Racehorse owner James McIngvale has expanded his high-profile lawsuit against three horsemen to include several consignors allegedly involved in claimed fraudulent public auction transactions.
Additionally named as defendants in the lawsuit, which was originally filed last September against trainer Bob Baffert and Florida-based agent brothers J.B. and Kevin McKathan, are Celebrity Farms, Eaton Sales, Highclere Sales, Hill ‘n’ Dale Sales Agency, Donato Lanni, David McKathan, and Murray Smith.
The amended complaint, which was filed Jan. 26 in U.S. District Court for the Southern District of Texas in Galveston, for the most part lumps the consignors together as a group, and provides no individual allegations.
Submitted in the latest complaint are two exhibits. One, called “Schedule A,” lists 48 total purchases that the McKathans allegedly made as buying agent for McIngvale from 2001-2004. The other document, “Schedule B,” cites 19 of those purchases, claiming the $5.47 million worth of deals involved “secret commissions or kickback(s).”
Other consignors listed on Schedule B aren’t named as defendants while some, but not all, of the newly-named defendants are. Attempts to get clarification of this and other points of interest from McIngvale’s legal team were unsuccessful.
But discussions with sources that have knowledge of the legal action raises speculation that some of the alleged secret commissions, if legitimate, may have been paid by someone other than the consignor, such as the owner or breeder of the horse that sold.
A new alleged incident detailed in the amended complaint focuses on the $450,000 purchase of the colt Compulsive at the 2004 Ocala Breeders’ Sales Co. March select sale of 2-year-olds in training. There, the lawsuit claims that the McKathans privately purchased the colt for $250,000 just prior to the auction, thereby receiving an alleged profit of $200,000 in addition to the 5% commission from McIngvale.
Compulsive was sold out of the consignment of Florida agent Paul Sharp, who is not named as a defendant in the lawsuit. Sharp did not return a call seeking comment. According to archived sales records, Compulsive had been purchased for $32,000 at the 2003 Fasig-Tipton Midlantic September yearling sale in the name of Florida-based M&H Training, which is co-operated by defendant David McKathan. It is believed that the horse was owned in a partnership.
Other than being named as defendant, no specific allegations were leveled against David McKathan, who is a cousin of the McKathan brothers. Nor are any specifics cited against Lanni, who is a director of bloodstock services at Hill ‘n’ Dale.
“The complaint contains no allegations of any conduct attributable to him,” said Lanni’s Lexington-based attorney, Tom Bullock.
The only specific reference to a consignor in the lawsuit was a carryover from the original complaint. In that instance, Smith, who was the seller of Work, a $950,000 purchase by the McKathans for McIngvale at the 2003 Keeneland April 2-year-olds in training sale, allegedly wrote a check for $95,000 to a limited liability company managed by the McKathan brothers.
Smith declined to comment on her inclusion into the lawsuit.
But some of the new defendants did react. John Sikura, president of Hill ‘n’ Dale, wrote in an email to The Blood-Horse that he was upset by his company’s inclusion in the suit, particularly after cooperating with McIngvale’s attorneys when asked.
“We did sell a horse on behalf of a client with a commission paid to the McKathan brothers many years ago,” Sikura wrote without elaborating on the specific transaction. “(McIngvale’s) attorneys were supplied with this record several months ago. You would have to ask them why they chose to make a ridiculous assertion public when they have been supplied with all of the facts. There was never a conversation about commission before the sale, and nothing was promised or asked for.
“I guess they are trying to give credibility to their suit by naming a bunch of people. We have nothing to hide and look forward to refuting any claims to the contrary.”
In a follow-up email, Sikura also made reference to other similar lawsuits, such as the one filed in California by Jess Jackson.
“There is a poisonous climate created by all of these suits which blame everyone for their failure to succeed in this business,” Sikura wrote.
Tom VanMeter of Eaton Sales also took exception to his company’s inclusion as a defendant.
“No one associated with Eaton Sales -- myself, my partner, any farm entity or LLC -- had any knowledge of any of this,” he said. “We have pointed this out to their attorneys over the weekend, and we are asking them to drop us immediately. We believe that we will be dismissed as a defendant in this proceeding.
“In the consignment business, you sell horses for people,” he continued. “Sometimes things are done without consignors’ knowledge, and that’s what happened here.”
The McKathans and Baffert have denied part in any fraudulent dealings in answers filed on McIngvale’s original complaint. In an amended answer also filed Jan. 26, the McKathans made a counter-claim against McIngvale, alleging the furniture tycoon reneged on an agreement to supply the agents with lifetime breeding rights to such stallions as Wimbledon, During and Bull Market.
“(Despite success), and the agreement between the parties, McIngvale never honored his obligation,” the counter-claim alleges.
- Amended Complaint in McIngvale Case (PDF - large file may download slowly on some connections)