Saturday, 4 May 2013

Who will rescue Yavapai Downs racetrack?

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In the windy high desert of north-central Arizona, amid the banana yucca, prickly pear and pinion pine, is a busted, dust-collecting horse race track. In recent years, the managers of the track were charged with various forms of mismanagement in civil court and additional federal accusations in federal bankruptcy court after $14 million in United States Department of Agriculture loans and piles of cash could not be accounted for.

During the good years, Yavapai Downs of Prescott Valley hosted horse racing from May to October at which time the caballeros and vaqueros packed up their blankets, buckets, feed and horse trailers and drove south on Interstate 17 to begin a new season at Phoenix’s Turf Paradise, when the months turn cooler. Now, the only activity at the Downs is from renters who run a soda pop distributorship from space on the Down’s property.

The loss of the track to the community is more than just some races run amuck; it is the loss of a major local happening that wore many colors.

The town of Prescott Valley tried to keep the track open. After all, it was keeping jobs and tax money coming since it opened in 2001. The town made significant improvements in track infrastructure, laying new water lines for a trailer park and neighborhood, and paving roads, driveways and turn lanes with the transportation department, according to town manager Larry Tarkowski. Now the only beneficiaries are the soda pop distributor and residents who benefited when the town extended water lines. But the town and taxpayers are now left holding the bag, to the tune of $1.2 million, plus a current water bill of $6,800 according to bankruptcy court documents.

Prescott, ten miles away, still hosts the World’s Oldest Rodeo and in past years hosted horse racing. But gone are the days of the Yavapai County Fair, which was successful for a decade when held at Yavapai Downs. The fair is now held in a hockey arena and parking lot on the other side of town. Gone are the small rodeos and horse shows in the modest arena called the Coors Center, and gone are the days of thunder when auto racing took over the second track at the Downs.

Painfully missing at the track are the classrooms of Achieve Academy, a charter school that used office space at the Downs so students could get hands on vocational technical training in the art of food preparation and horsemanship. One parent who volunteered there blames the co-mingling of racetrack funds and academy funds as the reason the track closed the doors to the school kids.

A few television screens are still dangling from the ceiling – old tools for off track betting where Prescottonians could wager on live video feeds from California, Colorado, Oklahoma, Virginia, Washington, New Mexico, New York, Pennsylvania, Iowa, Canadian horse racing firms, and, yes, the Kentucky Derby. But when the managers ran out of the gates, they left debts to all the other cooperating race tracks totaling nearly $500,000. The managers simply never paid the bills. A list of creditors owed money is below.

Charged with various dastardly deeds are long time Yavapai County residents Sharon Fischer and her husband; Gary Spiker and his wife; Laurie Boaz and her husband; Rod Cordes and his wife; Kevin Keighron and his wife; Phil Bybee and his wife; Charles Krause and his wife; other yet to be named corporations, and Jeff Wasowicz and his wife – Jeff being a long time employee of the largest land and cattle company known as Fain Signature Group of Prescott Valley. Local historians say it was the Fains who sold the land for the Downs to the Yavapai County Farm and Agricultural Association and that Wasowicz married one of the Fains. Ironically, Fain Signature is listed in the bankruptcy papers as a creditor owed $5,100 for land rental.

The bankruptcy trustee, Brian Mullen of Phoenix, was shrewd enough to claim all the mismanagement of funds inside the bankruptcy petition and in his civil case against the parties. Shrewd because a bankruptcy petition and civil charges leave open the possibility of future criminal charges, although Deputy County Attorney Jack Fields told me, “Our office has not received a submission for prosecution regarding Yavapai Downs.”

Mullen won’t comment, and out of respect, this reporter won’t press him for a comment until the grime in the stalls is totally raked. But the court documents secured by this reporter show accusations of breach of fiduciary duty, negligence and gross negligence, employee negligence and misrepresentation.

