is that in recent years it began 
receiving some form of state subsidy.
    The Maryland plan was enacted by the state legislature in 1985, as 
a program originally designed to cover jockeys while riding races and 
exercising horses during training hours. The plan was capitalized by 
horse owners who made contributions to a special fund each time they 
started a horse in a race. Any owner from any state--even a part 
owner--must pay a flat fee to the program in order to race in the 
state. Through the intense lobbying efforts of the Maryland Horsemen's 
Benevolent and Protective Association the plan was later amended to 
exclude coverage for jockeys during training hours. Hence, jockeys are 
covered by horse owners through their fund while riding in races, but 
horse trainers are obliged to pay for individual plans to cover 
injuries to those same jockeys during training hours. In short, the 
plan is inexpensive for horse owners, expensive for horse trainers, and 
to my knowledge there is no mechanism in place to guarantee that every 
trainer provides the required coverage.
    New Jersey has a workers' compensation program that combines 
features from the Maryland plan and traditional workers' compensation. 
Basically, both owners and trainers must contribute to a New Jersey 
fund--that is, the money in the fund comes out of purses--unless they 
can show employee coverage through another business or workers' 
compensation plan. The New Jersey plan left open for interpretation the 
eligibility of jockeys under certain other compensation plans that 
cover employees performing in a different capacity and that were 
accepted in lieu of contributions to the New Jersey Fund. I do not know 
if this problem has since been addressed and rectified.
    The Commonwealth of Kentucky is considering a program of workers' 
compensation in the racing industry. From the news accounts I have 
read, from a jockey's perspective the proposal is seriously flawed. 
Traditionally, employers pay for the insurance and employees accept the 
benefits as the exclusive remedy for an occupational injury. The 
Kentucky proposal would have jockeys, horse owners, and track operators 
share the expense. Track operators would contribute a set amount 
(relatively close to what they now pay for an ontrack accident policy), 
horse owners would contribute $20.00 per starter, and jockeys would pay 
10% of what they earn from a winning ride.
    By assessing only the winning rider, the plan penalizes excellence 
and could lead to jockeys considering a move to other states where they 
are more fairly compensated for their work. As an example, the Kentucky 
Derby carries a $2,000,000 purse with 60% paid to the owner of the 
winning horse. Ten per cent of that sum is paid to the winning jockey. 
Under the proposed scheme the winning owner would pay $20.00 to the 
insurance fund and the winning jockey would pay $12,000.00. This huge 
disparity plays out through the entire purse structure. Equally unfair 
to the jockeys is being forced to pay a premium for their own coverage 
and then forfeiting the right to litigation over an injury that may 
well be the responsibility of an owner, trainer, or track operator. 
There are several other problems inherent in this plan, and in my 
humble opinion it needs more study.
    The New York plan was an effort during my tenure leading the 
Jockeys' Guild to provide workers' compensation coverage to all 
licensed jockeys, apprentice jockeys, and exercise riders in the state 
of New York. The object was to provide benefits at the lowest cost, 
close all the loopholes, and eliminate litigation. This was 
accomplished by legislation providing for a fund that, for insurance 
purposes, is the employer of all licensed jockeys, apprentice jockeys, 
and exercise riders. All licensed owners and trainers contribute to the 
fund and the Fund is deemed, for insurance purposes, the employer of 
all licensed jockeys, apprentice jockeys and exercise riders. Anyone 
who rides, no matter who they are actually employed by, is covered 
under this plan--even exercise riders who are freelance and considered 
independent contractors. In lieu of hundreds of individual policies, 
the fund purchases one policy at considerable savings, and by virtue of 
the occupations of those covered under the plan it isolates the 
greatest risk. Certainly, trainers and stable employees receive 
injuries--it's inherent in the business; but when an ambulance leaves 
the race track, far more often than not, the occupant is a rider.
    The program in New York is called ``The New York Jockey Injury 
Compensation Fund'' and I am very proud of my work in initiating the 
plan. The ultimate goal was to see this plan become a flagship for the 
entire industry covering not just riders, but all backstretch 
employees. Several years after its adoption in New York, Dan Fick, who 
at the time was Executive Director of the American Quarter Horse 
Association, and I brought a proposed federal plan based on the New 
York model to Washington. However we couldn't generate enough interest 
to see it through to fruition.
    It was and still is my belief that by amending the Longshoremen and 
Harbor Workers Act a national workers' compensation plan can be put in 
place to best serve the needs of the racing industry. I know it can be 
done at reasonable expense. Regional offices already exist around the 
country to handle claims, and the licensing databases of Racing 
Commissioners International and the North American Parimutuel 
Regulators Association would provide an excellent deterrent to fraud 
and abuse.
    In closing, Mr. Chairman, I would respectfully recommend that this 
Subcommittee review the proposed national plan. It may be of assistance 
to this committee in finding a viable solution to the varied and 
woefully inadequate circumstances that exist today.
    Thank you for your time and your patience. If you have any 
questions I will be happy to answer them.

    Mr. Whitfield. Thank you, Mr. Giovanni. And at this time I 
recognize Mr. Violette for his 5-minute opening statement.

              TESTIMONY OF RICHARD A. VIOLETTE, JR.

    Mr. Violette. Thank you. Thank you, Mr. Chairman, for 
asking me to be here today. I am Richard Violette, Jr. I am 
first and foremost a thoroughbred racehorse trainer and have 
been training in New York for the last 20 years. I am also 
Chairman of the New York Jockey Injury Compensation Fund and 
have been so for the last 10 years.
    Prior to 1990, the Fund did not exist. A lot of the 
situations that have been discussed today, the disputes between 
whether riders were independent contractors or employees, the 
dispute on who was actually the employee, whether it was an 
owner or trainer. Even though New York was already a Workers' 
Compensation State for the riders, these disputes continued. 
Lots of time and money was wasted at hearings and litigation 
and during all this time, riders and their families went 
without benefits while the disputes were ongoing.
    In 1990, legislation was passed creating the New York 
Jockey Worker Compensation Fund. It took a couple of years to 
get off the ground. The Fund it a seven-man Board. Six of the 
members are appointed by the two horsemen's groups within the 
State and the seventh member is elected by the local New York 
Jockey's Colony.
    For Workers' Compensation purposes only, the Fund is 
considered the employer of all the jockeys and apprentice 
jockeys and the exercise riders. The Fund yearly bids out the 
premium. For the last 8 years we have actually procured the 
insurance from the New York State Insurance Fund. They are the 
biggest provider for Workers' Compensation and disability 
insurance in New York State. We also are governed and have to 
supply assessments and regulations to the State Racing and 
Waging Board on a yearly basis.
    The owners and trainers are assessed on a three-tier 
system. The owners have a portion of the purses earned every 
race. This year it was .7 percent of the purses earned. The 
trainers are assessed on a per-stall fee for stalls allocated 
throughout the year and there is an up-front premium and that 
is paid, which is $660 and it will be for next year, as well. 
The cost of insurance has increased over the last 10 years. The 
up-front premium used to be $150 but like everything else, 
Workers' Comp certainly has kind of gone through the roof.
    Here to report that it has been working, it seems to be a 
cost-saving mechanism for both owners and trainers. Owners do 
not have to acquire their own Workers' Compensation policy, as 
they did before 1990. They are automatically in the Fund. The 
Workers' Compensation Board assesses a value to one entity and 
bases their Workers' Comp amount on the one entity, which is 
the Fund. And I have to say we are pretty proud of the work we 
have done. I have been blessed to be surrounded by a number of 
Board members that are incredibly talented and kind-hearted an 
motivated. Unfortunately, we lost one this week. Gordon Wooten 
passed away. He was on-board since day one for the last 12 
years. He was a breeder of Silver Charm who won the Kentucky 
Derby.
    But in a nutshell, the question certainly is out there from 
the workers whether jockeys are independent contractors or 
employees. But pragmatically and prudently to try to protect a 
very valuable group within out industry, we basically stepped 
forward and we did the right think, I believe. And I will be 
available for any questions. Thank you.
    [The prepared statement of Richard A. Violette, Jr. 
follows:]

  Prepared Statement of Richard A. Violette, Jr., Chairman, New York 
                 Jockey Injury Compensation Fund, Inc.

                              INTRODUCTION

    Thank you Chairman Whitfield and the members of the House 
Subcommittee on Oversights and Investigations for your invitation to 
appear before you today and to discuss how we in the New York racing 
industry address on-track workers' compensation issues for jockeys, 
apprentice jockeys and exercise riders.
    My name is Richard A. Violette, Jr. I am a professional 
thoroughbred race horse trainer and have been one for more than 20 
years. I began my career as a trainer in New England at Suffolk Downs 
and Rockingham Park. I am currently based at Aqueduct Race Track in 
Queens, New York. My current stable consists of approximately 60 
horses.
    I am Chairman of the Board of Directors of the New York Jockey 
Injury Compensation Fund, Inc. I have had the pleasure to serve as the 
Fund's Chairman and as a member of the Fund's Board of Directors for 
more than 10 years.
    In addition to being the Fund's Chairman, I have also been 
President of the National Thoroughbred Horsemen's Association since 
2000 and have been a member of the Board of Directors of the New York 
Thoroughbred Horsemen's Association since 1990. I serve, as do all of 
the members of these Boards, on a pro bono basis. I was one of the 
founders in 2000 of the New York Groom Education Program, which 
educates backstretch workers on horse grooming techniques and English 
as a second language.
    I am pleased to report to you that the New York Jockey Injury 
Compensation Fund has been successful in its mission to obtain workers' 
compensation coverage to assure indemnity and medical payments to 
injured jockeys, apprentice jockeys and exercise riders in New York and 
be cost effective in the process.

BACKGROUND AND PURPOSE OF THE NEW YORK JOCKEY INJURY COMPENSATION FUND, 
                                  INC.

    Prior to the establishment of the Fund, jockeys, apprentice jockeys 
and exercise riders were often challenged in their claims for workers' 
compensation benefits as being independent contractors and thus, were 
not entitled to benefits.
    The fact is that jockeys are a unique type of employee. It is not 
unusual for them to be employed by several different employers (owners 
or trainers) in the course of a day at the race track and in fact, 
within a single hour. When pressed for coverage after an accident, it 
would sometimes be argued that the trainer was the jockey's employer. 
Such cases were pending before the New York Workers' Compensation Board 
prior to the establishment of the Fund. This situation created special 
and unusual problems from those encountered by an average employee 
regarding identification of coverage and employment.
    Similar problems arose with regard to the identification of which 
employer is responsible for an injury because of the unusual and 
distinctive jockey work environment. It is possible that a jockey may 
have an injured back after riding for an hour, and it may be impossible 
to determine which ride caused the injury even before getting to the 
question whether the owner or trainer was the jockey's employer.
    The result of such disputes was that the jockey and his family were 
without means of income when there were disputes to determine which 
employer was responsible or when the independent contactor defense was 
raised. These problems resulted in wasted time and money by the 
Workers' Compensation Board in hearing after hearing to evaluate and 
determine cases and resulted in delays of benefits intended to be paid 
under the New York Workers' Compensation Law.
    Chapter 346 of the Laws of 1990 of New York was enacted and, in 
addition to establishing the Fund, clarified the status of jockeys, 
apprentice jockeys and exercise riders as employees under the Workers' 
Compensation Law and established the Fund to procure workers' 
compensation coverage for them. Chapter 386 embraced the concept of one 
employer (the Fund) created by statute to provide coverage for a 
particular group of workers, in this case, the jockeys, apprentice 
jockeys and exercise riders who are injured on specified race tracks in 
New York State. Employers are also the owners and trainers who pay 
their assessed fee to the Fund each year.
    By statute, the Fund was created as a not-for-profit corporation. 
The Fund purchases coverage at a reduced rate, protecting owners and 
trainers and benefiting all jockeys, apprentice jockeys and exercise 
riders licensed for thoroughbred and quarterhorse racing on specified 
tracks in New York. It permits the Workers' Compensation Board to make 
an award against a single entity regardless of which owner or trainer 
was responsible and never to have resort to the New York Uninsured 
Employers Fund. With the New York Jockey Injury Compensation Fund, 
coverage will always be in place. It is not, however, authorized to 
obtain workers' compensation coverage for stable employees and other 
backstretch workers at the race tracks.
    Workers' compensation coverage obtained by the Fund is written by 
licensed insurance carriers and is issued on a blanket basis. The Fund 
currently obtains its worker's compensation coverage through the New 
York State Insurance Fund, the largest workers' compensation and 
disability benefits carrier in the state. The Fund does not issue 
workers' compensation coverage nor does it assume any risks.
    Workers' compensation premiums are paid from annual assessments of 
all licensed owners and trainers racing in New York under Section 213 
of the New York Racing, Pari-Mutuel Wagering and Breeding Law. Each 
year, the Fund determines the total funding necessary to acquire 
workers' compensation coverage and advises the New York State Racing 
and Wagering Board of the assessment to be made for the ensuing year.
    To assure for the equitable distribution of payments from owners 
and trainers, the Fund establishes payment schedules that account for 
certain factors including, where appropriate and applicable, (i) the 
geographic location of a racing association or corporation at which the 
owner or trainer participates, (ii) the duration of such participation, 
(iii) the amount of purse earnings, (iv) the number of horses involved, 
and (v) such other factors as may be determined by the Fund to be fair, 
equitable and in the best interest of the racing industry. In addition, 
by law, the amount is to be deducted from an owner's share of purses 
may not exceed 1% per year.
    The New York State Racing and Wagering Board requires any racing 
association, including non-profit and quarterhorse racing associations, 
to have each trainer utilizing the facilities of the association and 
each owner racing a horse there, place on deposit with the horsemen's 
bookkeeper of such association the amount to be established and paid in 
the manner determined by the Fund.
    The Fund is governed by a seven member Board, six of whom are 
appointed by horsemen's organizations. The six board members who are 
appointed by the horsemen's organizations serve two year staggered 
terms. The effect of this structure is that no more than two members 
are subject to reappointment in any two year period, assuring a 
continuity of experienced representation on the Fund's Board. As a 
result of recently enacted New York legislation, the seventh Board 
member is elected every two years by a vote of all licensed New York 
jockeys and apprentice jockeys. Some Board members have accepted 
reappointments to their positions for two year terms on multiple 
occasions.
    The Board is responsible for the transaction of all Fund business 
and the exercise of its powers and functions. The vote of four Board 
members is necessary for the transaction of any Fund business. Board 
members serve without compensation and are reimbursed for their 
expenses incurred in the performance of their official duties.
    The Fund is subject to the regulation and examination of the State 
Racing and Wagering Board and is required to submit to the State Racing 
and Wagering Board annually a financial report and a report of its 
activities during the preceding year.

