An attorney representing Stonestreet Stables, the majority owner of leading Horse of the Year candidate Curlin, emphasized Jan. 8 that a foreclosure motion being considered in a Kentucky state court involves only the minority interest in the star colt.
The foreclosure motion, which was filed in Boone County Circuit Court, asks a judge to foreclose on the membership interests and sell the property in Tandy LLC, the parent company of Curlin’s minority owner, Midnight Cry Stable.
Midnight Cry Stable, which owns 20% of Curlin, is the racing entity of embattled attorneys Shirley Cunningham Jr. and William Gallion, who are entangled in civil and criminal legal actions resulting from their handling of a $200-million settlement awarded to their former clients in the prominent fen-phen diet drug class-action lawsuit.
Richard Getty, an attorney for Curlin’s majority owner, Stonestreet Stables, said the legal battles including the foreclosure motion involve only the 20% interest Midnight Cry Stable owns.
“It has absolutely no bearing on the 80% owned by Mr. Jackson,” said Getty of wine-maker Jess Jackson, who owns Stonestreet Stables along with his wife, Barbara Banke. “It only involves the ownership interests of Tandy.”
A hearing on the foreclosure action is scheduled for Jan. 22 in a Frankfort court, where a new arbiter in the case, Senior Judge Roger Crittenden, resides.
Andre Regard, an attorney representing Tandy, claims the foreclosure would only affect the membership interests of Cunningham and Gallion in the company.
“There is no impending auction of Curlin, no impending action of selling the assets of Tandy,” he said. “There is a motion to foreclose on the membership interests of Gallion and Cunningham. It’s doesn’t go to the underlying assets; it only deals specifically with the shares.”
Tandy has additional shareholders other than the two attorneys, Regard claims, a fact he says complicates any potential sale of assets.
“The other shareholders can use the assets of Tandy to purchase the interests (of Cunningham and Gallion,)” he said. Regard declined to name the other members of Tandy, saying that information would be detailed in his clients’ answer to the foreclosure motion, which has yet to be filed.
“Whoever bought the shares would not have any management authority in Tandy,” he said.
Curlin, who capped a brilliant 2007 campaign by winning the Breeders’ Cup Classic – Powered by Dodge (gr. I) Oct. 27 at Monmouth Park, is still in training. The 4-year-old son of Smart Strike recently had his first published workout since the Classic, covering a half-mile in :53 2/5 seconds Jan. 6 at Fair Grounds. There have been no definitive statements released publicly in regards to the racing or breeding future of Curlin, who is clearly the best of the top 3-year-old colts of 2007 not retired to stud.
“According to my understanding, the horse is remaining in training, which everyone already knows,” Getty said. “I am unaware of what Mr. Jackson’s plans may be for the future of Curlin.”
Cunningham and Gallion are incarcerated in a Boone County, Ky., jail as a result of actions from related federal criminal proceedings against them and fellow defendant and attorney Melbourne Mills Jr. involving the fen-phen settlement. Last year in the Boone County civil action, the three were ordered to pay a $42 million judgment to their former clients.
The fen-phen plaintiffs contend in the foreclosure motion that Tandy is “wholly owned” by Cunningham and Gallion, and claim the pair has contrived to avoid paying any of the $42-million judgment.
“The judgment debtors have sought to devalue assets, ignore court orders, file frivolous lawsuits
against its former business associates, and resist all forms of discovery,” said the motion written by attorney Angela Ford. “Accordingly, the time has arrived for the court to exercise its foreclosure power over the judgment debtors' membership interest in Tandy.”
A receiver was previously appointed by the court to handle any funds either produced by a sale of Curlin, or any earnings generated from racing or breeding. Accordingly, Midnight Cry Stables’ portion of the Breeders’ Cup Classic winning purse minus expenses -- $417,720.24 -- was transferred to the receiver in December.
“It is up to the court to decide how those funds should be utilized and what bills should be paid on behalf of Tandy to third parties,” a court filing written by Getty said.
The filing warned that future expenses would “be substantial” for whoever ends up with the 20% interest.
“… should a sale not occur and Curlin is put to stud or raced, Tandy’s share of insurance costs alone will be substantial. The insurance costs attributable to the 20% interest in Curlin owned by Tandy could approach $500,000 over the course of the next year alone.”
In addition to ownership in Curlin and other horses, Tandy also controls non-equine assets. A 30,000 square foot commercial building the company owns in downtown Lexington is currently offered for sale at an asking price of $2.7 million. Fayette County records show Tandy paid $2.3 million for the property known as Barrister Hall in 2001.
Jess Jackson's 80% of Curlin is unaffected by a foreclosure motion being considered in a Kentucky state court.
