HISA Charges Marshall Gramm with Multiple Rule Violations, Including Fraud

The Horseracing Integrity and Safety Authority (HISA) has charged Marshall Gramm with multiple rule violations, including fraud, following an investigation into the unauthorized access of confidential horse health information, the organization announced in a press release Monday.

The charges stem from an investigation launched after past performances for Deterministic and Griffin's Wharf containing confidential health information were posted on social media in June by an individual unconnected to either horse.

According to HISA, its preliminary investigation found no breach of the HISA Portal by a person or entity without prior authorization to access the system.

HISA subsequently expanded the investigation to determine whether someone with authorized access had exploited vulnerabilities to obtain and share confidential horse health records.

The investigation included interviews and information gathered by HISA employees and contractors, as well as an independent forensic cybersecurity analysis conducted by Arete.

HISA said the findings “unanimously pointed to” Gramm as being solely responsible for accessing confidential health information and creating past performances for horses with which he had no legitimate connection.

According to HISA, Gramm “deliberately and methodically” accessed confidential horse health information over a six-week period beginning in early May and ending in mid-June.

HISA alleges Gramm developed an automated method of obtaining the information at scale in a manner designed to mimic authorized activity and avoid detection by the organization's security systems.

HISA said Gramm used the information to create the past performances that were subsequently shared on social media.

The authority also said Gramm participated in handicapping contests, engaged in pari-mutuel wagering and claimed several Covered Horses across multiple jurisdictions and racetracks during the six-week period.

HISA said it will seek restitution of any proceeds derived from those activities on behalf of affected entities and individuals.

According to HISA, when confronted with the findings of the investigations, Gramm admitted that he was the source of the past performances for Deterministic and Griffin's Wharf.

HISA has initiated enforcement actions against Gramm for alleged rule violations relating to fraud and unauthorized access to horse health records.

The organization said it will also evaluate other available remedies and share information gathered during its investigation with federal and local law enforcement, state racing commissions and other relevant authorities.

HISA said Monday that it has made changes to its technology systems designed to prevent similar unauthorized access and is devoting additional resources to protecting confidential information.

Gramm is a Professor of Economics and Department Chair at Rhodes College in Memphis, Tennessee. He holds a B.A. from Rice University and a Ph.D. in Economics from Texas A&M University.

His academic research focuses heavily on gambling and pari-mutuel betting market efficiency. He has also published several articles on the economics of horse racing.

Gramm issued the following statement Monday in response:

“HISA has unfortunately decided to pursue disciplinary proceedings against me regarding data I accessed through the HISA Portal. I made a good-faith effort to resolve this matter with HISA, and we came very close to doing so. Ultimately, we could not reach agreement on several issues, including my ability to speak publicly and tell my side of the story.

“I intend to vigorously defend myself in the HISA proceedings. I am a college professor and data analyst, and gathering and analyzing large datasets is something I have done throughout my career, including extensive work with horse racing data. The information at issue was available through my authorized HISA account. It was a large dataset, and at the time I accessed it, I had not fully reviewed its contents or understood the scope of the information it contained.

“I used my own account and credentials and never attempted to conceal my identity or circumvent HISA's security. Once logged into my account, I bypassed no security protocols or other safeguards to access the information. Where I exercised poor judgment was in not bringing the vulnerability to HISA's attention sooner after it became a public story. I should have done so, and I regret that I did not.

“I want to apologize for the difficulties this situation has caused. Horse racing has been an important part of my life for many years, and I care deeply about the integrity of the sport. I remain willing to work with HISA to address the access-control weaknesses that allowed this information to be available.    “Making me the focus of this matter is a distraction from the fundamental issues HISA needs to address with its systems.”

Lazarus Adresses The Press

In a Zoom press conference Monday, HISA CEO Lisa Lazarus expanded upon some of the details in the agency's earlier press release.

Lazarus said the deal HISA was attempting to strike with Gramm fell through because he wanted HISA to “essentially conceal some information” in exchange for a settlement.

“That was always a complete no-go for us,” said Lazarus. “We had to share publicly what had happened. We had to be fair to our stakeholders, inform everyone.”

Reports on social media have suggested Gramm's ability to access the data was made easier by a quirk of the HISA portal, in which each horse has an individual number that can be simply changed in the URL to access another horse's file.

According to Lazarus, this is “patently false and not at all what happened.”

She added that “our evidence showed that Mr. Gramm used essentially an automated and invisible browser to download records at scale while employing methods to avoid detection.”

When pressed about it later in the press conference, Lazarus explained one of the alleged mechanisms Gramm used to avoid detection was to download the information in batches of no more than 500, to avoid a security trigger.