                               CONCLUSION

    Since the Fund began its operations in 1991, it has made great 
strides in assuring the availability of workers' compensation coverage, 
thereby allowing injured jockeys, apprentice jockeys and exercise 
riders to receive indemnity and medical payments without unnecessary 
delay.
    I am very proud of what we at the New York Jockey Injury 
Compensation Fund have accomplished. I have been blessed to serve with 
members of our Board that are incredibly intelligent, kind-hearted and 
motivated. Without them, none of our accomplishments would have been 
possible. On this note, this week Gordon Wooten, a long time Board 
member, passed away. His input and insight will be dearly missed and 
impossible to be replaced.
    The Fund looks forward to continuing its mission working with the 
New York racing industry to obtain workers' compensation for jockeys, 
apprentice jockeys and exercise riders.
    I would be pleased to answer any questions you may have.
    Thank you.

    Mr. Whitfield. Okay. Thank you, Mr. Violette. Mr. Daney, 
you are recognized for 5 minutes.

                  TESTIMONY OF BERNARD J. DANEY

    Mr. Daney. Thank you. My name is Bernard Daney. I am 
Chairman of the Delaware Thoroughbred Racing Commission. I am 
also Chairman Elect of the Association of Racing Commissioners 
International and Board Member of the National Racing Compact. 
In 1998, the State of Delaware, in conjunction with the Jockey 
Guild, passed a law, which set $175,000 from the purse account 
and $175,00 from the Delaware Racing Association, which is the 
racetrack, in a fund to be administered by the Jockey Guild. 
And the funds were to be deposited annually in a trust fund in 
Lexington, Kentucky. The Thoroughbred Racing Commission signed 
an agreement with the Guild on October 1, 1998, outlining 16 
points of agreement that we would operate with the Guild and 
quickly it came to fruition because we had in Delaware an 
injured jockey, Julie Snellings, who was paralyzed. She was 
drawing $250 a month from the Jockey Guild. We were able to 
increase that to about $1,000 a month. About a year later we 
increased it to $2,000 a month. But there was a sad story. 
Because of her injuries, she passed away at a very young age. 
What the program did, we were able to help a young lady when 
she was in need.
    The good relationship with the Guild continued. The 
attorney in New York, Mr. Kennedy, came to Delaware on many 
occasions to explain the Fund, the operation of the program 
with the Guild and we had no problems operating with Mr. 
Kennedy.
    Sometime during 2001, the Guild moved their office to 
California. The Commission lost all contact with responsible 
employees in the Guild office. We made numerous requests for 
data concerning coverage, et cetera. We got some replies but 
many, many incomplete answers.
    Because of the complete frustration with the Guild, the 
Delaware jockeys presented a petition to the Commission to 
remove the funds from the Guild, ``because they have not 
managed the financial affairs of the Guild appropriately.'' 
That was May 23, 2003.
    As a result of that petition, we went to the Legislature 
and had them change the law. We took the funds out of the hands 
of the Guild and we set up a Jockey Health and Welfare Board. 
It consists of one of the Commissioners, a representative from 
the Horsemen's Association, a representative from Delaware 
Park, two jockeys and myself as an ex-officio member. And 
because of doing this, we were able to do a little better with 
the operation of the fund. The funds were taken out of the bank 
in Kentucky and moved under the control of the Department of 
Finance in Delaware.
    We had no meetings with the Guild with the jockeys to 
explain the program and programs of the Guild. The jockeys just 
kind of floundered. A lot of them would come to us asking us 
questions. We just had no answers for them because we couldn't 
extract it out of the Guild.
    At our Commission meeting on October 19, Mr. Fiss informed 
us that all health plans would be suspended on October 21, 2005 
and they were not going to accept any new jockeys from 
Delaware. We had at least 15 jockeys who met our requirements 
in 2005 and have not been insured by the Guild under our plan. 
We do not know if they have any coverage to this day. It is 
very disturbing to us and the people who are putting these 
funds up. Mr. Fiss even said at that time, the Guild is kind of 
running of money. Delaware is trying to help the Guild get some 
extra coverage and help to our jockeys and we get little or no 
cooperation from the Guild.
    Remember, we have many jockeys who have high earnings. They 
can buy their own insurance. They have enough money to do it. 
They are in the top one-third. Look at the poor jockeys who are 
in the middle income and the lower income. They need help from 
us and they need help from the Guild. We believe it is time for 
us to help the middle and the low-income jockeys. We hard how 
25 percent of the fee goes to the agent, 10 percent of the fee 
goes to the valet. They have families to raise and some of them 
are not making enough money, not to buy food, let alone health 
insurance.
    Sorry if I get a little bit excited about helping the 
jockeys. I can tell you a true story. About 25 years ago my 
wife and I were in Pamlico. We watched a jockey fall and our 
horse went down. He laid paralyzed on the ground and he has 
been paralyzed to this day. He walks with two crutches and 
luckily he is a steward at one of the tracks along the East 
Coast so I have a personal responsibility to these young men. 
Sorry.
    Mr. Whitfield. Mr. Daney, thank you very much. And at this 
time, we recognize Mr. Shapiro.
    Mr. Daney. I can continue, if you don't mind?
    Mr. Whitfield. Oh, okay. You are not through. Okay. Excuse 
me.
    Mr. Daney. Delaware, California, Maryland and other States 
supply funds to help the jockeys. Delaware Park has a million-
dollar policy to cover jockey on-track injuries. All States 
should have a supplement, as Delaware does to help support 
medical, dental and vision policies of the Guild members. I 
believe each track should follow the lead of Delaware Park and 
provide the million-dollar policy for on-track.
    I believe the industry should supply funds for the welfare 
of the jockeys, similar to the millions that they are supplying 
to the NTRA. Some of these funds should go for the safety and 
welfare of the jockeys.
    And last, I believe that the leading jockeys in this 
country must stand up and take the leadership of the problems 
of the middle and lower income jockeys. They must take the 
leadership and take back the Guild. And I guess they have taken 
my advice and have taken back the Guild. The Guild should be 
run by people with experience and knowledge of the problems of 
the jockeys. The leading jockeys must do this. Thank you.
    [The prepared statement of Bernard J. Daney follows:]

Prepared Statement of Bernard J. Daney, Chairman, Delaware Thoroughbred 
                           Racing Commission

                  RELATIONSHIP WITH THE JOCKEYS GUILD

    1.) Statute became law June 1998. $175,000 from purse account of 
the Delaware Horseman's Association and $175,000 from the Delaware 
Racing Association (race track). Fund to be administered by the Jockeys 
Guild (the Guild) and funds were deposited annually in trust account in 
Lexington, Kentucky bank.
    2.) The Delaware Thoroughbred Racing Commission (the Commission) 
signed an agreement with the Guild October 1, 1998, outlining 16 points 
of agreement.
    3.) Good relationship with the Guild and their New York attorney, 
Mr. Kennedy. Meeting held with the jockeys to explain the program at 
Delaware Park by attorney, etc.
    4.) Sometime during 2001 the Guild moved their office to 
California. The Commission lost all contact with any responsible 
employees in the Guild office. We made numerous requests for data 
concerning coverages, etc. We got some replies but many incomplete 
replies.
    5.) Because of complete frustration with the Guild, Delaware 
jockey's presented a petition to our Commission to remove funds from 
the Guild ``because they have not managed the financial affairs of the 
Guild appropriately.'' (May 23, 2003)
    6.) We then went to the Delaware Legislature and requested and 
received a new statute setting up a Delaware Jockeys Health and Welfare 
Benefit Fund. The Jockeys Health and Welfare Benefit Fund shall be 
administered by a Board, known as the Jockeys Health and Welfare 
Benefit Board, comprised of 1 member of the Delaware Thoroughbred 
Racing Commission, 1 member from the licensed agent under Chapter 101 
of Title 3 or Chapter 4 of Title 28, 1 member of the Delaware 
Horsemen's Association, and 1 representative from the organization that 
represents the majority of the jockeys who are licensed and ride 
regularly in Delaware, and 2 jockeys who are licensed and ride 
regularly in Delaware. The Chairman of the Commission shall serve as an 
ex officio member and vote on matters in the event of a tie vote on any 
issue. Members shall be appointed by the Commission and shall serve 2-
year terms. In addition to providing funding for jockey health and 
other welfare benefits, the fund may expend reasonable expenses for 
administrative purposes. Funds were to be transferred from the contract 
of the Guild to Department of Finance in Dover, DE.
    7.) No meetings by Guild with jockeys to explain our program or 
other programs of the Guild.
    8.) At our Commission meeting of October 19, 2005, Mr. Albert Fiss 
informed us that all health plans would be suspended on October 21, 
2005 and they would not accept any new Delaware jockey's. We had at 
least 15 jockeys who met our requirement in 2005 that have not been 
insured by the Guild under our plan. We do not know if they have any 
coverage. It is very disturbing.
    9.) Delaware is trying to help the Guild to get some extra coverage 
and help to our jockey's--we get little or no cooperation from the 
Guild.10.) Remember, we have many jockeys who have high earnings; they 
can buy the best coverage in the world. We also have ``middle income'' 
jockeys and have ``low income'' jockeys who need help with insurance 
costs. I believe it is time for us to help the middle and low income 
jockeys.

                               WHAT TO DO

    1.) Delaware, California, Maryland and other states supply funds to 
help the jockeys. Delaware Park has a policy of $1,000,000 to cover 
each jockey for on-track racing injuries.
    2.) All states should have a jockey supplement fund (as Delaware) 
to help support the medical, dental, vision policies of the Guild 
members.
    3.) I believe each track should follow the lead of Delaware Park 
and provide the $1,000,000 policy for on-track racing injuries.
    4.) I believe the industry should supply funds for the welfare of 
the jockeys similar to the millions that they supply to NTRA. Some of 
these funds should go for the safety and welfare of the jockeys.

                                  LAST

    1.) I believe the leading jockeys in this country must stand up and 
take some leadership in the problem of the ``middle income'' and ``low 
income'' jockeys. They must take the leadership and take back the 
Jockey Guild from outside interest and have the Guild run by people 
with experience and knowledge of this problem of the jockey's.
                                  or,
    2.) The leading jockeys must form a new jockeys association and 
have all jockeys resign and abandon the Guild as it is now constituted.

    Mr. Whitfield. Absolutely. And you should have told them to 
do it earlier than you did.
    Mr. Daney. I am glad they listened to me.
    Mr. Whitfield. Mr. Shapiro.

