IN THE MATTER OF THE

ONTARIO RACING COMMISSION ACT, 2000,

S.O. 2000, c.20

AND IN THE MATTER OF THE

APPEAL OF STANDARDBRED OWNER/DRIVER/TRAINERS

DARREN KIRBY AND GRAHAM KIRBY

Standardbred Owner/Trainer/Driver Graham Kirby (C26538) appealed Judges’ Ruling Number SB27759 issued against him on March 3, 2003 wherein he was fined the sum of $50,000 and fully suspended for two years for violation of Rules 3.09.1, 6.10, 6.13(a), 6.20(b), 6.21 and 6.27 of the Rules of Standardbred Racing.

Standardbred Owner/Trainer Darren Kirby (R99011) appealed Judges’ Ruling Number SB27760 issued against him on March 3, 2003 wherein he was fined the sum of $10,000 and fully suspended for two years for violation of Rules 6.21, 6.27, 6.20(b), 26.15 and 26.06 of the Rules of Standardbred Racing.

On July 16, 2003 and March 10, 2004, Vice Chair Larry Todd and Commissioners Pat Bullock and Brenda Walker convened to hear the appeals.

Herbert Arnold appeared on behalf of Graham Kirby and Darren Kirby and Don Bourgeois appeared on behalf of the Administration.

Upon hearing the evidence of Steve Schandlen, Mike Wilson, Darren Kirby, Dr. Lia Jackson and Graham Kirby, upon reading the exhibits and upon hearing submissions on behalf of the parties, the Ontario Racing Commission dismissed the appeals but varied the penalties. The Ontario Racing Commission substituted the penalties as follows:

Graham Kirby is fully suspended for three months and fined $3,000

Darren Kirby is fully suspended for three months and fined $3,000

The reasons for decision of the Ontario Racing Commission are attached to and form part of this Ruling.

Graham Kirby and Darren Kirby are suspended from May 1, 2004 to July 31, 2004.

Dated this 19^th^ day of April, 2004.

BY ORDER OF THE COMMISSION ________________________________

Don Bourgeois

Executive Director (Acting)

REASONS FOR DECISION

Trainer/driver, Graham Kirby, appeals the ruling of the Judges at Mohawk Raceway with respect to an order issued against him (Standardbred Ruling SB 27759) dated March 3, 2003, whereby he was suspended for a full two years and fined $50,000.00 for a violation of Rules 3.09.1, 6.10, 6.13(a), 6.21, 6.27, and 6.20(b) of the Rules of Standardbred Racing.

Trainer/owner, Darren Kirby, likewise appeals a ruling of the Judges at Mohawk Raceway with respect to an order issued against him (Standardbred ruling SB 27760) dated March 3, 2003, whereby he was suspended for two full years and fined $10,000.00 for a violation of Rules 6.21, 6.27, 6.20(b), 26.15 and 26.06 of the Rules of Standardbred Racing.

Both of the aforesaid rulings of the Judges were stayed by an order of the Executive Director on March 3, 2003, being respectively Ruling SB 26/2003 with respect to Darren Kirby, and Ruling SB 27/2003 with respect to Graham Kirby.

This matter was heard by a panel of the Commission consisting of Commissioners Bullock and Walker, along with Vice Chair Todd, on July 16, 2003 and March 10, 2004. An adjournment on the first day of hearing was required so that the appellants could marshal and produce various documents to support certain exhibits that were filed by them on the first day of hearing. Unfortunately, the assembling and preparation appears to have taken longer than both counsel anticipated when the hearing was adjourned on consent in July of 2003.

Donald Bourgeois appeared as counsel for the Administration of the Ontario Racing Commission and Mr. Arnold represented the interests of both Messrs. Darren and Graham Kirby.

The documentary background of the Administration’s case was set out in the form of a documents brief which was made Exhibit 1 at the hearing by agreement of all the parties.

Throughout the two days of hearing, a total of some 26 exhibits were filed, all on the consent of both counsel appearing before us.

The Administration called as its witnesses, investigator Steve Schandlen and Senior Judge Wilson.

The defence in this appeal called Darren Kirby, Dr. Lia Jackson, and Graham Kirby. No reply evidence was called.

In his argument, Mr. Arnold was of substantial assistance to this panel in acknowledging that the recollections and evidence of Darren Kirby “were not the best.” Mr. Arnold candidly admitted that Darren Kirby was “not the best witness”. He, however, urged us to review the documentation, which in his words, was the “best evidence” in this matter. The fact that Darren Kirby in cross-examination acknowledged that he couldn’t even recall which horses were transferred to him or when he acquired them is indicative of the aforesaid deficiency in his presentation.

The vast majority of the evidence heard by this panel related to a purported scheme of hidden ownership with respect to three standardbred racehorses, namely Til Monday, Manifesto and Art Ludt Hanover. All three of the aforesaid horses were transferred from the registered ownership of Graham Kirby to Darren Kirby between August 31, 2001 and September 22, 2001. These transfers were made at a point in time when Mr. Kirby was facing a TCO2 suspension, which suspension was in fact served between November 1^st^ and December 30^th^, 2001.

