A Kentucky state judge ordered April 8 that a lien placed on the purse winnings from Einstein ’s victory in the Santa Anita Handicap (gr. I) be released, and directed the funds be given to a court-appointed receiver overseeing the financial affairs of Midnight Cry Stable, which is operated by recently-convicted disbarred attorneys Shirley Cunningham Jr. and William Gallion.
Franklin County Circuit Court Judge Roger Crittenden made the ruling after hearing impassioned pleas from Andre Regard, an attorney representing Midnight Cry’s parent company, who claimed horses in the racing stable would miss proper care without immediate funding.
“Tandy (LLC) has no money,” Regard told Crittenden in a hearing held in a civil lawsuit over compensation Cunningham and Gallion received in the high-profile fen-phen settlement case. “As of Friday, they are going to have to release their staff. They don’t have money to buy hay. They don’t have money to buy (medication).
“They don’t have the money to feed the horses. They have a chance of starving the horses to death.”
Crittenden agreed to issue the order to “preserve the assets of the company, which are the horses.”
“My concern is that the … assets are preserved for whoever is going to benefit from them,” he said. “That’s been this court’s concern all along.”
The $480,000 owner’s share of the purse winnings Einstein earned in the March 7 Santa Anita Handicap are encumbered by a garnishment lien placed by the plaintiffs in the lawsuit — the more than 400 former clients of Cunningham and Gallion who claim they were bilked out of millions of dollars in settlement funds from the diet-drug trial.
The two former attorneys were found guilty April 3 of multiple charges of wire fraud in a separate federal criminal trial, and the jury followed that verdict up April 7 by ordering them to forfeit $30 million. Plaintiffs in the civil trial were previously awarded a $42-million judgment against Cunningham and Gallion, as well as a third attorney, Melbourne Mills Jr.
Cunningham and Gallion, who have denied any fraudulent activity, have appealed the latter judgment and are expected to formally appeal the criminal verdicts and forfeiture.
Plaintiffs’ attorney Seth J. Johnston told Crittenden the lien was filed with Santa Anita Park’s parent company, Los Angeles Turf Club, because it isn’t clear how money is being handled by Tandy. He argued a statement previously made by Crittenden to “wrap-up” the court-appointed receiver’s role in Tandy’s management had effectively diminished court oversight.
“The current management team does not believe they are under the guardianship of the receiver anymore,” Johnston said. “They are running (Einstein) as they see fit. If the court is going to release the garnishment, then the also court needs to order that all other money that we don’t know about would go to the receiver’s account.”
Johnston claimed there were upwards to "a couple hundred thousand dollars" still in the receiver's account, and that Tandy should perhaps pursue those funds.
Regard countered that the receiver had told his clients not to send his office any bills, and that Cunningham’s wife had been paying bills “out of her own resources.”
“The receiver is saying, ‘I’m not involved anymore. I don’t want to be involved anymore’ ” Regard said.
Crittenden made the “wrap-up” statement last December during a hearing over the proposed sale of Midnight Cry’s minority interest in two-time Horse of the Year Curlin . The potential sale bid from majority owner Stonestreet Stables was denied by Crittenden.
Plaintiffs co-counsel, Angela Ford, said she will still go after revenues generated by Curlin, who is now retired to stud, or any other asset related to Cunningham and Gallion, in an effort to collect on the $42-million judgment.
“Curlin is still very much on the table,” she said. “Tandy, like the nine other LLCs, were all created after the (fen-phen) settlement. So you have corporations that owned assets after the settlement that either the government will be looking at, or this court, if it enters an alter-ego order.”
An alter-ego order, which would effectively tie the LLCs, or limited liability companies, to the civil judgment, has not been signed by Crittenden, even though the judge has verbally stated in at least two hearings in 2008 that he was prepared to do so.
Ford recently filed a writ of mandamus with the Kentucky Court of Appeals asking that court to force Crittenden to sign the order, among other requests.