                 TESTIMONY OF RICHARD B. SHAPIRO

    Mr. Shapiro. Mr. Chairman and members of the committee, 
thank you in inviting me to testify before you. Fortunately, 
this week the members of the Jockey's Guild voted to terminate 
Dr. Gertmenien, Albert Fiss and Matrix Corp. For this reason, I 
will not delve into the details with the problems the 
California Horse Racing Board has had. I do however, sincerely 
hope that those people are held accountable for their actions 
in every sense of the law.
    I would like to assure all of our jockeys that California 
stands ready to assist the Guild and its members to return to 
sound financial footing and maintain the much needed health 
insurance they deserve. I have already spoken to members of the 
Guild and offered my assistance and the California assistance 
that we can lend to them during this difficult time of 
transition. I hope that all tracks and associations will step 
up and help the Guild rebuild itself.
    California provides approximately $1 million a year for 
jockeys health and welfare insurance. These monies are derived 
from uncashed refunds of pari-mutuel tickets. This program 
began in 1997 and to date, has resulted in over $4.4 million 
being given to the Jockey's Guild through 2004. As we speak, we 
have approximately $1.5 million available to continue to pay 
toward jockey health insurance.
    We have also obtained initial quotes for alternative health 
insurance from Blue Cross/Blue Shield and we will look forward 
to working with the new managers of the Guild to determine the 
best possible coverage for our riders.
    California backside workers, including the jockeys, are 
also covered by Workman's Compensation Insurance. To offset the 
high cost of this insurance, the California Horsemen's Safety 
Alliance was formed and incorporated into California racing 
law. Since 2002, tracks and horsemen have contributed 
approximately $22 million toward Workman's Comp insurance.
    If Gary Birzer's accident had occurred in California, he 
would have been entitled to unlimited medical care, unlimited 
disability payments and unlimited rehabilitation. Further, had 
he signed a waiver of the liability under the TRA program 
funded by California tracks, he would have received additional 
catastrophic injury insurance. In my opinion, it is 
unacceptable for any track in any State to provide any less 
than what California provides to our valued jockey partners.
    In addition to the California Health and Welfare Plan and 
Workman's Compensation Insurance, California also provides the 
following to backside workers and jockeys: Medical and dental 
clinics through the California Thoroughbred Horsemen's 
Foundation. California Thoroughbred Trainers administer a 
pension program for backside workers and trainers with net 
assets, with current assets, of $33 million. The Disabled 
Jockey Endowment and Don McBeth Jockey Fund receive charitable 
race day proceeds from all thoroughbred racing associations. 
Ultimately $2 million will be set aside for disabled riders. 
Recreational programs and facilities are provided at each track 
by the Gregson Foundation and the California Thoroughbred 
Trainers. Drug and alcohol counseling is provided by the 
Winners Foundation and religious services are provided by the 
Racetrack Chaplaincy of America.
    The California Horse Racing Board, in conjunction with the 
Thoroughbred Owners of California, CTT and all of our 
thoroughbred tracks, have initiated a comprehensive health 
study to determine optimum health conditions for jockeys. This 
comprehensive study is intended to lead us to a better approach 
to establish safe riding weights for riders based on scientific 
principles, such as body composition, height, gender, age and 
other variables that the current approach does not take into 
account. We cannot continue to accept the notion that one size 
fits all. The industry needs to ensure that weight management 
is done safely and in a manner that maximizes athletic 
performance. It is critical, however, that all tracks adopt a 
uniform scale of weights. It is my hope that the entire racing 
community, including the jockeys, will participate with us in 
this national study.
    Racing throughout the country is facing a transformation. 
Many jurisdictions, including California, are facing very 
difficult times. With the advent of casino-style gaming at 
racetracks in many jurisdictions those without the alternative 
gaming are fighting for their economic lives. In California 
alone, two of our five major tracks have been sold and are 
likely to cease operating as racetracks. The result of this 
disadvantage has been that our purses cannot keep pace with 
gaming States and consequently, we are losing horses and 
horsemen to other States throughout the country. Our existence 
is in jeopardy.
    Racing needs help to regulate issues that reach farther 
beyond one state's borders. With the advent of simulcasting, 
advance deposit wagering and the Internet, we face a host of 
problems that need to be addressed. Illegal offshore wagering 
today is estimated at hundreds of millions of dollars. This 
money is not reaching our betting pools and therefore doesn't 
benefit the horsemen, the tracks or the States where racing is 
being conducted. We need your help to stop this illegal 
activity. If we can bring that money back to our racing pools, 
there will be more money available to pay for new track 
surfaces, better insurance programs and better health and 
welfare plans.
    I know that some people in horseracing will not like to 
hear me advocate any Federal oversight but I look to you to not 
constrain us but to help an industry in transition. I ask that 
you help preserve the billions of dollars invested by tracks, 
horse owners, trainers and all participants in a sport they 
love. I ask that you help us save the tens of thousands of jobs 
created by this industry. We are at the beginning of a new 
century, yet we are a sport of tradition, pageantry and a rich 
history. We are a sport made up of wonderful people from all 
walks of life. Please help us find a way to insure and employ 
all our participants profitably. Help us have an incentive to 
not tear down tracks but build tracks. Help us root out those 
that try and cheat us and take our product beyond our borders. 
Help us establish common limitations and guidelines on 
medications to protect our horses.
    Racing needs your support to adapt to changing times so it 
can be healthy for centuries to come. Again, thank you for all 
the work that you are doing.
    [The prepared statement of Richard B. Shapiro follows:]

  Prepared Statement of Richard B. Shapiro, Commissioner, California 
                           Horse Racing Board

    Mr. Chairman and Members of the Committee, thank you for inviting 
me to testify before you on ``Thoroughbred Horse Racing Jockeys and 
Workers: Examining On-Track Injury Insurance and Other Health and 
Welfare Issues.''
    My testimony is intended to cover four specific topics. They are;

1. Issues and Challenges with the Jockeys' Guild
2. California's Efforts to Provide Health and Welfare Coverage for 
        Jockeys and Backstretch Workers
3. Track Safety
4. Competitive Factors and Federal Oversight

                             JOCKEYS' GUILD

    In October 2004 I became a Commissioner on the California Horse 
Racing Board. It was about that time that I read of the horrible 
situation where Gary Birzer, a jockey I had met one time at Mountaineer 
Park had been rendered paralyzed in a racing incident. I recall when I 
met Gary I was very impressed with his work ethic--working horses in 
the mornings, racing in the evening--always with a smile on his face.
    When I heard that unlike California there was no adequate accident 
insurance in place to cover his expenses, I was outraged. How could 
this possibly be? I placed on our monthly agenda an item for discussion 
to insure something like this could never occur in California. I 
specifically asked that Dr. Gertmenian appear to address our concerns. 
He didn't show up. Mr. Albert Fiss did attend the meeting, but when 
asked what steps the Guild was taking to make certain that all of our 
jockeys were insured, I was given evasive and non-responsive answers.
    Things only got worse from there. You see, California does provide 
Workman's Compensation coverage for its backside workers, including the 
riders, and further, California provides over a million dollars a year 
to the California Health and Welfare Plan, specifically for jockeys 
that ride at least 50 races in California and 100 races in a calendar 
year (Exh.1). But when I asked Mr. Fiss if the Jockeys in the jockeys' 
room had all registered for the coverage, he never answered my question 
as he didn't know. This was unacceptable to me. The Jockeys' Guild 
should know so.
    The Guild receives approximately $1 million each year from 
California for insurance coverage for the California riders. The health 
plan insuring riders in California is part of a Guild self directed or 
self insurance plan, that covers all riders in the country. The money 
derived from California is to be used only for the California riders. 
We, along with the TOC, have asked repeatedly for the Guild to show 
that our money is being used for its intended purpose, and to address 
many concerns related to the Guild (Exh. 2). They have failed to do so. 
We are not satisfied that our money is being spent for purposes that it 
was intended, and we are concerned it is being co-mingled with other 
Guild funds and jockey payments for health insurance. We are 
unconvinced that we are not subsidizing health insurance for riders in 
other states.
    We are also very concerned, given the Guilds' apparent financial 
straits, that there is insufficient funding to pay for claims, 
particularly in the event of a bankruptcy. The Guild has not even 
collected almost $1 million of dues from its own members, including 
large sums from its current Board members. Given the pattern of 
misrepresentation by the Guild, it is questionable that the Symetra 
excess policy (Exh. 3) may not be enforceable. We also are alarmed that 
within one year of the current Guild management taking over, the Jockey 
Disabled fund has been depleted from $1,327,083 in 2001 to $0 in 2003. 
We still don't know where that money went, and how disability expenses 
increased to over $850,000 in 2002 versus $194,000 in 2001 (Exh. 4).
    The Guild is required to provide to us and the Thoroughbred Owners 
of California, who are also party to the agreement, audited statements 
for each year's actual expenditures. The Guild has failed to timely 
comply with this requirement, and only when we insisted that it be 
done, did we finally receive audits on September 9, 2005, for the years 
ending 2003 and 2004 (Exh. 5). Those reports highlighted varying 
concerns of its own auditors, as contained in the Management Letters 
from the auditors. Concerns included lack of proper controls, 
allocation of funds, and other procedures that should have been 
implemented by the Guild (Exh. 6).
    Additionally, we note that of the approximate $1 million dollars 
contributed by California, approximately 51% of the money provided to 
the Guild is used for Administrative expenses (Exh. 7). The Guild 
retains a plan administrator, but they also claim approximately 15%, or 
$150,000 for Guild administrative expenses. We need to know why nearly 
50 cents of every dollar is not going to our jockeys' health benefits. 
It is also interesting to note that since 1997 the self directed health 
plan of the Guild has increased in cost by 83% as compared to the 
CalPERS increase of 67.2% for the same period. (Exh. 8)
    In early 2005, we advised the Guild that we wanted to see 
alternative health insurance quotes from outside insurance companies. 
We asked that they competitively bid the insurance coverage. As we sit 
here today, the Guild has not only failed to seek out any competitive 
bids, but we have asked for census data so we could obtain alternative 
bids, and they have failed to provide that information to us, despite 
repeated requests. Just this past week, I called the Guild asking to 
speak with Dr. Gertmenian or Albert Fiss, their controller, neither of 
them were available. I was told that David Shepard, their Chairman was 
there, but he never returned my call. The purpose of my calling was to 
simply ask them to authorize the company that administers the health 
insurance plan to release census data to an insurance broker who 
specializes in racing related health insurance. I do not want to see 
this Guild implode and render our jockeys without health insurance.
    Notwithstanding their total lack of efforts, I have obtained 
preliminary quotes for medical insurance from Blue Cross or Blue Shield 
for our California jockeys (Exh. 9). But without the census data we 
cannot get firm quotations. I ask you to ask Dr. Gertmenian to sign the 
release of information (Exh. 10) I have before me, so that we can 
protect our jockeys. If he really cares about these men and women and 
their families, I can't imagine he wouldn't immediately sign this 
document.
    At your hearing on October 18th, Dr. Gertmenian testified that 
California had conducted an audit of the Guild and was satisfied. Let 
me be very clear with respect to his testimony. His statement was 
completely untrue, and he knows it. We have never been satisfied with 
the Guild's performance, and the California Horse Racing Board in an 
open meeting voted unanimously to proceed with a forensic audit of the 
Guild as a result of that dissatisfaction. (Exh. 11)
    As a result of our ongoing problems, and the non responsiveness and 
untimely performance of the Guild, we have determined that we will have 
the State of California Department of Finance undertake a forensic 
audit of the Guild, which is commencing as we speak (Exh. 12). Until 
such time that we are satisfied that the money provided to the Jockey 
Guild is being spent appropriately and for its intended purpose, it 
will be my recommendation to the California Horse Racing Board that all 
future payments be withheld from this Jockeys' Guild.
    All of the California racing industry is dedicated to the welfare 
of our valued riders. It is unconscionable what happened to Gary 
Birzer. It is unacceptable that this Guild would not provide 
replacement wheelchair wheels to a paralyzed rider by the name of Gary 
Donahue. It is unacceptable that riders who asked questions were thrown 
off their Board of Directors. And it is horrifying to hear that guild 
management refers to Gary Birzer as a ``casualty of war''. There is no 
war; Gary Birzer is only a casualty of the inept management of this 
organization.
    If Gary Birzer's accident had occurred in California, he would have 
been entitled to unlimited medical care, disability payments and 
rehabilitation. Further, had he signed a waiver of liability under the 
TRA program funded by California tracks, he would have received 
additional catastrophic injury coverage. In my opinion, it is 
unacceptable for any track, in any state, to provide any less than what 
California provides for our valued Jockey partners.
    I am convinced that with real Guild leadership--not a group of 
people looking to wage war--all of the racing industry can and will 
come together to take care of the riders who put their lives on the 
line every time they mount a horse.

