State Report Says Race Track Owners Knowingly Withheld Millions The operator of the Saratoga, Aqueduct and Belmont racetracks knowingly withheld nearly $8.5 million that was due to bettors over a 15-month period, according to a new state report, and the Cuomo administration has asked the state inspector general to determine if executives broke civil or criminal laws. The New York Racing Association, a public-benefit corporation, operates the three racetracks. Late last year, the association said it had inadvertently failed to increase payouts on certain bets from Sept. 15, 2010, to Dec. 21, 2011, as required by state law. A 2008 law increased what is known as the "takeout rate," or the amount of bettors" winnings kept by the association, but that change expired in September 2010. The report, a copy of which was obtained by The New York Times, says the association's management actually knowingly violated the law and withheld the money. "Various NYRA officials, including the president/C.E.O., were aware that the "takeout" rate was above the legally allowed rate, yet continued to collect it," wrote John D. Sabini, the chairman of the State Racing and Wagering Board, which wrote the report. Mr. Sabini, wrote in his letter that the document produced by the agency was an interim report, warranted by the seriousness of what had been discovered so far. In a separate letter to the racing association obtained by The Times, Robert L. Megna, the governor's budget director, said, "The report presents the possibility of violations of state law, and calls into question whether the "character and general fitness" of NYRA executives meets the standard necessary to be licensed in the racing industry in New York." "The NYRA board of directors takes the concerns expressed in this report very seriously," C. Steven Duncker, the association's chairman, said in a statement. The report is sure to escalate the battle between the racing association, which is quasi-independent, and the administration of Gov. Andrew M. Cuomo, whose executive branch agencies include the Racing and Wagering Board. While the report does not specify what the money was used for, the Cuomo administration has harshly criticized the racing association for overpaying its executives. The administration has been trying to broadly reshape gambling policies and recently championed legislation to allow the creation of as many as seven non-Indian casinos in the state. The governor has also moved to consolidate the state's complex tangle of bodies that regulate gambling. The violations relate to what are known as "exotic" bets - high-stakes wagers like a trifecta or superfecta, in which someone picks the first three or four horses in order; and bets that require choosing finishers in multiple races, like the Pick 3, Pick 4, Pick 6, and Grand Slam. After the 2008 law expired, the association was allowed to keep no more than 25 percent of the take on exotic bets, but it kept collecting 26 percent. In December, the racing association said it had committed an "unintentional oversight." "This change was unintentionally overlooked, due to the complexity of the takeout provisions in the racing law," the agency's communications director, Dan Silver, said in a statement at the time. As part of its effort to make amends, the agency lowered the takeout rate on exotic bets going forward, to 24 percent. But e-mail traffic included in the report indicates that Charles Hayward, the racing association's chief executive, knew about the takeout rate problem. He received an e-mail on Sept. 28, 2010, from an unidentified individual outlining the problem, and Mr. Hayward forwarded it to the association's general counsel, according to the report. The discussion was not limited to Mr. Hayward. In another e-mail, an association vice president, Elizabeth Bracken, told another executive: "Takeout legislation sunsets middle of September, but I have not heard that we intend to lower takeouts." In August 2011, Steven Crist, publisher of The Daily Racing Form, e-mailed Mr. Hayward, forwarding a reader's concern the takeout rate was "outside the parameters of the law." In a reply, Mr. Hayward said the association had meant to address the issue but "political forces intervened." After facing steep losses and being "smacked around by Cuomo," they decided to wait to address the issue, he wrote. Mr. Crist, a former New York Times reporter and a former racing association executive, agreed to keep the discussion confidential. Months later, in a column, he said the association made "an honest mistake." In an interview Sunday, he said he believed at the time that the association was not required to change the takeout rate.