Wasowicz, Cordes, Keighron, Boaz, Bybee and Krause are current or former board of director members. Fischer was the former director of finance at the Downs, and controller of Achieve Academy. Spiker was a former general manager, and he “signed for the Charter Holder” – Achieve Academy’s paperwork. The Arizona Education Department investigated the shutting down of the academy by the racetrack, and Spiker and Ridennoure claimed that their 86 student attendance in 2009 was not enough to sustain the program; they needed a minimum of 150, so the racetrack broke the academy’s lease, which was to run through 2014.

Parents, like Brenda Pendergast, disagree. “It was the Downs’ management that co-mingled school funds with racetrack funds, and that caused its downfall,” said Pendergast. She said she volunteered for Achieve Academy for years. It was open from 2002-2009 and at one point had nearly 400 students in attendance, from fourth grade through high school.

Phil Bybee’s family came to the Prescott area in the 1870s – when the Earp brothers were deciding if they wanted to move to Tombstone; Fort Whipple was helping to keep the peace with Indian tribes; and Yavapai County’s newest industry was running − horse racing. Phil was born and raised in Prescott, but now stands accused of negligence. “We were victims of the down turn in the economy,” said Bybee. “People lost discretionary and disposable income, and they made a choice not to come to the race track.” But he also said there was a downward trend in horse wagering as early as 2005. As a board member, he worked as a volunteer for years and said he never got a dime in pay, and his innocence will all come out in the wash.

He said press reports about mismanagement of funds are not true. And he likes Sharon Fischer. “She struck me as very honest. I worked with Sharon for several years. Her personality didn’t always get along with everybody but there’s not a dishonest bone in her body.” Bybee said the track had a high interest loan and the USDA loans retired that debt at a smaller interest rate.

Even with good intentions, the track had a cloud over its paddock for many years. Good horses wouldn’t run there when it had a quarter-mile race track because it had a sharp turn and was unsafe for jockeys. One woman jockey was impaled on the guardrail. She lived and filed a lawsuit. After the one-mile track expansion, more quality horses made the circuit and that drew more paying customers; but then came the economic downturn, and the loss of hundreds of jobs.

The last general manager before the bankruptcy was Mike Mullaney. He was paid more than $46,000, plus reimbursement for a Jeep tire, to manage the track from April to July of 2011, and he signed off on the federal court’s “statement of financial affairs” for the Downs in July 2011.

A former general manager who spoke on condition of anonymity said, “I had no idea how much debt we were under when I accepted the job. Long time employees had been developing bad habits under someone’s supervision for years.”

The source went on to say, “It’s as simple as money taken in and no bills paid. Fischer threw papers up in the air when I asked her financial questions.” In a separate email, the ex-general manager said, “We inherited what we got, sorted out what we believed to be truths, rectified what we could and applied bandages, but the bleeding could not be stopped.”

When asked if Fischer left tens of thousands of dollars on her desk when she left, the ex-general manager said he heard that story, too. And he was quick to point out that Fischer had hired her daughter to do work around the track. Unpaid bills show Fischer is still trying to get $900 in payment for her “book keeping services.” The source and former general manager said a previous Downs general manager would have his wife handle cash in big brown bags to avoid the appearance of “impropriety.”

Some say local elected officials should have had their finger on the pulse of the dying nag. “I can’t speculate on what elected officials were involved but it’s safe to say Carol Springer, Tom Thurman and Chip Davis were county supervisors at the time and had indirect oversight because of the county’s financial interests,” the “anonymous” ex-general manager told me.

According to information Mullaney stated in court filings, it was the Yavapai County Fair Association (YCFA) Board that secured three USDA Rural Development loans – one for $9 million, one for $2.5 million, and one for $1.5 million. The various organizations and acronyms can be confusing: the YCFA created the Farm & Agriculture Association (FAA) in 2009 which meant the FAA and the YCFA had joint interest in the federal loans they obtained. This reporter filed a Freedom of Information Act Request with the United States Department of Agriculture and learned that Charles Krause signed off on one loan that combined two loans totaling $10.7 million in 2009 in his capacity with the Yavapai County Farm and Agricultural Association.