  CALIFORNIA'S EFFORTS TO PROVIDE HEALTH BENEFITS FOR ITS BACKSTRETCH 
                                WORKERS:

    As mentioned previously, California provides approximately $1 
million dollars a year for Jockeys Health and Welfare Insurance. These 
monies are derived from uncashed refunds of pari-mutuel tickets. This 
program began in 1997, and to date has resulted in over $4,411,000 
(Exh. 13) being given to the Jockey's Guild through 2004 for Jockey 
Health Insurance.
    California backside workers, including the jockeys, are covered by 
Workman's Compensation insurance (Exh. 14). To offset the high cost of 
this insurance, the California Horsemen's Safety Alliance was formed 
and incorporated into California Racing Law. Since 2002 and through 
2005 approximately $11,250,000 has been contributed by tracks and 
horsemen to offset the cost of Workman's Compensation expenses. In 
2004, an additional section was added to California Racing Law, which 
provided that an additional .5% of the takeout on exotic wagers would 
be used to further defray the high cost of Workman's Compensation 
Insurance. Since May of 2004 and through October 2005, an additional 
$11,300,000 of monies has been collected for costs associated with 
Workman's Compensation Insurance for our backstretch workers and 
jockeys.
    In addition to the California Health and Welfare Plan, and 
Workman's Compensation Insurance, California also provides the 
following monies and services for jockeys and backside employees:

1. Medical and dental care is provided to all backstretch workers by 
        the California Thoroughbred Horsemen's Foundation.
2. Backstretch workers and trainers participate in a pension program 
        administered by the California Thoroughbred Trainers 
        Association. Current assets under management are $33 million.
3. Disabled Jockey Endowment and the Don McBeth Jockey fund are funded 
        from charitable race day proceeds from all Thoroughbred racing 
        associations. Ultimately, $2 million will be set aside for 
        these disabled riders. Between 2003 and 2005 to date 
        approximately $425,000 has been donated to these causes.
4. Recreational programs and facilities at each race track are provided 
        and sponsored by the California Thoroughbred Trainers, the 
        Gregson Foundation, the Racetrack Chaplaincy, and each of our 
        racing associations.
5. Drug and alcohol counseling is provided to all backside workers by 
        the Winners Foundation.
6. Religious services and ministry services are provided by Race Track 
        Chaplaincy of America.
    The California Horse Racing Board in conjunction with the 
Thoroughbred Owners of California, California Thoroughbred Trainers and 
all of our thoroughbred tracks, have also initiated a comprehensive 
health study to determine optimum health conditions for jockeys. This 
comprehensive study, a draft of which is attached to my written 
testimony, is entitled ``Athletic Performance in Jockeys: A Baseline 
Study of Physiological and Nutritional Factors.''(Exh.15) This study is 
intended to lead us to a better approach to establishing safe riding 
weights for riders based on scientific principles such as body 
composition, height, gender, age and other variables that the current 
approach does not take into account. We cannot continue to accept the 
notion that ``one size fits all''. The industry needs to develop better 
nutritional training and monitoring practices to ensure that weight 
management is done safely and in a manner that maximizes athletic 
performance.
    It is my hope that the entire racing community, including jockeys, 
will join with us and participate in this study to determine not only 
optimum and minimum standards for riders, but also establish a 
reasonable scale of riding weights that is implemented throughout the 
country.

                              TRACK SAFETY

    All of our race tracks in California are maintained in excellent 
condition. Our horsemen's organizations including the California 
Thoroughbred Trainers (CTT) and Thoroughbred Owners of California (TOC) 
are vigilant in working with our race tracks to insure the safest 
possible conditions for both horses and riders.
    I believe that the California Horse Racing Board was the first 
regulatory agency to adopt track safety regulations and require track 
maintenance plans and inspections. Let me just cite a couple of the 
racing law and regulations that are in existence in California:
    Horse Racing Law:
    (Section 19481) required the CHRB to adopt safety standards 
governing track base and racing surface, rails, gaps, turf access, 
lighting, equipment, drainage, communications, veterinary services, 
medical and ambulance services, track inspection procedures, housing 
regulations for workers and inspection of housing facilities.
    California Horse Racing board Regulations were adopted 
specifically:

(Section 1468) governs emergency procedures, communications, and 
        ambulance services.
(section 1469) governs safety of race course
(section 1471) establishes track safety standards and inspections 
        requirements
(section 1472) establishes rail construction and track specifications
(section 1473) governs renovation of dirt track
(section 1474) governs maintenance of dirt rack and requires written 
        track safety maintenance program
    Prior to the issuance of any license to conduct any race meeting, 
the CHRB conducts inspections and the racing association must satisfy 
the CHRB that all procedures are in place before the granting of the 
license. It is also customary for track safety to be discussed between 
the representative groups, jockeys, and the California Horse Racing 
Board to insure that the track surface is safe at all times. When and 
if there are concerns, it is the policy of the California Horse Racing 
Board, and all of our tracks, to immediately address the problem and if 
the track is deemed to be unsafe for any reason, racing will not be 
permitted until the problem has been remedied.
    California, through UC Davis and a variety of organizations, has 
participated in a variety of studies to maintain and develop the safest 
possible track surfaces. As evidence of this commitment to track 
safety, just recently Hollywood Park determined that its new Turf 
Course was not fit for racing, and all turf racing at the meeting that 
just commenced was cancelled.

               COMPETITIVE FACTORS AND FEDERAL OVERSIGHT

    Racing throughout the country is facing a transformation. As part 
of this process many jurisdictions, including California are facing 
very difficult times. With the advent of casino style gaming at 
racetracks in many jurisdictions, those without the alternative gaming 
are fighting for their economic lives. In California alone, two of our 
five major tracks have been sold and are likely to cease operating as 
race tracks. Unfortunately, California only has casino style gaming on 
Indian lands. The result of this disadvantage has been that our purses 
cannot keep pace with gaming states, and consequently we are losing 
horses and horsemen to other states throughout the country. (Exh. 16)
    But aside from California, racing needs help to regulate issues 
that reach farther beyond one states borders. With the advent of 
simulcasting, advance deposit wagering, and the internet, we face a 
host of problems that need to be addressed. Illegal off shore wagering 
today is estimated at hundreds of millions of dollars. This money is 
not reaching our betting pools, and therefore doesn't then benefit the 
horsemen, tracks or the states where racing is being conducted. We need 
your help to stop this illegal activity. If we can bring that money 
back to our racing pools, there will be more money available to pay for 
new track surfaces, better insurance programs and better health and 
welfare plans.
    We need consistent racing laws and rules that apply to all 
jurisdictions to insure a safe and level playing field. Uniform 
medication rules, uniform scale of weights, uniform minimum standards 
for riders and uniform insurance coverage, including Workman's Comp 
coverage in all states.
    I know that some people in the horse racing industry will not like 
to hear me advocate any federal oversight, but I look to you not to 
constrain us, but to help an industry in transition. I ask you to help 
preserve the billions of dollars invested by tracks, horse owners, 
trainers, and all participants in a sport they love. I ask that you 
help us save the tens of thousands of jobs created by this industry. We 
are at the beginning of a new century, yet we are a sport of tradition, 
pageantry, and a solid historical background. We are a sport made up of 
wonderful people from all walks of life. Please help us find a way to 
insure and employ all of our participants profitably. Help us have an 
incentive to not tear down tracks, but build tracks. Help us root out 
those that try and cheat us and take our product beyond our borders. 
Help us establish common limitations and guidelines on medications to 
protect our horses. Racing needs your support to adapt to changing 
times, so it can keep the sport healthy for centuries to come
    Again, I would like to thank you for taking the time to conduct 
this hearing and inviting me to address you.

                                Appendix

    All attachments to Mr. Shapiro's testimony can be viewed online at 
the Committee's hearing website: http://energycommerce.house.gov/108/
Hearings/11172005
hearing1709/hearing.htm

    Mr. Whitfield. Thank you, Mr. Shapiro. And at this time, 
Mr. Monahan, we will recognize you for 5 minutes on behalf of 
the Quarter Horse.

                    TESTIMONY OF DICK MONAHAN

    Mr. Monahan. Mr. Chairman, thank you for the opportunity to 
appear at this hearing on behalf of the American Quarter Horse 
Association. I am currently an AQHA National Director and 
Chairman of the AQHA Racing Committee and Racing Council, which 
governs quarter horse racing throughout the United States.
    I have been involved in American Quarter Horse Racing as an 
owner and breeder since 1970 and since 1975 have been involved 
in the management of small racetracks in the State of 
Washington where I live. I am a trial lawyer in Walla Walla, 
Washington to pay for my horse habit.
    Issues involving the health and welfare of jockeys and 
other workers at racetracks are of utmost important to the AQHA 
and AQHA members involved in racing. Just what is an American 
Quarter Horse? If you have ever seen a horse in one of rodeo's 
timed events, been along for work on a ranch or watched a 
Western on a big or small screen, nine times out of ten you 
have witnessed an American Quarter Horse.
    Located in Amarillo, Texas, AQHA remains the world's 
largest equine association, registering more than 4.5 million 
American Quarter Horses and serving currently more than 350,000 
members. The Association has more than 1.2 million active 
owners. According to the recently completed study by the 
American Horse Council, the National Economic Impact of the 
Horse Industry on the United States, American Quarter Horses 
made up approximately 15 percent of the 845,000 horses racing 
or breeding for racing in the U.S. And account for about 6 
percent of the $10.7 billion direct economic impact of racing 
in the United States. About $340 million is wagered each year 
on American Quarter Horse racing.
    I share these figures so that the committee will understand 
where American Quarter Horse racing fits within the horseracing 
industry in the U.S. While we are not a large segment of the 
racing industry, the leadership role AQHA plays and has played 
in the industry is vital. We are committed to the safety of the 
jockeys, exercise riders and other backstretch workers and the 
horses involved in our product. AQHA has always done its part 
to benefit all of the horseracing and those who participate and 
the membership stands ready to do that as well, now.
    Over the years, AQHA Racing Committee and Council has 
discussed track safety and issues to ensure the safety and 
fairness of racing. Since 2002 alone, AQHA has invested more 
than $600,000 working with other industry associations on 
various issues such as a racetrack surface study. We 
participated heavily in the Racing Medication and Testing 
Consortium and conduct regularly assistant starter workshops to 
assist gate workers with properly handling horses behind and in 
the gate, to protect horses, jockeys and the wagering public, 
to ensure safety and fairness.
    Since 1960 and thanks in large part to our generous 
members, AQHA and the American Quarter Horse Foundation has 
contributed more than $5 million in research grants to colleges 
and universities to study various issues and diseases that 
affect all breeds of horses, not only racing American Quarter 
Horses.
    With respect to the jockeys and exercise riders, almost all 
of those who ride American Quarter Horses also ride other 
breeds. For this reason, they are included in any agreements 
reached regarding insurance, be it health insurance or 
catastrophic insurance and any jockey can join the Jockey's 
Guild who chooses to do so.
    AQHA has never been directly involved in the negotiations 
that produced agreements regarding insurance in the past. 
Rather we have relied on the Jockey's Guild and the 
Thoroughbred Racing Association to finalize all of those 
agreements. This does not indicate any lack of interest or 
concern, only recognition that other organizations were able to 
reach acceptable agreements in the past that include American 
Quarter Horse racing. We have always participated in and 
utilized the final product and appreciated the efforts of all 
concerned to protect these individuals.
    As did many others, we watched with concern as the 
leadership of the Jockey's Guild changed, causing a strain in 
the traditional processes and relationships. As the committee 
has learned, the path to the current situation in the racing 
industry regarding protection of our jockeys has been 
unfortunate but we do not believe it is permanent.
    Efforts to resolve this issue were started some time ago 
and a great deal of work has gone into it. We are confident 
that the industry can resolve this issue, as it has done in the 
past. The will always has been there but new circumstances have 
changed the regular order. We believe that this too will change 
and that the previous order will be restored.
    The industry makes every effort to make racing as safe as 
possible. Racing surfaces are groomed between every race to 
keep surfaces in the best shape. Races are canceled when 
condition, weather or jockeys raise concerns. New surfaces are 
being explored and used all the time.
    At AQHA, we believe these issues can be resolved by the 
industry by working together. The process has begun and the 
industry is working on a resolution. That may involve a new 
paradigm but it will happen and AQHA will be involved.
    We appreciate your committee's involvement in this 
important process. Clearly, it has already spurred some 
changes. We expect that such change will continue and the 
jockeys and other workers will be protected and insured as 
before, if not better. Thank you very much for the opportunity 
to participate in these hearings.
    [The prepared statement of Dick Monahan follows:]

Prepared Statement of Testimony of Dick Monahan, American Quarter Horse 
                              Association

    Good afternoon. Thank you for the opportunity to appear at this 
hearing on behalf of the American Quarter Horse Association. I am Dick 
Monahan, Chair of the AQHA's Racing Council.
    I have been involved in American Quarter Horse Racing as an owner 
and breeder since 1970. Since 1975 I have been involved in the 
management of small racetracks in eastern Washington.
    I am currently an AQHA National Director and Chairman of the AQHA 
Racing Committee, a 90-member oversight committee, and the Racing 
Council, a 9-member steering committee.
    I am a trial lawyer in Walla Walla, Washington to pay for my horse 
habit.
    Issues involving the health and welfare of jockeys and other 
workers at racetracks are of utmost importance to AQHA and AQHA members 
involved in racing.
    Just what is an American Quarter Horse? If you have ever seen a 
horse in one of rodeo's timed events, been along for work on a ranch or 
watched a Western on the big or small screen, 9 times out of 10 you 
have witnessed an American Quarter Horse.
    These heavily muscled, compact horses could and can run a short 
distance over a straightaway faster than any other horse,, The fastest 
were called Celebrated American Quarter Running Horses by--English 
colonists in the 1600s.
    The American Quarter Horse established a reputation as the greatest 
cattle roundup and trail driving horse in history and were also popular 
with early American racing enthusiasts. To ensure the unique qualities 
of this breed be preserved, a group of American Quarter Horse 
enthusiasts met in Ft. Worth, Texas in 1940 to establish what has to 
become the largest equine breed registry in the world, the American 
Quarter Horse Association.
    Located in Amarillo, Texas, AQHA remains the world's largest equine 
Association, registering more than 4.5 million American Quarter Horses 
and serving more than 350,000 worldwide members. The Association has 
more than 1.2 million active owners.
    AQHA functions as the official record keeping and governing body of 
the American Quarter Horse industry. AQHA records all American Quarter 
Horse ownership, processes, approved show and race results, catalogs 
performance and produce data on all American Quarter Horses, maintains 
association funds and publicizes the American Quarter Horse industry 
through three magazines.
    In addition, AQHA maintains current statistics on ownership in each 
state and country as well as American Quarter Horse population figures. 
With nearly 161,000--new registrations in 2004, AQHA's role in 
preserving the integrity of the breed is expanding on a daily basis. 
Whether American Quarter Horses are still being used in traditional 
ranching operations, for showing, racing or pleasure, AQHA strives to 
provide services beneficial to all Association members and ultimately 
the American Quarter Horse.

