Racetrack operator Magna Entertainment backed the wrong horses when it chose third parties to handle its pari-mutuel betting. When two of its three totalisator service providers, Scientific Games Racing and United Tote, failed to deliver Type II SAS 70 reports despite what its 10-K called “management’s timely requests,” Magna had to report a material weakness under Section 404 of the Sarbanes-Oxley Act—even though its own internal controls passed muster.
Magna doesn’t like to talk about this. The company not only refused comment, but also gagged its service providers. Scientific Games referred a reporter back to Magna, and a spokesman for United Tote explained the company could not comment without Magna’s written consent.
