In the latest round in the legal battle between Fifth Third Bank and Zayat Stables, the bank is seeking to subpoena the personal banking records of Ahmed Zayat in an effort to determine if he has used corporate assets for personal use.
In a motion filed in New Jersey bankruptcy court, Fifth Third alleges that since 2006, Zayat has used money from the corporate racing stable for personal use, including a "series of loans to relatives and family friends...to pay Mr. Zayat’s credit card bills to fund what are upon information and belief, personal gambling accounts, and to pay for non-residential lodging for his family members in Florida."
The bank’s legal filing came in response to a notice from Zayat’s attorneys that they will ask bankruptcy judge Donald J. Steckroth to partially quash the subpoena from Fifth Third for Zayat’s personal banking records. Fifth Third has sued Zayat Stables for $34 million in unpaid loans. In response to the suit, Zayat Stables filed for bankruptcy protection to ward off efforts by the bank to liquidate the racing stable, which has more than 200 horses in training. Under auspices of the bankruptcy court, Zayat Stables is using a Fifth Third cash collateral for operating expenses.
Zayat’s attorneys notified the bankruptcy court on May 4 they would file a motion to quash the subpoena of Zayat’s personal bank records.
"Fifth Third is not entitled to non-debtor Zayat’s personal financial bank account records and statements which are far afield from the financial condition or financial affairs of Zayat Stables, LLC that is proper inquiry..." the motion from Zayat’s attorneys states. The motion went on to say it believes the records request from Fifth Third is unrelated to the bankruptcy case but is designed to "gain an advantage in pending litigation in Kentucky federal court, or simply to harass."
Fifth Third’s initial suit against Zayat Stables, filed in federal court, has been stayed, pending the bankruptcy case.
Although the bank contends Zayat has intermingled personal and business funds since 2006, it is seeking only those personal banking records from Jan. 1, 2009 to "avoid imposing an undue burden on Mr. Zayat."
"The discovery Fifth Third seeks should determine whether any of the loans were repaid to Mr. Zayat rather than to Zayat Stables, whether Mr. Zayat received any gambling income from the use of the debtor’s funds, whether that income is in whole or in part property of the (Zayat) estate, and whether Mr. Zayat received any credits or refunds from credit card issuers or providers of personal services to him or family members that were paid from Zayat Stables’ prepetition assets," according to the bank’s filing.
A copy of a cancelled check accompanying the Fifth Third filing show Zayat, using Zayat Stables’ funds, paid $50,000 for legal counsel for Jeffrey and Michael Jelinsky. Records filed in the Zayat case have shown Zayat loaned the brothers, who were subsequently convicted of illegal bookmaking, $600,000 in 2006 and 2007. Zayat said the Jelinsky brothers were sons of a friend of his and he loaned them the money to help them through some tough economic times.
Other documents accompanying in the bank’s motion show a $100,000 wire transfer to Nhplay.com and multiple wire transfers to NJAW totaling thousands of dollars. The documents said the bank believes Nhplay.com is an internet gambling site and that NJAW stands for New Jersey Account Wagering.
To support its request for Zayat’s personal banking records, Fifth Third said, "Considering the many transfers of Zayat Stables assets to personal friends, insiders, and to pay personal debts of family members, it seems apparent that Mr. Zayat’s and Zayat Stables’ financial affairs are inextricably commingled and intertwined."