                         AQHA MISSION STATEMENT

    * To record and preserve the pedigrees of the American Quarter 
Horse while maintaining the integrity of the breed.
    * To provide beneficial services for its members that enhances and 
encourages American Quarter Horse ownership and participation.
    * To develop diverse educational programs, material and curriculum 
that will position AQHA as the leading resource organization in the 
equine industry.
    * To generate growth of AQHA membership via the marketing, 
promotion, advertising and publicity of the American Quarter Horse.
AQHA Racing Mission Statement
    * To insure the long-term viability of American Quarter Horse 
racing by increasing racing opportunities and developing, as well as 
retaining, new owners in state and international venues.
    * To record complete race results, records, past performance 
information and related racing statistics for the American Quarter 
Horse racing industry.
    * To recognize the worthwhile achievements of American Quarter 
Horses in racing.
    AQHA supports and promotes American Quarter Horse racing, which is 
authorized in twenty-five states, although a good portion of that is at 
state and county fairs with only a few days of racing at each fair.
    According to the recently completed study by the American Horse 
Council, the National Economic Impact of the Horse Industry on the 
United States, American Quarter Horses make up approximately 15% of the 
845,000 horses racing or breeding for racing in the U.S. and account 
for about 6% of the $10.7 billion dollars direct economic impact of 
racing in the U.S. About $340 million is wagered each year on American 
Quarter Horse racing.
    I share these figures so that the Committee will understand where 
American Quarter Horse racing fits within the horse racing industry in 
the U.S. While we are not a large segment of the racing industry, the 
leadership role AQHA plays in the industry is vital. We are committed 
to the safety of the jockeys, exercise riders, other back stretch 
workers and the horses involved in our product. AQHA has always done 
its part to benefit all of horse racing and those who participate, and 
the membership stands ready to do so now.
    Over the years the AQHA Racing Committee and Council has discussed 
track safety and issues to insure the safety and fairness of racing. 
Since 2002 alone, AQHA has invested more than $600,000 working with 
other industry associations on various issues such as: 1. Racetrack 
Surface Study to determine the effects of various surfaces on horses 
legs and how to reduce or eliminate catastrophic injuries, 2. The 
Racing Medication and Testing Consortium whose mission is to develop, 
promote and coordinate, at the national level, policies, research, and 
educational programs which seek to ensure the fairness and integrity of 
racing and the health and welfare of racehorses and participants, and 
protect the interests of the betting public; and 3. Conducting 
assistant starter workshops to assist gate workers with properly 
handling horses behind and in the gate to protect horses, jockeys and 
the wagering public to insure safety and fairness.
    Since 1960, and thanks in large part to its generous members, AQHA 
and the American Quarter Horse Foundation has contributed more than 
five million dollars in research grants to colleges and universities to 
study various issues and diseases that affect all breeds of horses, not 
only racing American Quarter Horses.
    Today, there are no racetracks that exclusively offer American 
Quarter Horse racing. Instead, it is offered in a mixed format with 
other breeds, primarily Thoroughbreds, American Paint Horses and 
Arabians.
    With respect to the jockeys and exercise riders, almost all of 
those who ride American Quarter Horses also ride other breeds. For this 
reason, they are included in any agreements reached regarding 
insurance, be it health insurance or catastrophic insurance and any 
jockey can join the Jockeys' Guild who chooses to do so.
    AQHA has never been directly involved in the negotiations that 
produced agreements regarding insurance in the past. Rather we have 
relied on the Jockeys' Guild and the Thoroughbred Racing Association to 
finalize such agreements. This does not indicate any lack of interest 
or concern, only recognition that other organizations were able to 
reach acceptable agreements in the past that include American Quarter 
Horse racing. We have always participated in and utilized the final 
product and appreciated the efforts of all concerned to protect these 
individuals.
    As did many others, we watched with concern as the leadership of 
the Jockeys' Guild changed, causing a strain in the traditional 
processes and relationships. As the Committee has learned, the path to 
the current situation in the racing industry regarding the protection 
of our jockeys has been very unfortunate. But we do not believe that it 
is permanent.
    Efforts to resolve this issue were started some time ago and a 
great deal of work has gone into it. We are confident that the industry 
can resolve this issue as it has done in the past. The will always has 
been there, but new circumstances have changed the regular order. We 
believe that this too will change and that the previous order will be 
restored.
    The industry makes every effort to make racing as safe as possible. 
Racing surfaces are groomed between every race to keep surfaces in the 
best shape. Races are cancelled when conditions, weather or jockeys 
raise concerns. New surfaces are being explored and used - all the 
time.
    At AQHA, we believe these issues can be resolved by the industry by 
working together. The process has begun, carriers have been contacted, 
and the industry is working on a resolution. That may involve a new 
paradigm, but it will happen and AQHA will be involved.
    We appreciate your Committee's involvement in this important 
process. Clearly it has already spurred some changes. We expect that 
such changes will continue and that jockeys and other workers will be 
protected and insured as before, if not better.
    Thank you very much for the opportunity to participate in these 
hearings.

    Mr. Whitfield. Thank you, Mr. Monahan. And at this time we 
recognize Mr. Haire, who I understand you are the interim head 
of the Jockey's Guild. Is that right, Mr. Haire?
    Mr. Haire. Yes.
    Mr. Whitfield. Glad to have you here. You are recognized 
for 5 minutes.

                   TESTIMONY OF DARRELL HAIRE

    Mr. Haire. Thank you. Thank you, Mr. Whitfield. Mr. 
Chairman and members of the subcommittee, I am Darrell Haire 
and I am the former National Member Representative for the 
Jockey's Guild and presently, effective 2 days ago, I am the 
organization's temporary national manager. Before going to work 
for the Guild, I was an active rider for 15 years.
    First of all, I would like to thank the committee for 
inviting me to testify and to thank you for conducting these 
hearings. Your willingness to take a hard look at our industry, 
including uncovering mismanagement at the Guild has been eye 
opening to say the least. The letters that you have sent to 
Federal agencies asking them to look into establishing health 
and safety standards for jockeys have been circulated to every 
jockey's room in the country. I can't tell you how much it 
means to the jockeys around the country that the U.S. Congress 
has shown such an interest in our welfare.
    Today, I am here to give you four concrete steps that we 
need to help us. A jockey's life is tough and the job is very, 
very dangerous. Except for the top jockeys, the pay is not 
great. The average jockey makes about $35,000 a year. Why do we 
do it? Plain and simple, because we love the sport and we are 
professional athletes dedicated to our craft.
    Of the thousand or so active riders around the country, 
every year some of us will be killed or made quadriplegics. You 
met Gary Birzer last month and in just the last 2 weeks, 
Michael Lapannese died as a result of an on-track accident at 
Suffolk Downs. And yesterday, 16-year-old apprentice jockey 
Josh Radosevich was fatally injured as a result of a spill at 
Beulah Park in Ohio. And in the last 2 years, Michael Rowland 
and Christopher Quinn died as a result of injuries on the 
track. In addition to Gary Birzer, jockeys Shannon Campbell and 
Remi Gunn sustained injuries so severe that they were left 
paralyzed. While we understand and accept the dangers that we 
face on the job, what we can't understand is why, in an 
industry so wealthy, we do not enjoy the same basic protections 
that virtually every other worker in this country, including 
almost all professional athletes, have enjoyed for the last 100 
years.
    Except in four States, California, New York, Maryland and 
New Jersey, jockeys are not covered by Workers' Compensation 
insurance. If we are injured, we must somehow get by with the 
mere $100,000 in medical coverage at many tracks and at some 
tracks, $1 million in coverage. One track, Mount Pleasant 
Meadows in Michigan, provides no on-track coverage at all and 
all the jockeys there are required to waive their rights as a 
condition of working. What coverage that exists is not 
guaranteed and can be cutoff at any time. Such coverage is 
plainly inadequate. Workers' Compensation does provide lifetime 
medical coverage for a work-related injury, indemnity benefits 
if you are permanently disabled and temporary wage replacement, 
while you are recovering from your injuries.
    Whatever else you can say, our little union cannot afford 
to shoulder the burden of the inevitable on-track injuries, the 
cost of healthcare for our families and providing for the 
permanently disabled. It is breaking the back of the Jockey's 
Guild. It is simply an impossible burden for us to bear.
    We need your help desperately. We need you to make the 
horseracing industry accept the burden that all other 
industries shoulder by amending the Interstate Horse Racing Act 
to require that, as a condition of broadcasting a signal, 
Workers' Compensation coverage must be in place.
    The California Supreme Court recognized jockeys' workers 
rights in 1941 and he Commonwealth of Kentucky is considering 
requiring such coverage now. However, the horseracing industry 
in Kentucky wants the jockeys to help pay for their own 
Workers' Compensation coverage. This violates the basic 
principle of the Workers' Compensation Law, that workers give 
up the right to sue for their injuries in order to receive 
coverage in a no-fault, no-cost system. We put up our lives. 
They need to put up the premium.
    Four States out of 38 racing States require Workman's 
Compensation coverage and that must change. Second, we need 
Congress to amend the Interstate Horse Racing Act to include 
jockeys in the provisions that the racing signal cannot be 
broadcast unless the horsemen have in place agreements to 
compensate them for their media rights. Jockeys were left 
simply out of this requirement when the law was passed and it 
is critical that we, as professional athletes, are given the 
same rights as all of the other elements of the industry. We 
deserve to have a revenue stream that fairly and adequately 
compensates us for the value of our image and the talent that 
we bring to horseracing.
    Third, we need national health and safety standards for 
jockeys. This means uniform standards for appropriate jockey 
minimum weights, track conditions and emergency response. The 
California tracks owners and trainers, as well as the 
California Horse Racing Board, are working in cooperation with 
us to study jockey health, with an aim of coming up with weight 
standards that don't require jockeys to do terrible things to 
their bodies to make weight. As you know, every day in this 
country, jockeys make themselves vomit, sit in sweatboxes for 
hours and take diuretics to lose weight. Just last Saturday, 
Chris Herrel, a 31 year old jockey riding at Churchill Downs in 
Kentucky died suddenly after a history of engaging in extreme, 
but all too common, weight reduction practices. He is not the 
only one. Six months ago, 21-year-old jockey Emmanuel Sanchez, 
who was riding at Colonial Downs in Virginia, died in similar 
circumstances.
    One far-thinking State like California cannot do it alone 
or it will create an unfair, competitive balance between racing 
States. The weight standards in this country need to be 
medically sound, not arbitrarily based on the body size of 
jockeys in the middle of the 19th century. Every day across the 
country, our members get on horses dizzy, sick, hungry and 
dehydrated because of what they do to themselves. Surely 
together we can come up with a national standard for weight 
that is safe for us and won't hurt the horses.
    The same thing is true for track conditions and emergency 
response. Today there are still places in this country that 
lack properly equipped ambulances and trained personnel who can 
administer advanced life support to downed jockeys. Precious 
minutes are allowed to pass before jockeys receive appropriate 
emergency medical treatment. Those moments can be the 
difference between life and death.
    With regard to track conditions, there is no reason why 
there should not be a national minimum standard for track 
safety rails, safety reins or safety equipment, established 
through the OSHA system.
    Fourth, the National Labor Act needs to be amended 
explicitly to recognize our collective bargaining rights. The 
NLRB's decision to exclude horseracing from its jurisdiction 
leaves a gap in labor law enforcement that works to the 
detriment of the jockeys. The Guild has been collectively 
bargaining on behalf of the jockeys for years but has no 
protection against unfair labor. The NLRB must be called into 
play.
    Mr. Chairman, jockeys, tracks and horsemen needs to be 
working together for the betterment of our industry. Our 
members love this sport and have dedicated their lives to it. 
We believe that if we all put our heads together, we can solve 
our mutual problems for the betterment of the sport.
    Mr. Chairman, that concludes my opening statement. I am 
available to answer any questions you may have.
    [The prepared statement of Darrell Haire follows:]

Prepared Statement of Darrell Haire, Interim National Manger, Jockeys' 
                                 Guild

