Scenes from the morning workout at Woodbine Racetrack on June 27, 2013. The Globe found that Woodbine Entertainment paid $51-million in bonuses to employees over a 12-year period. (Moe Doiron/The Globe and Mail)

OLG began review of racetracks’ spending of slot revenues in 2010

RENATA D’ALIESIO AND KAREN HOWLETT

The Globe and Mail

PublishedMonday, Sep. 30 2013

 

Ontario’s gambling agency launched a review of Woodbine Entertainment Group and other racetrack operators in 2010, demanding that they provide proof of how billions of dollars from government-owned slot machines had improved the horse-racing industry, reveals a letter obtained by The Globe and Mail.

 

Paul Godfrey, then six months into his post as chairman of the Ontario Lottery and Gaming Corp., wanted to introduce more stringent governance practices throughout the agency, according to sources. He sent a letter dated July 29, 2010, to track operators, asking them to submit reports outlining how they had spent slot revenues. He also advised new reporting standards were in the works to address accountability gaps.

 

The letter eventually led to a wider inquiry about compensation practices at Woodbine, culminating in a formal probe by Ontario’s gambling regulator, the Alcohol and Gaming Commission.

 

Mr. Godfrey, who declined to comment for this story, sent the letter well before he became aware of the size of compensation payouts at Woodbine Entertainment, according to sources familiar with the review. The Globe and Mail revealed Saturday that Ontario’s gambling regulator is investigating Woodbine’s executive compensation and governance practices. The probe involves an examination of Woodbine’s status as a not-for-profit corporation.

 

Woodbine Entertainment, the province’s largest racetrack and slot-machine operator, provided OLG board members with detailed information on its operating and capital expenditures, Clay Horner, head of Woodbine’s compensation committee, said Sunday. Some track operators, meanwhile, refused to hand over any information while others fully complied, the sources said.

 

In 2011, Richard Bonnycastle, a founding member of the Jockey Club of Canada, suggested to Mr. Godfrey that he investigate compensation at Woodbine Entertainment.

 

The company, however, refused to disclose executive pay to the OLG, according to the sources. The OLG then made a formal complaint about compensation to the Alcohol and Gaming Commission of Ontario in April, 2012. Mr. Horner said that Woodbine Entertainment provided information on executive compensation to the gambling regulator before the company became aware of the investigation.

 

The standoff between the OLG and Woodbine played a key role in the government’s decision last year to cancel the slots-at-racetracks deal, government and industry sources told The Globe. The move financially crippled many horse breeders and jeopardized thousands of jobs. The slots program had generated $4-billion of revenue for racetracks and just under $10-billion for provincial coffers since 1998.

 

The backlash in rural Ontario prompted Premier Kathleen Wynne to ask a panel of former cabinet ministers to develop a new deal for track operators that ensures horse racing remains part of the province’s gambling strategy. Ms. Wynne ousted Mr. Godfrey from the OLG in May in part because of disagreements over horse racing and a downtown Toronto casino.

 

Through interviews and documents, The Globe found that Woodbine Entertainment paid $51-million in bonuses to employees over a 12-year period through two profit-sharing programs: one for the rank and file and a separate plan for management. Some managers were also eligible for further payouts under a long-term incentive plan. The cost of that plan is not known.

 

Woodbine Entertainment has cancelled its profit-sharing programs, a condition of receiving government transition funds to replace slots revenues.

 

Serious questions about inadequate oversight of the province’s slots-at-racetracks program had been raised in a 2008 report for government. But that report spurred little action until 2010.

 

The Premier declined to comment on Woodbine Entertainment on Sunday because the matter is under investigation. A comprehensive five-year plan for the horse-racing industry is due in October. The plan is expected to include guidelines and benchmarks for funding.

 

http://www.theglobeandmail.com/news/toronto/olg-began-review-of-racetracks-spending-of-slot-revenues-in-2010/article14598975/