To Zorn's chagrin, Stronach to retain Laurel, Pimlico with sale to bankrupt Magna's parent company

Steve Zorn, managing partner of Castle Village Farm and a blogger on The Business of Racing, reports at his blog and on Facebook that lawyers for Frank Stronach's Magna Entertainment Corp. are in bankruptcy court today, presenting a revised reorganization plan that will (again) cancel an auction of Maryland's racetracks that was set for Thursday, leaving Stronach and MEC in charge of Maryland racing. Zorn says that's "bad news" both for racing in Maryland, and nationwide.

The Baltimore Sun has confirmed that the auction is off.

Zorn earlier had voiced concerns that Stronach and Magna would again find a way to stave off the auction of its majority ownership in Laurel Park and Pimlico. His breaking of the news that the auction is off to some degree contradicts reporting earlier today by The Blood-Horse that MEC had reached a settlement with the DeFrancis family, former owners of the tracks, on the family's future rights to potential slot revenues at the tracks, "apparently (clearing) the way for an auction of the tracks on Thursday."

Or not. Perhaps with the DeFrancis issue out of the way, Stronach and MEC have successfully argued that their position is sufficiently strengthened, permitting MEC's continued ownership of the tracks.

The Blood-Horse cited the Baltimore Sun as reporting that the deal between MEC and the DeFrancis family could pay Joseph DeFrancis and his sister Karin $8 million from MEC and $4 million from the Maryland Jockey Club to settle their claim to future slot revenues. It also was reported that the DeFrancis siblings could receive 15 to 25 percent of the proceeds of the auction if the total sale price is more than $39 million. (Ontario-based MEC paid $117.5 million for just 51 percent of Pimlico and 58 percent of Laurel in 2002, and another $18.3 million to acquire an additional 20 percent of each track in 2007.) But the newspaper reported that the DeFrancis siblings would only receive $1 million if the tracks wound up being purchased by MEC's parent company MI Developments, outside the auction process -- exactly what appears to be happening.

Now the Associated Press reports that MI Developments will pay $89 million to settle a lawsuit filed by a committee of Magna's unsecured creditors, $13 million to cover secured claims of PNC Bank, about $6 million to the holders of unsecured claims against the Maryland Jockey Club, and $5 million to "the former owners of Laurel Park and Pimlico."

The DeFrancis family was reportedly among the half-dozen or so potential bidders in the now-canceled auction. Others mentioned include the Cordish Cos., Penn National Gaming Inc., and Blow Horn Equity LLC, a Pennsylvania-based horse breeder and racing consultant backed by private equity.

The Sun's Web site story says that "plans to sell the track had raised concern about the future of ... racing in Maryland and the fate of the Preakness, the second leg of horse racing's Triple Crown." But clearly leaving the tracks in the hands of Stronach's people hasn't exactly allayed all concerns. After all, how much faith can be instilled in the Maryland racing community and its fan base by leaving in charge the company that went bankrupt in the first place? That's better than giving someone else a shot?

After all, the once-lengthy list of MEC-managed racing-industry properties includes such notable investments ditched or gone wrong as:

• The ill-fated, once-famed Bay Meadows Racetrack in San Mateo, Calif., now sold and bulldozed for a redevelopment plan that has stalled to nothing, leaving piles of rubble in its place.
• Great Lakes Downs in Michigan; closed by Magna in November 2007 and sold to the Little River Band of the Ottawa Indians for redevelopment as a casino.
• Remington Park in Oklahoma; sold for a reported $70 million profit to the Chickasaw Nation in a deal that is yet to close.
• Thistledown Racecourse in Ohio; sold for a reported $75 million profit in September to Harrah's Entertainment, another deal yet to close.
• And, Lone Star Park in Grand Prairie, Texas, bought for $100 million and reportedly being sold to the Chickasaws for just $27 million, yet another deal not yet competed because the Delaware bankruptcy judge delayed the sale in light of a competing bid from Penn National Gaming.

Yes, Magna still manages the likes of Santa Anita, Gulfstream Park, and Golden Gate Fields. It also owns HRTV and XpressBet.com. But the firm's list of scratches and also-ran finishes certainly rivals, if not exceeds, its record for racing biz wins. So it isn't surprising that some, perhaps many, industry insiders like Steve Zorn would rather wager on a new shooter -- or maybe an old veteran like the DeFrancis family -- in the race toward Maryland's horse racing future.