    Mr. Chairman and Members of the Committee: I'm Darrell Haire, and 
I'm the Interim National Manger of the Jockeys' Guild. Before going to 
work for the Guild, I was an active rider for 15 years.
    First of all, I would like to thank the Committee for inviting me 
to testify and to thank you for conducting these hearings. Your 
willingness to take a hard look at our industry, including uncovering 
mismanagement at the Guild, has been eye opening--to say the least. The 
letters that you have sent to federal agencies asking them to look into 
establishing health and safety standards for jockeys have been 
circulated to every jockeys' room in this country.
    I can't tell you how much it means to the jockeys around the 
country that the United States Congress has shown such an interest in 
our welfare. Today, I am here to give you four concrete steps that we 
need to help us.
    A jockeys' life is hard and the job is very, very dangerous. Except 
for the top jockeys, the pay is not great. The average jockey makes 
about $35,000 a year. Why do we do it? Plain and simple, because we 
love the sport and we are professional athletes dedicated to our craft.
    Of the thousand or so active riders around the country, every year 
some of us will be killed or will be made quadriplegics. You met Gary 
Birzer last month, but in just the last two weeks, Mike Lapannese died 
as a result of an on-track accident at Suffolk Downs. And in the last 
two years, jockeys Michael Rowland and Christopher Quinn died as a 
result of injuries sustained at the track and, in addition to Gary 
Birzer, jockey Shannon Campbell and Remi Gunn sustained injuries so 
severe that they were left quadriplegics. Many more jockeys, like Gary 
Boulanger, Rick Wilson, Myra Truitt, Jim Burns, Ron Warren, and Tony 
D'Amico have suffered severe or career ending injuries in just the last 
several years. While we understand and accept the dangers that we face 
on the job, what we can't understand is why, in an industry so wealthy, 
we do not enjoy the same basic protections that virtually every other 
worker in this country--including almost all professional athletes--
have enjoyed for the last 100 years.
    Except in four states--California, New York, Maryland and New 
Jersey--jockeys are not covered by workers' compensation insurance. If 
we are injured, we must somehow get by with a mere $100,000 in medical 
coverage at many tracks and, at some tracks, a million dollars in 
coverage. One track, Mt. Pleasant Meadows in Michigan, provides no on-
track accident coverage at all and jockeys are required to waive all 
rights as a condition of working. What coverage exists is not 
guaranteed and can be cut off at any time. Such coverage is plainly 
inadequate. Workers' compensation provides lifetime medical coverage 
for a work-related injury, indemnity benefits if you are permanently 
disabled, and temporary wage replacement while you are recovering from 
your injuries.
    Whatever else you can say, our little union cannot afford to 
shoulder the burden of inevitable on-track injuries, the cost of health 
care for our families, and providing for the permanently disabled. It 
is breaking the back of the Jockeys' Guild. It is simply an impossible 
burden for us to bear.
    We need your help desperately. We need you to make the horseracing 
industry accept the burden that all other industries shoulder and 
require that every state, not just the far thinking states that have 
already stepped up to the plate, to provide workers' compensation 
coverage for jockeys and exercise riders. This can be accomplished by 
amending the Interstate Horseracing Act to require that, as a condition 
of broadcasting a signal, workers' compensation coverage must be in 
place.
    The California Supreme Court granted workers' compensation coverage 
to jockeys in 1941 and the Commonwealth of Kentucky is just considering 
requiring such coverage now. However, the horseracing industry in 
Kentucky wants the jockeys to help pay for their own workers' 
compensation coverage. This violates the basic principle of workers' 
compensation law: that workers' give up the right to sue for their 
injuries in order to receive coverage in a no fault, no cost system. We 
put up our lives, they need to put up the cost of the premium. Four 
states out of 38 racing states require workers' compensation coverage 
and that must change.
    Secondly, we need Congress to amend the Interstate Horseracing Act 
to include jockeys in the provisions that the racing signal cannot be 
broadcast unless the horsemen have in place agreements to compensate 
them for their media rights. Jockeys' were simply left out of this 
requirement when the law was passed and it is critical that we, as 
professional athletes, are given the same rights as all of the other 
elements of the industry. We deserve to have a revenue stream that 
fairly and adequately compensates us for the value of our image and the 
talent that we bring to horseracing.
    Third, we need national health and safety standards for jockeys. 
This means uniform standards for appropriate jockey minimum weights, 
track conditions, and emergency response. The California tracks, 
owners, and trainers as well as the California Horse Racing Board are 
working with cooperatively with us to study jockey health with an aim 
of coming up with weight standards that don't require jockeys to do 
terrible things to their bodies to make weight. As you know, every day 
in this country jockeys make themselves vomit, sit in sweatboxes for 
hours, and take diuretics to lose weight. Just last Saturday, Chris 
Herrel, a 31 year old jockey riding at Churchill Downs in Kentucky, 
died suddenly after a history of engaging in extreme--but all too 
common--weight reduction practices. He is not the only one. Six months 
ago, 21 year old jockey Emmanuel Sanchez, who was riding at Colonial 
Downs in Virginia, died suddenly in similar circumstances.
    One far-thinking state, like California, cannot do it alone or it 
will create an unfair competitive balance between racing states. The 
weight standards in this country need to be medically sound, not 
arbitrarily based on the body size of jockeys in the middle of the 19th 
century. Every day across this country, our members get on horses 
dizzy, sick, hungry, and dehydrated because of what they do to 
themselves. Surely, together we can come up with a national standard 
for weight that is safe for us and won't hurt the horses.
    The same is true for track conditions and emergency response. 
Today, there are still places in this country that lack properly 
equipped ambulances and trained personnel who can administer advanced 
life support to downed jockeys. Precious minutes are allowed to pass 
before jockeys receive appropriate emergency medical treatment. It can 
be the difference between life and death.
    With regard to track conditions, there is no reason why there 
should not be national minimum standards for track safety rails, safety 
reins, or other safety equipment established through the OSHA system. 
It is ironic that the kitchens and heat plant and parking lot are 
covered by uniform OSHA standards, but the race track itself, is not.
    Fourth, the National Labor Relations Act needs to be amended to 
give us real collective bargaining rights. Not only is horseracing in 
general exempted from the NLRA, but as an organization of so-called 
``independent contractors'', we have no bargaining rights. We have no 
means of collectively negotiating our rights or compensation, while the 
rest of the industry collectively negotiates purse agreements and other 
agreements that affect us. We cannot even get together lawfully to call 
the regulators or protest unsafe track conditions. This isn't right.
    Mr. Chairman, jockeys, tracks, and horsemen need to be working 
together for the betterment of our industry. Our members love this 
sport and have dedicated their lives to it. We believe that, if we all 
put our heads together, we can solve or mutual problems for the 
betterment of the sport.
    Mr. Chairman, that concludes my opening statement. I am available 
to answer any questions you might have.

