Less than two weeks after the $14 billion horse racing wagering industry was rocked by allegations that a winning $3 million bet was rigged, investigators have been told that the possible wrongdoing could be more widespread than first believed.
Industry observers also have raised questions about the vulnerability of older computer equipment used by the companies that process bets. Two years ago, a proposed overhaul of those systems "fell apart" when "the scope and cost of the plan became an issue," according to Tim Smith, president of the National Thoroughbred Racing Association.
Don Groth, president of Catskill Off-Track Betting Corp, the OTB site where Derrick Davis placed his winning wager, said yesterday that he has turned over to authorities the names of two Catskill OTB account holders, one of whom made a winning Pick Six wager prior to the Breeders' Cup. Groth said he told authorities that he believes the two are friends of Christopher W. Harn, the senior software engineer fired by Autotote, a computer wagering company, for his alleged role in the Pick Six bet.
"Following the Oct. 31 announcement by Autotote [that it had fired Harn], I was able to connect the dots and determine that both individuals are friends of Chris Harn," Groth said.
Harn's lawyer, New York-based Daniel Conti, maintained his client's innocence. Neither Davis nor Harn has been charged.
"As far as I'm concerned, nothing has changed," Conti said. "My client is out of a job with a large mortgage and a two-year-old daughter at home. And no one involved in the investigation has produced any evidence that he's done anything wrong."
Investigators believe Harn and Davis, both 29, worked together to manipulate the winning wager. The two were housemates and members of the same fraternity at Drexel University in Philadelphia.
The New York State Racing Board would not comment on Groth's allegations, spokeswomen Stacy Clifford said, adding that "the backgrounds of the individuals involved are part of the investigation." Clifford said the investigation, which is being led by the board and includes the New York State Police and the FBI, includes a review of multiple bettors and many different races.
The betting scandal has led to questions about the quality of the industry's tote system. When wagers like a Pick Six are made from off-track sites, there is a delay in the time they are reported because the volume of information is too much for current systems to handle. But banks and other financial service companies have paid to upgrade systems so that larger amounts of data can be moved much faster, said Steve Surdu, director of Consulting for Foundstone Inc., a computer security firm in Mission Viejo, Ca.
"In general the parimutuel wagering industry's technology infrastructure is relatively arcane compared to other technology heavy industries," said Michael Tew, a Bear Stearns analyst who follows the industry.
Racing officials concede a plan to upgrade the industry's tote system was unsuccessful in 2000. The NTRA and IBM proposed creating an Internet-based network that would run through a fiber-optic system. That deal disintegrated due to technology issues, such as simulcasting, networking and standardizing, said Smith.
"The IBM plan did not go forward for a variety of reasons," Smith said. "The scope and cost of the plan was an issue."
The NTRA formed a task force last week charged with finding ways to improve security at the wagering companies. The task force, which has enlisted the systems security unit of Ernst & Young, will attempt to address the lag time between when Pick Six wagers are made and actually sent to the host system. In a Pick Six, bettors try to choose the winning horse in six consecutive races. To avoid overloading computer systems, information is divided and recorded at different times. The amount of a wager and the time the bet is made is transferred through computer systems. Details such as which horses bettors choose is held back at the off-track site or at "wagering hubs."
The task force will also examine the ability of a tote company employee to compromise the system, and the potential for hackers to get into the system
"Technology has changed so fast that some things that were problems then aren't now," Smith said. "The cost of accessing bandwidth has gone down considerably.
"There needs to be industry-wide standards; to get that done will take the cooperation of tracks, tote companies and regulators."
As the investigation continues, the possibility that other tainted bets have been placed in the past has moved to the forefront. A former Autotote employee who worked closely with Harn said there were more than a dozen people with access to Autotote's computer system who could have manipulated wagers.
"I'll bet [Autotote executives] are working 24-7 on finding out if somebody has done this before," said the former Autotote employee. "It doesn't make sense that somebody would do $3 million right off the bat."
Harn worked in Autotote's research and development department, assigned to maintain the company's computer system. Many of the 19 people in the unit have the same computer access as Harn, according to an Autotote executive who requested anonymity.
"The other companies have a lot of people with the same level of clearance," said one industry analyst. "[They] could do the same things that Autotote accused Harn of doing."
An executive at Autotote said that during 2000 Harn also worked at another tote company, AmTote, one of only three companies that handle national parimutuel wagering.
"He [told people] he was leaving for a position that had more managerial potential," the executive said, adding that he did not know why Harn returned to Autotote.
A spokesman at AmTote denied this week that Harn had ever worked there.
Reached this week, Harn refused to comment.
Two of his former Autotote colleagues said Harn was well-respected and traveled often on company business. One on trip, he met his future wife, Mercedes, in Peru.
Davis placed his wager 20 minutes before the start of the first race. After the fourth race and after the winners of those races had been announced, Harn allegedly plucked the wager from the electronic hub and changed Davis's picks to the winning horses. Davis put money on every horse in the final two races.
The ticket cost Davis $192 to cover all of the combinations at $2 each, and Davis placed the bet six times at a cost of $1,152. Davis's six winning tickets were worth $428,392, and he had 108 of the 186 consolation tickets.
The consolation payoff for hitting five of six races was $4,606.20. Each of the 72 other holders of those tickets stand to collect an additional $35,699 if Davis's tickets are nullified. The tickets are frozen during the investigation.