It isn't that racing's faithful don't want to see Frank Stronach and MEC succeed in managing racetracks. It's just that they've reviewed the past-performances and don't see much reason to bet on them.

Genius move: Stronach Stables buys Einstein

Einstein, Brazilian-bred son of Derby winner and multiple champion Spend a Buck and himself a multiple Grade 1 stakes winner, has been sold by Midnight Cry Stable to Stronach Stables for an undisclosed sum.

And I suppose that's good for the horse.

A horse for any course, Einstein is a multiple Grade 1 winner on turf at distances ranging from 8 1/2 furlongs to 11 1/2, and won this year's Santa Anita H.-G1 on synthetic. A G2 winner on dirt in Churchill's Clark Handicap, he's also been Grade 1-placed twice at Churchill in the 2008 and 2009 renewals of the Stephen Foster.

No doubt, the horse is a rugged, versatile competitor with stamina, something Stronach's people have said is sought by their breeding program.

"Mr. Stronach's breeding program focuses on soundness and on powerful outcrosses," said Eric J. Hamelback, general manager of Stronach-owned Adena Springs farm near Paris, Ky.

Einstein certainly fits the bill. And for the horse's sake, Frank Stronach's racing and breeding interests have been successful. Not so much Stronach's management of racetracks via Magna Entertainment Corp. If that sort of business history were to seep over into the racing and breeding side of Stronach's interests, Einstein might eventually be destined for receivership instead of stud duty.

Despite Stronach's checkered business success, his ownership of Einstein is a step up for the horse. Midnight Cry's owners, William Gallion and Shirley Cunningham Jr., were found guilty last month of bilking millions from clients in the fen-phen pharmaceutical settlement. The men were ordered to pay more than $127 million in restitution and both will spend time in prison.

Also lucky for Einstein, he'll stay with trainer Helen Pitts, who has shown she knows how to handle the horse. (She's also a trainer for whom the NTRA needs to get on the stick and write an appropriate bio!)

So, good luck to a great horse and his new owner in Sunday's Pacific Classic and beyond.

Paulick Report anniversary a time for celebration, contemplation

I noticed upon a visit to RaceDay360 that the "Paulick Report" is celebrating its first anniversary today. That's red-letter date, not just for Ray Paulick, former editor in chief of The Blood-Horse, who started his site after leaving that job, but also for all of racing journalism.

Paulick has noted that turf writing, as it's called, has long lacked the independence necessary to be a wholly reliable source of information on the industry. The Blood-Horse, for instance, is published by the Thoroughbred Owners and Breeders Association and thus controlled by a board of directors that also includes members of The Jockey Club; obvious potential conflicts of interest there.

Regardless of ownership, at many trade publications there is an ongoing struggle between journalists and, as Paulick calls them, "bean-counting publishers," over whether honest, sometimes by necessity critical journalism compromises the publication's ability to sell advertising to the very individuals and businesses the newsroom is covering. In the case of turf writing, those businesses include racetracks, stud farms, wagering sites and other horse- and racing-related concerns.

But in one year of his site, Paulick has proven that good, honest journalism can attract an audience, and doesn't completely repel advertisers.

In a brief item on the front page of his Web site, Paulick reported that in May his site saw 135,786 user sessions. That's an average of 4,380 per day. Some of those might be the same people returning to read new stories later in the day, but for a year-old "maverick" online publication, it's healthy traffic nonetheless.

And, Paulick's pages are smattered with advertising from key players in the industry. A quick glance this afternoon shows support from Airdrie Stud, Walmac Farm, Liberation Farm, McMahon of Saratoga, Werk's eNicks, Buck Pond Farm, Margaux Farm, Team Valor and TVG, among many others.

This advertising appears despite the fact that Paulick for the past year has reported extensively on troubles, squabbles or even outright scandals in the thoroughbred industry, ranging from extensive coverage of the Ernie Paragallo horse-abuse case, the furor created by the Breeders' Cup's December decision (later overturned) to ax its special stakes program supplements and how the Breeders' Cup's "old guard" and "new guard" have struggled behind the scenes for control of the series. He's joked about TOBA giving an award to its own Sales Integrity Division, and either he or his guest writers have tackled issues like drugs in racing, the antiquated tote system, and machinations in track management from Magna's mangling of its holdings to Churchill's power-play to push wagering through its Twin Spires account-betting system.