“Our system essentially looks at certain activities as being typical activities, right? People are moving and changing horses. That's what it's for. But it's set to essentially set off alarm bells if somebody is transacting at an unusually high level,” said Lazarus.

“So, instead of him downloading the millions of records that he ultimately downloaded at once, he did it in batches of 500 because, if it was below 500–500 or below–it wouldn't trigger our security system,” said Lazarus, before adding, however, that Gramm hasn't “conceded” he employed such an approach.

As for what kind of information Gramm was downloading, Lazarus said that he was accessing “the majority of what was available at that point in time for a significant number of records,” and that he was “doing it at scale.”

For the nine horses that Gramm claimed during a six-week period, Lazarus said that HISA will return the owners of the horses in question the relevant purse monies, which total between $80,000 and $90,000.

“In order to be fair to the owners, we're going to essentially pay that money back,” and then “we hope to ultimately recover that from Mr. Gramm,” said Lazarus.

During the settlement negotiations, there had been talk of offering the horses to the original owners for the same price they'd been claimed.

“But given that settlement broke down and we're in legal proceedings, that's not something that we can actually require at the outset,” said Lazarus.

Using “relationships” already forged with federal authorities like the FBI, Lazarus said HISA has asked the feds to “initiate” the process of determining if Gramm is guilty of federal crimes.

“We will obviously be sharing what we've learned with the relevant racing commissions, law enforcement, wagering platforms,” said Lazarus. “Anybody who we believe could be affected by this conduct.”

As for the ethical ramifications of Gramm's alleged conduct, Lazarus discussed his multiple connections with important bodies within the sport.

“There's no question that he would know what he was doing was wrong, that it was unethical and that he was violating multiple rules,” said Lazarus. “The way we really characterize this and understand it as fraud on the market, like insider trading. He had access to information that nobody else did. He was able to use that information to monetize it.”

To further explain their position, Lazarus shared an “anecdote” from the day a HISA investigator confronted Gramm at Saratoga, when he reportedly admitted what he had done. That confrontation, she said, occurred at about 5 p.m..

“Earlier that day at 11 a.m., there was a call that had been set up by The Jockey Club because they were unaware of what was transpiring. We had kept it really confidential during the investigation period,” said Lazarus. “That call was to talk about whether or not the industry should make changes to its policies going forward as a consequence of these PPs that had leaked.”

Gramm, said Lazarus, was on the call, alongside Patrick Cummings, Lazarus herself, Jim Gagliano, Charlotte Clement, and other Jockey Club representatives.

“Gramm spent an hour on that call with us contributing his ideas to where we go from here without once acknowledging that he was actually the one that caused the fact we had to talk about changes in policy,” said Lazarus.

“To me, it's very disingenuous to say that this was some sort of accident, because frankly, if it had been and he had come to us, we would always have a very different reaction and a very different outcome,” said Lazarus.

“But the only time he was willing to admit that he had actually been the perpetrator,” said Lazarus, “was when he was confronted with the facts.”

Who Is Marshall Gramm?

Gramm is the co-founder and managing partner of Ten Strike Racing, which was founded in 2016 in partnership with Clay Sanders. Ten Strike is a partnership based at Oaklawn offering fractional ownership from claiming horses to graded stakes horses. Gramm has served on the board of directors for the Thoroughbred Idea Foundation and Thoroughbred Charities of America.

Gramm grew up in Washington, D.C., the son of Phil Gramm, the former United States Senator and Congressman from Texas, himself a former economics professor at Texas A&M. Gramm and Ten Strike have campaigned several graded stakes winners, including Warrior's Charge, winner of the GIII Razorback and Philip H. Iselin Stakes. He was fourth in the 2019 Preakness and earned over $1 million; Long On Value, winner of the Grade I Highlander Stakes, campaigned in partnership with Madaket Stables.

As a standalone venture (not including partnerships), they have won 454 races from 2,172 starts with earnings of over $15 million. They have also campaigned horses in dozens of other partnerships.

Ten Strike's website says they support the TAA, Turning For Home, the Permanently Disabled Jockeys Fund, New Vocations, and Anna House. Gramm is also active in handicapping tournaments, and told TOBA in 2019 that he considers himself a horseplayer first.

He has qualified for the National Horseplayers Championship (the NHC) over a dozen times, reaching the final table in 2019 and finishing ninth overall. He won the Breeders' Cup Betting Challenge in 2020, taking home almost $500,000 in prizemoney and betting payouts. He also has served on the NHC Players committee, helping craft and guide tournament rules.

—Sue Finley contributed to this report