Additionally, the aforesaid transfers of the three named racehorses from Graham Kirby to Darren Kirby were made at a point in time when Graham Kirby was in default of certain obligations with respect to child support and in proceedings with his former partner and the Family Responsibility Office with regard to child support payments.

This panel heard at length evidence from both the Administration and the appellants with respect to the consideration or purported consideration for the transfer of the three standardbred racehorses, as well as the particulars and rationale for a number of post-transfer financial transactions between Graham and Darren Kirby.

The reconstruction and reconciliation of the financial relationships between Graham Kirby as trainer for owner Darren Kirby before November 1, 2001 and after December 30, 2002, make it abundantly clear to us that Graham Kirby, as trainer for his owner/nephew Darren Kirby, was in violation of Rule 3.09.1 of the Rules of Standardbred Racing. The reconstructions and reconciliations contained in Exhibits 22, 23, 24, 25 and 26 simply underline and emphasize that all the terms of Graham Kirby’s engagement as the trainer of Darren Kirby’s horses at the relevant times in 2001 and 2002 were not “….set out in a written contract between the owner and trainer”, or documented with a “rate schedule including day rate and commissions on purses earned by the horses and the terms of payment” (Rule 3.09.1(c) of the Rules of Standardbred Racing.

This violation alone under the provisions of the Rules of Standardbred Racing is “an illegal practice” and was one of the reasons why the evidence before us was required to be so lengthy and complex.

It has to be noted that this entire proceeding and the original investigation resulted from a so-called anonymous tip to the Administration of the Ontario Racing Commission from a former partner of Graham Kirby who was involved in contested and protracted child support proceedings with him. From the investigator’s evidence and the documents provided to him by Ms. Parliament, it is only too apparent that the dispute we are hearing in proceedings involves separation issues and all the attendant ill-will and hostility that can sometimes accompany such proceedings.

All of the documentary exhibits before us, along with the evidence of Darren Kirby and in particular, Mr. Kirby’s statements given to the investigators looking at this matter before the original rulings, make it abundantly clear that Darren Kirby either withheld information or misled the investigators with respect to a number of issues regarding his relationship with his uncle/trainer both before, during, and after Graham Kirby’s two-month suspension in the fall of 2001. In this respect, we cannot but conclude that Darren Kirby was at various times in violation of Rule 6.27 of the Rules of Standardbred Racing in that during “any investigation or case”, he withheld information or misled investigators.

The simple fact that neither Graham nor Darren Kirby in their evidence could ever put anything near an exact figure as to what Graham Kirby owed Darren Kirby was only too indicative of this lack of precision in the supposed business dealings between nephew and uncle. Similarly, neither Darren nor Graham Kirby were able to put a value on the subject racehorses at the specific date of their respective transfers to Darren Kirby.

This panel was invited to conclude that the horses were transferred from Graham Kirby to Darren Kirby as part of a bona fide transaction with good consideration. One would have expected that the parties would have turned their minds to the value of the horses and the quantum of debt being offset or discharged as a result of the transfer of the horses. Such was not the case. Graham Kirby indicated before us and in prior proceedings that it was “tough to put a price on the horses” and, further, that he was unable to put a figure on what sum he owed Darren for the previous work. Quite clearly, the consideration for and the actual transfer of the three standardbred racehorses, Art Ludt Hanover, Til Monday and Manifesto, was an “act or omission in business practice…which when measured against generally accepted standards of good conduct would be regarded as dishonest, unfair or unsportsmanlike or contrary to the public interest…”

In the circumstances, we are left with no alternative but to conclude that the transfers of the aforementioned three standardbred horses from Darren Kirby to Graham Kirby were not bona fide transactions. We have some great difficulty understanding how Darren Kirby was able to race some or all of the aforesaid horses in November and December of 2001 when we have seen no evidence of any judges’ approval for the transfer of trainer from Graham Kirby to Darren Kirby.

Neither Mr. Bourgeois nor Mr. Arnold were able to help us with any evidence or documentation as to how the change of trainership occurred and what judges, if any, on behalf of the Administration, approved this change of trainer. The fact that we have no evidence before us of this procedural step either taking place or being considered is a disturbing variation from the prescribed and usual practice. Had this step transpired, the entire factual matrix underlying the judges’ rulings herein and this hearing might well have been avoided.

We find that neither Graham Kirby nor Darren Kirby appear to have available tax returns for either 2001 or 2002 that would assist us in any regard in considering whether the transfer of the three standardbred racehorses was bona fide and the consideration for same. We were advised that Darren Kirby had not filed as yet for 2001 and 2002 and that Graham Kirby had not as yet filed for 2002.

