The New York Racing Association (NYRA) is under fire for skimming $8.5 million from bettors.
In a new report, the Cuomo administration says NYRA pocketed a larger-than-allowed "takeout" percentage on "exotic bets" - special wagers on multiple horses or races.
The report alleges that NYRA then tried to cover up the wrongdoing.
When NYRA's contract to operate the state-owned horse tracks at Saratoga, Belmont Park and Aqueduct was renewed in 2008, it was given permission to take a 26 percent takeout until September 2010. After that point, the private entity's takeout rate was supposed to drop to 25 percent.
However, NYRA continued taking 26 percent until December 2011, according to the state's Racing and Wagering Board (RWB).
"It was shocking to me and if the facts are correct, it's very troubling, to say the least," Gov. Andrew Cuomo said Monday at a press conference.
NYRA was alerted to the takeout transgression by a reporter from the Daily Racing Form.
An email included in the RWB report shows NYRA CEO Charles Hayward asking the reporter to keep the matter confidential.
Robert Megna, the director of the New York State Budget and chairman of the body that oversees NYRA, voiced concerns that this type of behavior is not an isolated incident.
In a letter to NYRA Chairman C. Steven Duncker dated Sunday, Megna writes:
"The report raises serious questions about the actions of senior management of NYRA. A failure to meet this most fundamental obligation puts into doubt the continued efficacy of the State's franchise agreement with NYRA."
In a statement released late Monday, NYRA says Hayward and senior VP Patrick Kehoe had been suspended without pay.
The investigation has been turned over to the inspector general, according to the governor's office.