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.