Most of that coverage you wouldn't see from the mainstream publications; at least not in the depth and with the honesty Paulick has provided.

In the interest of depth and honesty, I'll confide that I e-mailed Ray Paulick on June 11 wanting to discuss precisely these issues (and the market for independent turf writing) and I haven't heard back from him yet. I still hope to. I'm sure he's busy and he doesn't know me from Adam.

That stated, on the occasion of the Paulick Report's anniversary, for full depth and honesty I'll go on record with my one legitimate quibble about that online publication. Amid the mind-boggling array of dozens or even hundreds of links to Paulick's reporting and aggregated racing news stories and blog headlines is one link that gives me pause: "Donate to Paulick Report."

I hope Ray Paulick makes out well with his advertising sales and is richly rewarded for his renegade turf-writing efforts. But my personal journalistic code makes it difficult to accept "independent" and "donation" in the same conversation.

Advertising is a commodity. Even industry players who have quarrels with how Ray Paulick reports on racing might continue to advertise with him if they see that the readership he generates is a healthy market they can't afford not to reach. So a business deal takes place: Paulick Report's stories generate readership; that readership lures advertisers who pay Ray Paulick for space; the advertisers receive said space and thus reach Paulick's readers. ... End of transaction.

Yes, it's the very same business transaction that goes on between any of the racing industry pubs and their advertisers, with the lone difference being that Paulick as an individual can, and does, show more backbone in his reporting, in spite of the threat of lost advertising revenues as a punitive response to coverage that steps on toes or wasn't flattering. (Which does happen in the media business when advertisers get offended. Trust me.)

But donations are different. A donation is, by definition, a gift. And while in an ideal world, a gift is given without expectation of anything in return, we all know that isn't always the case. That's why, in my own journalistic code of ethics, I'd never leave myself open to the negative possibilities -- that a financial contributor would come back on me later expecting favorable coverage, or that readers could be left with any question in their minds whether my list of anonymous donors holds even the slightest sway over who and what I'm covering, and how.

In 20 years of newspapering, I've never let a source so much as buy me lunch. And I've grown to realize that sometimes, heck most of the time, even compliments come to me only as the thinly veiled precursor to the asking of a favor, like a request to write a story about their business, or to leave out of the police blotter someone's kid's DUI.

I trust my own integrity. It gets questioned all the time, but that goes with the territory. My greatest pride in journalism has come from the many times I've been criticized by both factions of a controversial issue for "taking the other side" against them. What that really means is that I've told both sides of the story well and completely, for my readers' benefit. I haven't shortchanged one side or the other.

Since I do trust myself, I could probably accept a city manager's picking up the tab after a business lunch and know that I wouldn't sell out for an $8.95 cheeseburger and steak fries. But in a career where my motives and actions are questioned every single day by somebody, I can't accept sitting in a restaurant surrounded by others -- readers of my newspaper, in our small town -- and let them see such an authority figure reach across the table and pick up my check.

Paulick's donor list is private, but I'm not sure that confidentiality adds any measure of confidence; it only leaves you guessing about who did donate.

I do know it's tough to make it in a new business venture. And I'm fully aware of hundreds of sites that accept donations as a means of keeping them alive on the Web. When it comes to journalism, if you're National Public Radio, that's your business model. If you're an independent source of industry coverage, accepting donations is something I recommend against.

Ray Paulick knows himself better than any of us know Ray Paulick. I admittedly don't know him at all, though I'd like to. (Don't know whether I'm helping or hurting my chances here.)

I'm sure that he has full faith in his own journalistic integrity, just as I have full faith in mine. And I'm not trying to knock Ray Paulick down a peg -- as if I could -- I'm merely recognizing that in the journalism biz, sometimes it's healthy to wrestle with this sort of philosophical topic as a means of keeping everyone on his (or her) toes; though admittedly I'm at toe-level in this field, while Ray Paulick stands tall.

What I do consider to be a good sign: Ray Paulick is a guy so dead-set against even appearing to have favorites that he had to be dragged against his will into a William T. Young horse's win-photo. So he's probably a better bet for readers seeking impartial journalism than anybody else in the turf writing field.

His writing for the past year at Paulick Report has pretty much proven that. And, my reservations about donations aside, I suspect that it always will.