J&L Canterbury Farms claims it was a victim of fraud in two lease packages put together by ClassicStar and others that totaled $10.5 million, according to a complaint recently filed in the U.S. District Court Eastern Pennsylvania District.
Other defendants named in the suit, which carries criminal racketeering allegations, include former ClassicStar marketing director S. David Plummer, former ClassicStar president Spencer D. Plummer, ClassicStar parent company Geostar Corp., and ClassicStar and Geostar principal Tony Ferguson.
With the exception of Spencer Plummer, those defendants are among those named in a federal lawsuit filed last year in Kentucky that carries racketeering allegations and claims of at least $20 million in fraudulent activity. Spencer Plummer and ClassicStar are defendants in a separate lawsuit filed earlier in January in Utah that focuses on alleged breach of contract of a $1.2-million mare-lease program.
The Pennsylvania legal action filed by J&L Canterbury Farms, which also features criminal racketeering allegations, also includes as defendants Wilmington Trust of Pennsylvania, a regional banking entity affiliated with its parent, the trust conglomerate Wilmington Trust; Private Consulting Group, an Oregon-based financial adviser; and David S. Forman, who is claimed to be a New Jersey-based principal of Private Consulting.
In the lawsuit, J&L Canterbury Farms, which is operated by Leo and Jean Hertzog, claims representatives of Wilmington Trust of Pennsylvania and Private Consulting Group recommended ClassicStar’s mare-lease programs as good investments that also generated tax benefits.
But the Hertzogs allege ClassicStar lease programs were oversold, and they were persuaded to take alternate investments they claim never panned out. One such alleged alternative included a swap for two million shares of a publicly-traded energy company called Gastar; the other involved claims for ownership of an unspecified number of quarter horses. Both programs carried “put options” to sell back the shares and horses at a profit, the lawsuit claims.
With more than 15.7 million shares recorded in its most recent filing with the Securities Exchange Commission, Geostar was considered to be the second largest shareholder in Gastar.
Repeated attempts by The Blood-Horse to interview parties or attorneys affiliated with the lawsuit were for the most part unsuccessful. One that did return a call, Wilmington Trust spokesman Bill Benintende, said he could not comment because the company had not yet been served with the action.
In an e-mail to The Blood-Horse, Private Consulting Group executive vice president David Fitzpatrick also said he could not comment on the lawsuit. But he issued the following statement regarding ClassicStar:
"Private Consulting Group Inc., like other notable law firms, accounting firms and banking institutions, referred individuals and companies to ClassicStar, LLC for the purpose of exploring and potentially engaging in the business of breeding, raising and owning Thoroughbred horses.
“Beyond the referral of potential mare-leasing clients, Private Consulting Group Inc. had no involvement in the ongoing business operations of ClassicStar or the horse-breeding business activities of ClassicStar’s clients. At the time that referrals were made, we relied on the representations of ClassicStar and believed that ClassicStar's business practices and methodology were as they represented them to be."
Previous court filings in the Kentucky lawsuit claim ClassicStar “marketed” about $600 million in lease programs to at least 120 participants from 2001-04. During that same general time period, ClassicStar and/or Plummer purchased more than $45 million in bloodstock at public auction, including many high-profile mares.
ClassicStar Farm near Versailles, Ky., was the scene of a raid by federal agents last February in which business records and related documents were seized with the aid of a search warrant. A similar raid also took place at the Plummers’ performance horse ranch in Utah.
It is believed a related criminal investigation has since been conducted by the U.S. Attorney’s office in Oregon. When contacted Jan. 26, spokesman Kent Robinson of the U.S. Attorney’s office in Oregon issued a formal no comment on the status of any investigations related to ClassicStar and affiliates.