Springer has retired. Thurman and Davis were re-elected in November 2012. Only Thurman replied to my emailed questions, giving me a categorical denial that he knew anything. This in spite of the fact that he was named in Arizona Corporation Commission records as being on the “Ag Board” as it is known, at about the time the track started losing serious money – in June 2009.

Articles of incorporation, still on the Arizona Corporation Commission site show Krause was on the “Ag Board” the same time as Tom Thurman, Larry Ridennoure, Ron Cordes, Jeff Wasowicz and Sharon Fischer. Kevin Keighron replaced Thurman in July 2009.

Politics makes for strange stall mates, of course, so it makes perfect sense that elected officials, who own and race horses went to bat for a man who has stepped up to the trough as a potential new buyer. The former racetrack manager said, on condition of anonymity, that Congresswoman Ann Kirkpatrick opened the doors to the USDA loans. Arizona legislator Steve Pierce races horses and told the Arizona Racing Commission that a prospective new owner, Gary Miller, should be granted the license. Legislator Karen Fann used to have horses there and she said the same. Neither would comment for this article, nor would Congresswoman Kirkpatrick’s media spokeswoman. A delegation from the town of Prescott Valley went to the Racing Commission in Phoenix and described how badly they wanted the prospective new owner approved. Mayor Harvey Skoog and town manager Larry Tarkowski encouraged the Racing Commission to approve Gary Miller’s application so Yavapai Downs can re-open with racing. “We mentioned the benefits to the taxpayers of Prescott Valley because of the creation of over 300 jobs,” Tarkowski told me.

Part Two of this report will feature the man who wants to be the new owner along with
more information regarding the town of Prescott Valley’s desperate need to get the track running again.

The civil complaint, which is assigned to County Judge Michael Bluff, says the Downs filed for bankruptcy on July 13, 2011 and after that bankruptcy petition, Mullen was appointed trustee and discovered the breach of statutory standards of conduct. The court documents clearly state the debts came about as a result of former employee practices. Mullen’s court filings are particularly critical of Fischer and Spiker, claiming Fischer had an obligation to manage and maintain financial controls, property and assets while complying with all regulations from the Arizona Racing Commission, and Arizona’s Departments of Gaming and Revenue. Mullen’s complaint says when Fischer worked at the track in 2010 and 2011, she engaged in conduct that breached all aspects of her employment agreement, including misrepresenting the financial position of the track. Page 10 of the Complaint says Fischer demonstrated reckless indifference and a conscious disregard for the interests of the track, entitling Plaintiff to an award of punitive damages.

Spiker, Mullen’s complaint says, breached his supervisory obligations by misrepresenting the track’s financial condition which ended at the finish line - Chapter 7 Bankruptcy.
Mullen is asking the court to award compensatory damages against all those named, plus punitive damages against all and actual damages (with interest) to be proven at trial.

As of the filing date of this article, the civil case was in the discovery phase and the bankruptcy case was languishing in multiple cross motion filings.

Partial List of Creditors Holding Claims vs. Yavapai Downs (some OTB-related)

John Deere $8,600

Coconino County Treasurer, for races $69,000

Ajax Downs, Ontario, CN $6,600

Arizona Horseman’s Benevolent & Protective Association

2010 purse money $26,000

Assinaboia Downs, Winnepig, races $5,000

Fort Erie, races $10,000

Sacramento County Fair races $70,000

Harrah’s, Louisiana $48,000

Indiana Downs and Hoosier Park races $56,000

Liam Game Racing, Fargo $4,600

Los Alamitos CA races $34,000

Pacific Racing, Arcadia $36,000

Ruidoso Downs, NM $12,000

Thistledown, Cleveland $17,000

Sportech, Atlanta $56,000

Steptoe and Johnson law firm $30,000

Part Two of this report will continue where this article leaves off.

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