    Mr. Whitfield. Thank you, Mr. Haire, and thank all of you 
for being so patient and listening to all of this testimony. It 
is quite obvious that everything is fragmented and it is 
difficult to kind of get your arms around all the different 
aspects of this issue.
    One comment that Mr. Metzger, you made, you made the 
comment that you are not a recognized horsemen's group. Is that 
in the context of the Interstate Horse Racing Act or----
    Mr. Metzger. That is correct, Mr. Chairman. The recognized 
horsemen's groups would be the HBPA, the THA and the TOC.
    Mr. Whitfield. And who determines which group is 
recognized?
    Mr. Metzger. I may defer. I know an overview. I defer to my 
colleague right here.
    Mr. Roark. Mr. Chairman, the horsemen at a live race meet 
have the right to determine who represents them but 
contractually by practice it has been TOC in California, THA in 
New York, Maryland, New Jersey, Delaware. I believe that is 
all. And then we are in the other racing States. Now, HBPA used 
to be all racing States but that is no longer the case.
    Mr. Whitfield. Well now in Kentucky, Mr. Maline, it is my 
understanding that in some tracks you all represent the 
horsemen and in other tracks, that David Sweitzer group 
represents the horsemen. Is that right or not?
    Mr. Maline. Well not exactly, Chairman Whitfield. We 
represent the horsemen at every racetrack. We are he majority 
horsemen's group in the State of Kentucky. We do have a shared 
contract at Keeneland where we each, we share equally in the 
funding mechanism. And at Churchill we receive the majority 
funding but KTA does receive a small portion of that funding.
    Mr. Whitfield. And what does it take to be a member of the 
Kentucky HBPA?
    Mr. Maline. Well, the bylaws state that if you run a horse 
in the State of Kentucky, you are a member unless you choose 
otherwise. We also have a provision whereby we do have signed 
cards by our members.
    Mr. Whitfield. So you don't have to pay dues.
    Mr. Maline. No, you do not.
    Mr. Whitfield. So if you are a licensed trainer in 
Kentucky, then you are considered to be a member, right?
    Mr. Maline. That is correct, unless you choose otherwise.
    Mr. Whitfield. Now in your testimony, I noticed that you 
said 1.5 percent of the horsemen's share of wagering revenue is 
allocated for the funding of the KHBPA.
    Mr. Maline. Right.
    Mr. Whitfield. And approximately how much would that be per 
year?
    Mr. Maline. Approximately about $900,000 a year.
    Mr. Whitfield. Now, I would ask either you or Mr. Roark the 
question, would there be any--I had asked this question earlier 
and I am not sure what answer I received. But what would you 
say to the fact that if the Interstate Horse Racing Act was 
amended to include representatives of the jockeys as being an 
entity that would also negotiate with the track on the 
simulcast issue? How would you all respond to that?
    Mr. Maline. Well first of all, Chairman Whitfield, the 
Interstate Horse Racing Act in our opinion addresses two 
issues. That being the funding that horsemen and the racetracks 
receive, approximately 3 to 4 percent when our signal is sent 
to a specific area. We receive 3 or 4 percent back, of which we 
share equally with the racetrack. Now, as it was mentioned by, 
I believe, Mr. Scherf, that from that revenue that is received 
for purses, jockeys are--they receive 10 percent, as well as 
our trainers receive a same 10 percent of that revenue when 
they receive purse money. The second reason that the HBPA is 
involved in the Interstate Horse Racing Act is that there was 
concern back in 1978 that the racetracks would have a different 
priority as far as sending signals to other locations. That 
perhaps when they sent to another location that location would 
choose to just simulcast racing and not have live racing 
anymore.
    Now the racetracks, their concern would be the bottom line, 
most likely. They are not concerned in another State whether or 
not you have live racing. Horsemen are because we are 
transient. We do travel to those other locations. So the 
Federal Legislature at the time felt horsemen were better 
suited to determine if racing in those various locations would 
be protected. So for instance in Kentucky, when we decide to 
send our signal, it is our concern that there maintains live 
racing in that jurisdiction.
    Mr. Whitfield. But you all would then--your organizations 
would be opposed to any effort to change the Interstate Horse 
Racing Act in that respect?
    Mr. Maline. Yes, we would. Yes, because we feel they are--
they do receive revenue from that.
    Mr. Whitfield. Now Mr. Haire, what do you say to that?
    Mr. Haire. Well, I believe that in other sports athletes 
get a good piece of the revenue and we are asking just for a 
small percentage, where other football or baseball, these 
athletes receive 30 to 40 percent of the revenue. I believe we 
should get a piece of it.
    Mr. Whitfield. Mr. Shapiro, you mentioned in your comments 
that--and I made mention to this in my opening statement. That 
the Federal Government getting involved in racing creates 
immediate problems for a lot of people. We are involved to the 
extent that we passed the Interstate Horse Racing Act, which in 
the simulcasting is not providing about 85 percent of the purse 
money. But you specifically said that you feel like that there 
should be more Federal oversight. Would you expand on that 
comment?
    Mr. Shapiro. Well, I think you can take a look at 
California, where we at one point were perhaps the greatest 
racing state. We don't have the advantage of slot assisted or 
slot revenues to assist our purse pools. Consequently, racing 
in California has been disadvantaged tremendously and I believe 
that with the advent of simulcasting and Internet wagering and 
other wagering that is not taking place on track, that 
California has been plunged into a disadvantage across the 
board. And despite our efforts to provide the best health 
insurance and Workman's Compensation insurance and everything 
else that we do, we are losing our tracks and we are losing our 
horsemen. I believe that there has to be some Federal oversight 
and regulation to try and level the playing field so that 
States that don't have gaming can compete and can save their 
horses.
    You just take a look at what is happening when a track like 
Mountaineer Park, which has higher purses than we do in 
California. We have people that are raiding our barn areas, 
stealing--not stealing but claiming our horses and taking them 
to places like West Virginia because our purses don't keep 
pace. We are losing our jockeys. And so consequently, it is 
critical in my mind that there needs to be some Federal 
oversight on a lot of issues, including medication, including a 
scale of weights and including some of the wagering issues that 
are traveling beyond just California's borders.
    Mr. Whitfield. Is there a uniformity of weights around the 
country or is each State different?
    Mr. Shapiro. No. No. And in fact, as California, we have 
one of the higher weight scales and there is--we are 
disadvantaged there, too. We recognize that jockey weights have 
risen and we have voluntarily raised the scale of weights. But 
when trainers and owners look that they can go to Kentucky and 
other jurisdictions and race with less weight, there is this 
perception that it is going to hurt the horses with more 
weight, so we are further disadvantaged.
    Mr. Whitfield. Now, Mr. Monahan--oh, did somebody else want 
to make comment? Mr. Monahan, the Quarter Horse group, I know 
you all race at a lot of different tracks around the country 
but I guess there is not exclusive Quarter Horse racing per se. 
Is there or is there?
    Mr. Monahan. I suppose as close as we have to a straight 
Quarter Horse track is Las Alamedas in California.
    Mr. Whitfield. Okay.
    Mr. Monahan. It is certainly driven by the Quarter Horses. 
But for the most part, we race in mixed meets.
    Mr. Whitfield. Right. Now, has your organization supported 
this effort of the NTRA and other groups for a uniform 
medication rule as to what can be given to horses on race day?
    Mr. Monahan. Absolutely, Congressman, and I think you will 
find that the group that was put together to take care of that 
has done it. I mean, virtually every State has not adopted 
those rules. Is that correct? I think every State has now 
adopted the rules that was put together by the Consortium.
    Mr. Whitfield. Twenty-eight? Twenty-eight States. Okay. 
Okay.
    Mr. Monahan. I am not aware of any that haven't that race 
horses.
    Mr. Whitfield. Okay. Okay. Mr. Giovanni, in your testimony 
you talked about the New York program, which seemed to be a 
pretty good program. You all actually came to Congress at some 
point in time and it was not adopted but could you just 
elaborate on the way that program worked in New York for the 
Compensation?
    Mr. Giovanni. The legislation provides for a committee, 
which is basically the employer--or Fund, rather, which is 
basically the employer of all licensed jockeys, exercise riders 
and apprentice jockeys. The way it is set up is that an owner 
at the beginning of the year makes a contribution and so much 
is paid out of purses. There is a small percentage that comes 
out of purses. Trainers pay so much per day per stall. That 
covers the entire fee. Nobody falls through the cracks. If 
somebody is hurt and they are licensed, they are covered and I 
can give you a perfect example.
    There was a retired jockey who was exercising horses. His 
name was Antonio Viscarondo. He was employed by one particular 
trainer. Another trainer asked him when you are finished with 
your job, would you come by and work my horse out of the 
starting gate? I need to get him approved out of the gate. So 
he said he would do it and he went over when he finished his 
regular job. He was killed working a horse out of the starting 
gate, unfortunately. He was clearly not employed by this 
person. He was casual labor, independent contractor. However 
you want to categorize it. All of his medical expenses were 
paid. He left a 9-year-old son, who I believe is collecting 
$500 a week until he is 18 or 24 if he goes to college.
    And I cite that example because that is what needs to be 
done. Everybody who gets on horses, everybody on the backside 
needs to have some sort of protection, some sort of coverage. 
This plan works.
    Mr. Whitfield. Most people on the backside don't have much 
of anything.
    Mr. Giovanni. Exactly. They have basically nothing. 
Somebody needs to step up to the plate and take care of these 
people.
    Mr. Whitfield. I mean, they may be eligible for Medicaid or 
something like that but----
    Mr. Giovanni. That is it. That is surely it. Most of them 
are.
    Mr. Whitfield. Mr. Violette, do you administer the program 
that he is talking about?
    Mr. Violette. Yes, sir.
    Mr. Whitfield. Okay. Do you have any comments on it?
    Mr. Violette. I believe that is has worked quite well. 
Owners have saved money. Trainers have saved money. The 
trainers have been able to extract the group that is at a 
higher risk out of their own policy, which they have to provide 
for the rest of their backstretch help, for the hot walkers and 
grooms. And by extracting that, their entry rate has gone down 
so they have saved money on their own policy for the rest of 
them. While they have kind of passed along the high risk group 
into a larger fund, where we have also been able to save money 
because we are a large group.
    Mr. Whitfield. But all these people are considered 
employees of this entity?
    Mr. Violette. Correct.
    Mr. Whitfield. Okay. Well, Mr. Stupak, I will recognize you 
for questions.
    Mr. Stupak. Thank you, Mr. Chairman. First of all, I ask 
for unanimous consent that other members may submit their 
opening statements. Some of them could not be here.
    Mr. Whitfield. Without objection, it is ordered.
    Mr. Stupak. And I take it we are going to keep the 
committee open to submit some written questions, also?
    Mr. Whitfield. Yes, we will keep it open for the normal 
time.
    Mr. Stupak. Okay. Thank you. Mr. Giovanni or Mr. Violette, 
you said that jockey has to be licensed, right, in order to 
belong to this Fund?
    Mr. Violette. Yes, sir.
    Mr. Giovanni. The jockey, the apprentice jockey or the 
exercise rider has to be licensed within the state.
    Mr. Stupak. What do they have to do to be licensed?
    Mr. Violette. Actually, John can answer better, as far as a 
jockey.
    Mr. Stupak. Right. I want to make sure there is no gap here 
where people fall through for a couple years while they are 
trying to get licensed.
    Mr. Giovanni. No. If somebody needs a license, they just 
apply to the New York State Racing and Wagering Board for a 
license. They may ask you, have you ridden before or where have 
you ridden. If you haven't ridden, you would be licensed as an 
exercise rider or in some other capacity. When first applying 
for a jockey's license, what they do is give you a temporary 
license but still a license. They allow you to ride one or two 
races under the scrutiny of the stewards to make sure that you 
are qualified and competent enough to hold a professional 
license and then they provide you with your license. So nobody 
would fall through the cracks.
    Mr. Stupak. Mr. Haire, what is the best State to race in if 
you are a jockey?
    Mr. Haire. The best State would be California, I would say.
    Mr. Stupak. You mean, because of their----
    Mr. Haire. The Workman's Comp, of course. And they--
California just seems to go out of their way to accommodate the 
riders, safety-wise.
    Mr. Stupak. And the reason Mr. Shapiro said that they were 
actually not doing well in California and losing money because 
of simulcast, right? Is that right?
    Mr. Shapiro. What I am saying is, that we are struggling to 
survive because we are economically disadvantaged because we 
don't have slot revenues.
    Mr. Stupak. The gaming, right?
    Mr. Shapiro. Yes.
    Mr. Stupak. Mr. Haire, what is the worst State besides 
Michigan to ride in?
    Mr. Haire. Well----
    Mr. Stupak. You can say Kentucky. The Chairman won't be 
mad. No, I am only teasing. Only teasing. What would be a bad 
State besides Michigan, because I have taken from your 
testimony an example of Mount Pleasant, Michigan.
    Mr. Haire. Well, I would say West Virginia, absolutely.
    Mr. Stupak. And why is that?
    Mr. Haire. West Virginia, for whatever reason unknown to 
me, just don't seem to really want to take care of the riders 
as far as safety-wise. We have had a difficult time over the 
years.
    Mr. Stupak. Okay.
    Mr. Haire. There are a lot of accidents there.
    Mr. Stupak. In the last panel I think one testimony was 
about 1,500, almost 1,600 jockeys around the country. Would 
that be a fair estimate?
    Mr. Haire. There is about 1,800 licensed, yes.
    Mr. Stupak. Okay. Do all the States require them to have a 
license to race?
    Mr. Haire. Yes, sir.
    Mr. Stupak. So this New York model could sort of be 
duplicated in other States then?
    Mr. Haire. Yes, sir.
    Mr. Stupak. Okay. Do the jockeys want to be independent 
contractors? Or do you think they--I am asking for your 
opinion. You were a jockey for what, 15 years, you said. You 
are obviously active in the organization. Do they want to be 
independent contractors or do you think they would like to come 
together, form some kind of collective bargaining agreements or 
something with whoever are their owners? What would they rather 
be?
    Mr. Haire. We would like to be able to have collective 
bargaining and be able to, you know, have an agreement with 
these racetracks to work with us to do the right thing.
    Mr. Stupak. Okay. What is the status of the Jockey Guild as 
of this afternoon? I mean, we had some testimony or statements 
I guess by us, that new leadership is in place and there has 
been some struggles there. But what do you think the future of 
the Jockey Guild is?
    Mr. Haire. I believe the riders, Mr. Stupak, have taken 
control of the organization again and we are--with the help of 
the riders and a new Board, we are getting things under 
control. It has been--really it has been a real mess but we are 
getting our arms around it. We have a lot of support and we 
will turn it around and we have very--it is a positive 
atmosphere now.
    Mr. Stupak. Okay. The last panel, we were asking about 
these mount rides and I was getting Charlestown and what was 
the other one?
    Chairman Barton. Mountaineer.
    Mr. Stupak. Mountaineer goofed up but one was paying the 
mount fees and the other wasn't paying mount fees and they said 
they would just get a bill and they would pay the mount fees. 
Is there a formal agreement with the tracks? Anything in 
writing saying you get a bill from the Guild and you pay these 
mount fees?
    Mr. Haire. No, sir.
    Mr. Stupak. In your knowledge, has there ever been one?
    Mr. Haire. No, sir. They did have an--they signed a TRA 
agreement but not all racetracks, sir, are TRA racetracks.
    Mr. Stupak. Are covered.
    Mr. Haire. So for instance Delaware, we don't receive any 
money from Delaware for mount fees and they have slots in 
Delaware.
    Mr. Stupak. Right. Mr. Violette, in New York how many 
claims have been made for like, over 100,000 and how many have 
been up to a million?
    Mr. Violette. Well, we have an exercise rider who is a 
paraplegic, a young lady who was injured about 5 years ago and 
right now, her reserve is at $3 million.
    Mr. Stupak. Her reserve? So there will be a time when she 
will exceed that amount and then?
    Mr. Violette. Yes and it is a projection. I mean, she is a 
young lady Mr. Stupak. Right.
    Mr. Violette. And we could be--you know, the Fund or the 
State Insurance Fund could be supporting her for the next 40 or 
50 years so those reserves are pretty high.
    Mr. Stupak. So once she exceeds $3 million, then----
