When Jim Cullen was recently banned from all North American auction through 2010 as a result of action taken by Keeneland and Fasig-Tipton under the Sales Integrity Program, it marked the latest in a series of business and legal setbacks for the 42-year-old Lexington bloodstock agent.
Cullen, a former Turf writer who went on to work for West Point Thoroughbreds, the Thoroughbred Owners and Breeders Association, Texas Thoroughbred Association, and Adena Springs before forming bloodstock and advertising agencies earlier this decade, is the subject of several lawsuits and claims made by former clients and trainers, as well as the Internal Revenue Service. The lawsuits claim Cullen billed and collected funds from clients that were to be used to pay for horses and stud fees which were never paid.
Cullen, who operates Cullen Bloodstock LLC and the Oakland Group advertising agency, now works for the Old Colony insurance company and is a licensed trainer, maintaining a stable of horses owned by his wife and racing under the name Florence Racing Stable. A horse he trains for Margaux Farm, named Love You Crazy, was entered in the second race Nov. 24 at Churchill Downs but was scratched.
According to records filed in Fayette County, Ky., Circuit Court, Cullen has been ordered to pay National City Bank $348,181.65. In a deposition taken earlier this year by Emily Cowles, representing National City Bank, and Mike Meuser, representing former clients John Trumbulovich, Kevin Geiger, and Vincent Cobert, Cullen acknowledged some stud fees were never paid for, though clients had sent the payments to Cullen, and that some horses he purchased at auction were not paid for because his clients changed their minds about wanting the horses after he had signed for them.
Cullen said though the money for some seasons came to him from clients, he operated his agency on the premise that since his business was incorporated as a limited liability corporation, the funds could be used as he deemed necessary, as long as the fees were eventually paid.
In the deposition Cullen acknowledged some of the fees went unpaid, but said his inability to pay stud fees on behalf of clients who had remitted the money to him were business mistakes on his part. "I’m a good horseman," Cullen said in the deposition, a copy of which was obtained by The Blood-Horse. "I’m obviously not a good business person."
For example, Cullen noted that a judgment against him for more than $300,000 was the result of a stud fee for A.P. Indy going unpaid and the mare, owned by client Cam Horton, aborted. Upon questioning by Cowles, Cullen said he incorrectly believed the stud fee had been insured. Here is the exchange, according to the deposition transcript:
"Q: Did he (Horton) pay you the $300,000?
A: He paid Cullen Bloodstock. Yes.
Q: What did you do with that money?
A: It went to operating expenses, and – see, the big, the big misconception, I was always under the impression that by being a business, an LLC, you could, that could offer protection to run it as a business. So I, you know, the money came in. We had outgoing expenses, etcetera. That, and but I figured since we insured it that he was covered, the company was covered. Much to my dismay and –
Q: Who was it insured with?
A: It wasn’t insured.
Q: It wasn’t insured.
A: That was an oversight on my part that’s ultimately going to cost me $300,000-plus."
Cullen said he paid Horton $30,000.
Also as part of the deposition, Cullen said he never paid for two horses bought at Fasig-Tipton, including Patsy Ann, purchased for $100,000. Cullen said he never paid for the mare but assured Fasig-Tipton president Boyd Browning he would take care of the debt. Cullen said in the deposition he bought the daughter of Yankee Gentleman on behalf of a client who decided he did not want the horse.
Because Cullen did not have an agent authorization form between himself and the client on file with the sale company, "it became my responsibility," he said. Following the purchase of Patsy Ann, Cullen said he sold some interests in the horse to other clients but never paid Fasig-Tipton.
Cullen was then asked why he did not pay the sale company when he began selling interests in Patsy Ann. "Because I needed it in the operating account and I figured... that is a business mechanism," he responded.
Though Fasig-Tipton was "willing to basically write it off," Cullen said, he took responsibility for the debt and promised the sale company he would eventually pay it. "I haven’t declared bankruptcy. I am not running. Any of the accounts I’ve made, I’ve been—I will acknowledge and be responsible for," he said in the deposition.
Cullen said many of the problems associated with the operation of his bloodstock agency trace back to IRS audits conducted in 2004-05 that concluded money Cullen deposited to his escrow account should be considered income and he was "slapped with a quarter million-dollar tax liability. They did not consider the monies that were paid out of that account, and so we’re actually...I’ve got an IRS lien on just about everything I own right now, which should go away according to my accountant, my sister (a partner in Grant Thornton), and this tax attorney."
During the deposition, Cullen said he no longer had access to a lot of his financial records because his accountant has blocked his access to his QuickBooks account until an outstanding $1,800 payment is received.
An attempt to reach Cullen Nov. 24 was unsuccessful.
After the sanctions by Keeneland and Fasig-Tipton were initiated under the SIP Code of Conduct, Cullen said in a statement to The Blood-Horse: "First and foremost, I would like to make it clear that this action has nothing to do with unscrupulous behavior on my part at any sale. This problem is a byproduct of an overzealous bank claiming sales proceeds that belonged to my clients. Unfortunately, two or three of my partners have not received their proceeds, which total approximately $25,000.
"I have and will continue to work with these clients to make sure they are paid in full. I am embarrassed and truly sorry it has come to this, but I am a strong supporter of the Sales Integrity Task Force and respect their decision while I work to resolve these business matters."