Similarly, there was no evidence of any paper entry, promissory note or any other document delineating or confirming the debt for past services from Graham Kirby to Darren Kirby. The fact that Darren Kirby stated that the wages owed by his uncle were about $10,000.00 and would be included on his 2002 income tax return, when filed, was in the circumstances of this proceeding not persuasive evidence.

Both the registration records and Graham Kirby in his evidence confirmed that the latter never reacquired ownership of the three subject horses after his suspension had been served and he was re-instated as at January 5, 2002. This evidence is, however, equivocal, given the fact that the Family Responsibility Office proceedings involving Graham Kirby appear to have continued long after 2001 and throughout any period of time in which the subject racehorses were either owned by one or other of the Kirbys and/or still racing entities. We have concluded and find as a fact that part of the factual events transpiring in this proceeding appear to have been motivated by the dynamics and parallel proceedings between Graham Kirby and Ms. Parliament and the Family Responsibility Office.

Graham Kirby confirmed before us that he has been substantially in arrears of his child support obligations since November 2001 and, further, that the Family Responsibility Office is at the time of the hearing in the process of active enforcement of Mr. Kirby’s obligations in regard to child support.

Mr. Bourgeois in his argument stressed the fact of a significant number of cheques either from Darren Kirby or payable to Darren Kirby being deposited in the accounts of Graham Kirby. (See Exhibit 15 and 16). We note that some of these cheques were in the exact amount of sums earned by the respective horses racing under the trainership of Darren Kirby. The evidence in chief of Darren Kirby was to the effect that certain of these sums of purses earned were flowed through to his uncle as loans to Graham Kirby because “he needed money to survive”. These loans from Darren Kirby to his uncle, while perhaps laudable, do not appear to be properly accounted for in the various reconciliations and adjustments documented before us. In fact, certain exhibits filed by Mr. Arnold would appear to treat the so called “loans” during the period of Graham Kirby’s suspension as simply purses earned in the annual reconciliation and accounting which we were told was the basis of the arrangements between the uncle and his nephew.

For this reason, we have an additional basis to conclude that the transfer of Art Ludt Hanover, Til Monday and Manifesto, was not a legitimate or bona fide transaction. Accordingly, both Darren Kirby and Graham Kirby are in violation of Rule 6.21 of the Rules of Standardbred Racing in that they provided or permitted inaccurate information about the ownership of a horse to be programmed.

For the above reasons, we are unanimously of the view that the violations as noted above have taken place on the part of both Darren and Graham Kirby. We have concluded that a substantial component of the motivation for the aforesaid violations may well be outside the parameters of horse racing. However, this does not excuse the violation of the Rules of Standardbred Racing.

Accordingly, we are obliged to dismiss the appeal of both Darren Kirby and Graham Kirby as to the issue liability.

With respect to the issue of penalty, Mr. Bourgeois urged upon us the importance of general and specific deterrence as well as a review of the penalty in the context of the public interest. Mr. Bourgeois did indicate that a public interest review could include the ability to pay of the violators and the ability of the violators to pay their other legitimate obligations. In this context, we heard no evidence that would refute or dispute Graham Kirby’s evidence to the effect that he is not at present training or driving any horses and his only income is from boarders at his farm property.

Likewise, we note the evidence on the record that Darren Kirby’s income at the present is relatively modest from a long-standing retail position.

In regard to penalty, Mr. Arnold urged upon us that an appropriate solution would involve the disgorgement of any profit generated or flowing to the violators. He stressed that this must be assessed on a net and not a gross basis. We do note and conclude that the subject horses’ earnings throughout the impugned period of August 2001 to August 2002 would generate only a very modest net profit if one were to allocate any reasoned or reasonable overhead for the care and cost of maintenance to each of the standardbred racehorses.

Taking cognisance of the aforesaid principles, we find that both the period of suspension and quantum of the fines assessed to Graham Kirby and Darren Kirby are excessive and unrealistic in the circumstances at hand. For this reason, we would therefore allow the appeal as to penalty and substitute as follows:

With regard to Darren Kirby, we would substitute a full suspension of three months and a fine of $3,000.00.

With regard to Graham Kirby, we would likewise impose a full suspension of three months and a parallel fine of $3,000.00.

While there may be an argument based on the level of culpability to assess Graham Kirby a greater fine, we conclude that the levying of Graham Kirby’s penalty must be assessed and scrutinized in the arena of the statutory public interest. This latter consideration, in our view, outweighs the general need or requirement for a punitive differential between himself and Darren Kirby. Mr.Graham Kirby quite clearly has continuing other legal obligations and these must be balanced against the penalty imposed in our statutory considerations.

In closing, we must thank both counsel for their helpful submissions in this matter and, in particular, Mr. Arnold for his candid acknowledgment with regard to the reliability of one of his witnesses. Additionally, we would hope that Graham Kirby, once his suspension as above has been served, he would see fit to employ his considerable talents in the horse racing industry in a constructive and remunerative fashion.

Dated at Toronto, this 19^th^ day of April, 2004.

Larry Todd

Vice Chair