    Mr. Violette. No, she is still for the rest of her life. 
There are no limits on the medicals, the rehabilitation or the 
weekly stipend.
    Mr. Stupak. Okay. Mr. Shapiro, the California Horse Racing 
Board provides annual maintenance audits of the tracks. Is that 
right?
    Mr. Shapiro. Yes. What we so is prior to the--we issue 
licenses to racing associations annually. So prior to the 
issuance of any license, we have a review where we inspect the 
entire backside for the living conditions.' Mr. Stupak. Sure.
    Mr. Shapiro. And we inspect the track, as well. And 
California has adopted minimum safety standards that are 
outlined in my written testimony and every track must adhere to 
those. You may note that if there is an unsafe riding surface, 
such as just recently at Hollywood Park the all turf racing was 
canceled because the Racing Association came forward and said 
they had concerns and so all turf racing was canceled.
    Mr. Stupak. I am going to ask this question. I don't know 
who wants to answer it. Maybe Mr. Shapiro if you know. Can I go 
on the Internet and watch a race somewhere else and place a bet 
on the Internet?
    Mr. Shapiro. Absolutely. Absolutely. You have----
    Mr. Stupak. So when I am in California and if I want to bet 
on someplace in----
    Mr. Shapiro. There are a number of different providers that 
you can go to. You can go back to your office, log on the 
Internet and you can just go to TVG, You Bet, Express Bet and 
you can bet something like 80 different tracks around the 
country. You just have to open an account.
    Mr. Stupak. And that stream of revenue, how do we tap into 
that to take care of some of the concerns that have been raised 
here these last couple hearings?
    Mr. Shapiro. Well, there are different agreements in place 
between the simulcast providers and the tracks and those are 
negotiated between the simulcast providers and the individual 
racing associations.
    Mr. Stupak. I see.
    Mr. Shapiro. And so there are fees that are paid to the 
host track and also the track that then is importing the races.
    Mr. Stupak. But California law would not allow you to 
access this Internet gaming, right?
    Mr. Shapiro. Well, we do receive revenues from it.
    Mr. Stupak. From that?
    Mr. Shapiro. But it is reduced revenues.
    Mr. Stupak. It is reduced revenue. Right. Sure.
    Mr. Shapiro. Right. Because there is--a racetrack in 
California makes approximately 17 cents on every dollar that is 
wagered at a live racetrack. Now, that 17 cents is then split 
between the track, the State and the horsemen.
    Mr. Stupak. Right. Right.
    Mr. Shapiro. But it is much less for simulcast revenues.
    Mr. Whitfield. And there is some offshore gambling that you 
wouldn't receive any benefit from.
    Mr. Shapiro. Well, that is one of the big problems that is 
facing racing today, is there are hundreds of millions of 
dollars from signals that are being pirated that are offshore. 
And all the tracks in the States are suffering because those 
revenues are not coming into our mutual pools. And so 
consequently, tracks aren't getting that money and they are not 
rebuilding their track surfaces as much as they should and they 
need to. And horsemen, including jockeys, aren't getting the 
benefit of that revenue, either and of course, the States don't 
get that money. So it is a serious and major problem that is 
pretty much going unchecked and that is why perhaps looking at 
the Interstate Horse Racing Act and ways to modify that would 
be very helpful.
    Mr. Whitfield. Is there anybody on the panel that 
understand the Wire Act? And I have been told that the Wire Act 
conflicts with the Interstate Horse Racing Act in some regard 
and that there is some question about whether or not--does 
anybody know what I am talking about?
    Mr. Roark. Kind of.
    Mr. Whitfield. Mr. Roark?
    Mr. Roark. All I can tell you is, the Wire Act of 1930 
something had to do with telephone wagering and there has been 
positions taken that based on the Wire Act, simulcast wagering 
may or may not be legal. At this point we are doing it and it--
well, it is our position that it is legal. I would like to 
comment, if I may, Mr. Chairman, on something Mr. Shapiro said.
    Mr. Whitfield. Yes?
    Mr. Roark. I don't want this committee to be left with the 
impression that all offshore wagering is being done and pirated 
from us.
    Mr. Whitfield. Right.
    Mr. Roark. We have contracts in place with racing 
jurisdictions around the world, as well as organizations and 
racetracks that provide some revenue to us. There are a lot of 
places that aren't doing that. The Interstate Horse Racing Act 
could not apply to that because they are foreigners and in 
foreign countries. But based on treaties and based on other 
things, we are working on solving that problem and we hope to 
have something in place in the next year or two to get 
something done about that.
    Mr. Stupak. As long as the race is run in the United 
States, we would have something to say about it, whether bets 
are placed off-shore or not.
    Mr. Roark. We should have, Congressman.
    Mr. Stupak. We will have.
    Mr. Roark. We should have. Yes, sir.
    Mr. Stupak. We will have.
    Mr. Roark. Sir?
    Mr. Stupak. We will have.
    Mr. Roark. Yes, sir. I agree. I hope so.
    Mr. Stupak. Mr. Roark, why don't more States do what New 
York does? Why would there be objection to a model like New 
York has?
    Mr. Roark. To me, it is not a matter of objections, 
Congressman. The problem is the funding because as horsemen, we 
spend a couple of billion a year on either buying horses or 
having training them and all the expense factor of getting 
horses ready to race.
    Mr. Stupak. Sure.
    Mr. Roark. And we are getting revenue back less than $1.5 
billion so we are losing--only about 3 percent of thoroughbred 
race owners make a profit. So you would say why do you do it? 
The love of the sport. The majority of us lose money. I 
practice law. As Mr. Monahan said, I am a trial lawyer so I can 
afford to have my horses. But the problem is revenue and the 
owners are always asked to help fund whatever. Like on the 
Racing Medication Task Force, the research is being done and 
they are asking us to provide so much a mount all over the 
country to fund that research. Second, the----
    Mr. Stupak. What is the most lucrative part of horseracing 
then? Is it the gaming?
    Mr. Roark. The what?
    Mr. Stupak. The most lucrative. Where do you make the most 
money?
    Mr. Roark. Who, me?
    Mr. Stupak. Who gets the most money? The tracks? The people 
placing bets? Where is the money in horseracing if there is $26 
billion----
    Mr. Roark. I would say the really good breeders that breed 
the best horses, mostly in eastern Kentucky and in other States 
of course, as well as the grade one racetracks. They make more 
money than anyone else does, in my opinion.
    Mr. Stupak. Well, our problem is what I am seeing here is, 
you know, you can't have horseracing without the horses. You 
can't have horseracing without the jockeys. You can't have 
horseracing without the tracks. Everyone is protecting their 
own turf. Everyone says it is an inherently dangerous sport. 
Everyone says we do it for love of the sport. But when you get 
injured, love ain't going to get you very far.
    Mr. Roark. Well, we are the engine that drives the train, 
Congressman. We are the owners that race the horses. Without 
our horses, the tracks would have no reason to be open.
    Mr. Stupak. Sure.
    Mr. Roark. And our asset is transportable, you know. We can 
move from track to track. Our problem is that--and we are glad 
that the jockeys are getting almost $94 million of our purses 
annually, which is almost 10 percent and that comes out of the 
owner's pocket. And then the trainer's share comes out of the 
owner's pocket. And the tracks and I don't agree with each 
other about where the funding should come from. I made them a 
proposition more or less. I said look, as soon as you pay $94 
million in insurance premiums around the country, we will split 
with you over and above that whatever the cost of insurance is.
    Mr. Stupak. Yes, but they have a--you know, as the horse 
owners, if you take the example we had in testimony here in the 
Kentucky Derby. If I own a horse and my horse wins and that 
only happens once a year, obviously, but that is quite a bit of 
money and the jockey doesn't get that opportunity to make that 
kind of money.
    Mr. Roark. The jockey of the winning Derby horse?
    Mr. Stupak. Well, okay, you get $600,000. They get what, 
$120,000? Ten percent of that?
    Mr. Roark. The Derby winner gets $1.2 million. The jockey 
gets $220,000 of that.
    Mr. Stupak. $120,000, yes. Yes.
    Mr. Roark. And that owner probably has spent $10 million 
getting the horse to where he could even run in the Derby, or 
more.
    Mr. Stupak. Yes, but then they have the stud fees and 
everything else from that winner, don't they?
    Mr. Roark. Maybe. Hopefully, they do. It depends on the 
horse's breeding, actually. Some horses will win the Derby, 
they will end up commanding a big stud fee compared to others.
    Mr. Stupak. Sure. All right. Well, we are looking for a 
revenue source because we have got to take care of these folks.
    Mr. Whitfield. Mr. Violette, let me just ask a couple other 
questions. You are a trainer?
    Mr. Violette. Yes, sir.
    Mr. Whitfield. And I might just make a comment then. The 
horseracing industry, I know there are exceptions to the rule 
but it seems like the trainers have more to say about 
horseracing than anybody. I mean, a lot of owners that I know 
are kind of hands off and the trainers basically seem to be in 
control. But you are a trainer and you have other experiences 
in this industry. How important do you think this scale of 
weight issue is for jockeys and uniformity on that one issue? 
Is that a big deal?
    Mr. Violette. From a health issue, it is obviously very 
important. We don't want ill jockeys riding on horses. We don't 
want jockeys starving themselves to death.
    Mr. Whitfield. Right.
    Mr. Violette. On the flip side, weight is significant as 
far as contributing to injuries on horses. We can't have 150-
pound jockeys in the afternoon. And I think everything has to 
be done educationally for riders on how to take care of their 
bodies, how to eat properly, how not to damage--and maybe we 
have to have a minimum fat standard as far as being able to 
ride. Suddenly in New York the scale of weights has gone up 
about four or five pounds the last year. They have been very 
quiet. The actual allowances, once you start with a top weight 
going down, they used to have--you know, if you hadn't won a 
race in such a such a date, you were allowed nine pounds. Those 
allowances have disappeared so the scale has actually gone up.
    Mr. Whitfield. Um-hum.
    Mr. Violette. But there has to be a line somewhere as to 
how heavy you can be in order to be a jockey or how light you 
have to be. And I think once you establish a line, there is 
always going to be some segment of the community, it might be 
me, that if it is 140 pounds, maybe I am going to half-starve 
myself to get down to 140 pounds.
    Mr. Whitfield. Yes.
    Mr. Violette. So I think a good deal of common sense has to 
be involved. Our horses are very brittle these days. They don't 
seem to take the training or the number of racing starts that 
we used to, I don't get out of our racehorses. Do I think there 
is a fine line there? There has to be some common sense. There 
has to be some responsibility accepted by the riders to try to 
eat responsibly and try to limit their weight. And you know, if 
you are 6'1'', maybe you should be playing basketball and not 
trying to be a jockey.
    Mr. Whitfield. Yes. I am just going to go down here real 
quickly and then we are going to conclude this hearing. But we 
have heard a lot about medication today and I have heard some 
major jockeys who have retired have said that one of the 
reasons they retired was not knowing what has been given to the 
horse. And therefore, not knowing whether or not there may be 
an accident or so forth. I would just like to just go down and 
ask each one of you individually, do you think that illegal 
medications or illicit medications do contribute significantly 
to horseracing being a dangerous business? Mr. Metzger?
    Mr. Metzger. I don't believe there is enough research to 
document this at that time but I do believe the industry has 
come together to put the research together through the Racing 
Medication and Testing Consortium. Through the new project 
announced, the EDRI through Dr. Caitland's lab at UCLA. I think 
the industry is going to put the research in there instead of 
speculating it.
    Mr. Whitfield. Okay.
    Mr. Metzger. Our organization has been out, we believe, at 
the forefront of the integrity issues to ensure that. But at 
this time, I don't think we have the evidence and the research 
but we are moving in that direction with the amount of money 
that has been committed to the EDRI and the Racing Medication 
and Testing Consortium.
    Mr. Whitfield. Okay. Mr. Roark?
    Mr. Roark. I agree with Mr. Metzger, Mr. Chairman, but also 
I would say I don't think it is that significant, as far as 
illegal medications are concerned.
    Mr. Whitfield. Okay.
    Mr. Roark. I think they get a lot of publicity but I don't 
think it is that significant around the country.
    Mr. Whitfield. Okay.
    Mr. Roark. It does exist. We all know that and sometimes on 
a daily basis.
    Mr. Whitfield. Okay.
    Mr. Roark. But I don't think it is that significant, 
comparatively speaking.
    Mr. Whitfield. Okay. Mr. Maline?
    Mr. Maline. Well, I totally agree. I don't think it is that 
significant. I think it is important that research be continued 
throughout the country. I also feel that therapeutic medication 
is important for horses, just as it is for human beings. And we 
propose the most stringent testing but at the same time we feel 
research is necessary to determine if indeed therapeutic 
medication is a help or hindrance.
    Mr. Whitfield. Mr. Riedel, do you have a comment?
    Mr. Riedel. Well, just to say that I last trained 
racehorses 25 years ago and I have been far away from that. But 
I do believe racehorses do need therapeutic medication.
    Mr. Whitfield. Okay. Mr. Giovanni?
    Mr. Giovanni. Mr. Chairman, first of all let me say that I 
think Mrs. Whitfield has done a wonderful job in Kentucky with 
the Kentucky Medication Committee. They have put together some 
standards, threshold levels, trace levels. That is important. 
It has always been my belief that injuries to horses equates to 
injuries to jockeys. Pain is the early warning system for the 
horse. When the horse doesn't feel pain, they extend themselves 
and they get hurt and they fall and when that happens, jockeys 
get hurt.
    So I really appreciate the work that she has done and the 
work that the Consortium has done but I still think there is a 
lot more work to be done.
    Mr. Whitfield. Mr. Violette?
    Mr. Violette. I think for a while this was on the back 
burner within the industry but the last three or 4 years it has 
really been on the front burner with the pilot turned way up. 
Between the Racing Consortium and the aggressive nature that 
different racing and wagering boards have taken, we are not 
really, maybe not ahead of the curve. But the industry is being 
very, very aggressive these days and trying to establish very, 
very low tolerance levels for anybody trying to cheat the 
system and trying to improve the testing to have it all state-
of-the-art.
    Mr. Whitfield. Mr. Daney?
    Mr. Daney. We are very aggressive in our testing and 
continue to be in support.
    Mr. Whitfield. Okay. Mr. Shapiro?
    Mr. Shapiro. I do believe that there is a place for 
therapeutic but I also believe that there are medications that 
are being abused throughout the sport. And I believe that all 
tracks need to be vigilant and I think uniform testing and no 
tolerance penalties should be instituted and it is necessary to 
protect the integrity of the game.
    Mr. Whitfield. Mr. Monahan?
    Mr. Monahan. Congressman, I think the Consortium, I mean, 
all of the areas of the industry have come together with that 
Consortium and when it is finished, it is going to be taken 
care of. It really is. The threshold levels of pain medications 
and testing for illegal medications, that is a real, real good 
program.
    Mr. Whitfield. Mr. Haire?
    Mr. Haire. Congressman Whitfield, I am a proud member, a 
charter member, of the Consortium and I--you know, we made so 
much progress the last few years. I firmly believe that these 
horses should have limited medication so these jockeys can feel 
what they have underneath them, like they used to years ago 
when there was no medication. It is very important when a 
jockey warms up his horse or they can feel that animal. They 
are athletes, too. They know if there is a problem coming on, 
if they warm up out of it or not. So I believe hay, oats and 
water. That is all they need in their system and get back to 
how racing used to be when it was that way.
    Mr. Whitfield. I would ask unanimous consent that we submit 
this binder into the record with all the exhibits. And I want 
to thank all of you for your patience as you have been here. We 
spent a lot of time together today and I don't know if you all 
have enjoyed it as much as we have or not. But it is a 
complicated issue and we look forward to working with all of 
you on an individual basis or collectively to try to address 
some of these issues. So thank you very much and I hope you 
have a great weekend and hope to see you again soon. Thank you. 
And the record will remain open for 30 days for additional 
questions and this meeting is adjourned.
    [Whereupon, at 5:25 p.m., the subcommittee was adjourned.]

                                 
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