A Las Vegas federal jury has awarded nearly $1.9 million in damages to a New York horsewoman and her partners in a case involving the undisclosed sale of shares and seasons of prominent Thoroughbred stallions.
Ashley Andrews and members in the Ashtonwood Stud Associates she manages were awarded the damages in November following the eight-day trial that included as defendants her business partner in certain Thoroughbred investments, Las Vegas horseman Robert B. Raphaelson.
Raphaelson was accused of secretly selling a share in Gone West the plaintiffs held with the defendants, which included Raphaelson’s wife, Lucille, and an agency with which he is affiliated, Kentucky Blue Stables. The defendants were also accused of secretly selling jointly-held season breeding rights to stallions A.P. Indy, Kingmambo, and Seeking the Gold -- often years in advance -- and later fabricating documents to represent to Andrews that they were same-year deals.
“The trial went every bit as well as I could ever hope for,” said attorney Christopher Green of the law firm of Boies, Schiller & Flexner in Armonk, N.Y., who led the legal team for the plaintiffs. “Trying a case is never easy. It’s a very unpredictable process. There were some rulings that went against us, but we had strong enough evidence to get to the finish line.”
SELLING OF SEASONS
At the center of the dispute, which included since-dismissed racketeering charges, were fabricated contracts written by Raphaelson -- documents in which he admitted to forging signatures, primarily the signature of agent Robert Greenbaum of Thoroughbred Advisory Group. Greenbaum and TAG, who were named as defendants in the lawsuit but later dismissed, separately sued Raphaelson for legal fees in Florida federal court, a matter later settled with unspecified financial terms.
Starting in 2001, Raphaelson, a former accountant who has been investing in and managing stallion shares for 30 years, sold in advance to a variety of clients jointly-held stallion seasons to A.P. Indy, Kingmambo and Seeking the Gold. He then later wrote the fabricated contracts -- often at a higher price as indicated by market value -- and paid the plaintiffs their share based on those documents.
The practice was reportedly discovered by Ashley Andrews in 2005 after she spoke with non-party Ben Sangster of Swettenham Stud about purchasing the venture’s Kingmambo seasons. Sangster told her he had already acquired seasons --- unbeknownst to him in deals secretly put together by Raphaelson. In a telephone conversation later taped by Andrews, Raphaelson admitted to the fabricated contracts.
“The jury did not believe the various explanations Mr. Raphaelson gave for his conduct,” said Green, a one-time Lexington resident and horseman who was raised on the Whitney family’s Greentree Farm, which his father Bob managed for 25 years. “They drew upon common sense and experience and judged accordingly.”
But Raphaelson’s attorney, Neil Papiano of Los Angeles, said his client was forced into secrecy because Andrews allegedly sabotaged previous deals by wanting to hold out too long for the highest possible price.
“He said he sold to fictitious names, so that she wouldn’t call and destroy the deals,” Papiano said. “She disrupted deals several times. You can’t do it that way. My client was just protecting everyone’s interests.”
The plaintiffs claimed the secret selling of the seasons caused at least $1 million in damages based on proceeds Raphaelson received by not paying the plaintiffs, and the difference between those unpaid proceeds and the actual market value of the seasons that he sold.
Raphaelson was also charged with secretly selling in 1999 a jointly-held share in Gone West for $650,000 to non-parties Josham Farm and Hill ‘n’ Dale Farm. Raphaelson claims the Gone West transaction was a mistake in that it should involved a separate share he owned outright.
Papiano claims Raphaelson paid the plaintiffs $323,811 over the years for their 25% interest in the Gone West share -- using returns from the share he owned outright -- far more than the $162,500 they would have theoretically realized from the ’99 sale.
“He certainly wasn’t trying to cheat anyone,” Papiano said. “Our interpretation is that she owes him $160,000. So that will probably be a separate lawsuit.”
Coupled with a partial summary judgment of $510,625 entered last year against the defendants, total damages approaching $2.4 million have been realized in the case, including the jury-awarded $285,074 in additional compensatory damages, and $1.6 million in punitive damages. A final judgment based on the jury’s recommendations has yet to be entered by presiding U.S. District Judge Robert C. Jones.
“The size of the punitive damage award is notable in that Nevada is a very conservative state,” Green said. “People think of Las Vegas as wild and woolly, but the jury pools are very conservative. They don’t give big awards unless they are outraged.”
However, Papiano argues that in lieu of a $1 million settlement informally offered to the plaintiffs prior to the trial, the jury’s awards could ultimately result in a victory of sorts.
Papiano, who previously helped Hall of Fame jockeys Laffit Pincay and Chris McCarron win a $7 million lawsuit against Andrews’ husband, Vincent, and others, is confident the $1.6 million in punitive damages will be reduced per a post-trial motion he has filed.
“I don’t believe that will stand, because that is more than Nevada law allows,” he said of a state statute that caps punitive damages at three times the compensatory damages. “You’re never happy with damages. But when you get sued for many millions of dollars, and the jury comes down with 280-some thousand dollars -- it sounds like a big number, but not when you are being sued for millions of dollars.”
Green claims the actual pre-trial settlement offer was $1,035,625, or $525,000 above the summary judgment damages, which have been paid out but are being disputed by the defendants. In any event, Green says even if the damages are reduced -- and he claims they won’t be -- it can hardly be claimed a victory for the defendants.
“What do you think is the best outcome: Pay to settle the case … or … have a jury of your peers tell the world that you committed breach of fiduciary duty, conversion and fraud and that you acted with oppression and malice?" he wrote in excerpts from an e-mail to The Blood-Horse.
The jury ruled Raphaelson and Kentucky Blue Stables were liable for breach of fiduciary duty, fraud, intentional concealment and conversion. Lucille Raphaelson was not found liable on any counts.
Among several post-trial motions filed in the case, the plaintiffs are asking the court to refer aspects of the case to law enforcement authorities for an investigation into Robert Raphaelson over alleged fraudulent documents produced during the discovery portion of the case. The plaintiffs have also asked the judge to reconsider his dismissal of the Nevada racketeering charges and grant a summary judgment of at least $2 million on those charges.