After months of having fingers pointed at them, the principal parties involved in the ongoing ClassicStar legal saga are now taking shots at each other.
Embattled breeding operation ClassicStar and its parent company filed a series of legal documents June 21, actions that both level allegations of blame against two of their former executives and make a request to consolidate a myriad of cross-country federal lawsuits into a Kentucky federal court.
The one-time marketer of high-profile mare lease programs to dozens of mostly new players to the Thoroughbred industry, ClassicStar has filed complaints against former father-son executives S. David Plummer and Spencer Plummer, as well as Utah finance company National Equine Lending Co., which is alleged to be run by a relative of the Plummers.
ClassicStar and its parent company, GeoStar, as well as the Plummers and NELC, are included among a variety of co-defendants in civil actions launched by investors who claim they lost large sums of money in the mare lease programs, including at least six lawsuits filed at the federal court level in five different states.
In the complaints filed June 21, ClassicStar delivers 14 charges against the Plummers and NELC, including fraud, breach of contract, and unjust enrichment, among others.
“The net result of the Plummers’ actions has been for the Plummers to amass personal wealth and build a state-of-the-art breeding facility with funds from GeoStar and the mare lease clients,” the complaint claims.
ClassicStar managing partner Tony Ferguson told The Blood-Horse he can back up every allegation of the 22-page complaint.
“This suit is the result of 16 months of internal investigation and was drafted by a seven-man legal team after reviewing over 200,000 e-mails and documents,” Ferguson said. “There will be many things said about who did what, and who got what. But our internal audit team is 90 percent complete with their work. We have followed the money and welcome the opportunity to pursue this case.”
Included in the allegations are claims the Plummers worked breedings of Quarter Horses into the lease programs – which were originally targeted at Thoroughbreds – to increase their personal sales commissions. But ClassicStar claims the Plummers never intended to enact the actual matings proposed, thus clients were left with far fewer horses for the money they invested.
ClassicStar also claims that David Plummer, acting as president of Buffalo Ranch (his Quarter Horse operation in Utah), and Spencer Plummer, at the time president of ClassicStar, privately executed termination papers on the Quarter Horse breedings without filling in Ferguson or any other GeoStar executives.
“These notices of termination between father and son purportedly ended (the Plummers’) obligations to provide Quarter Horse mares and their foals to ClassicStar,” the complaint said.
Several other allegations include scenarios where the Plummers colluded on internal deals without the knowledge of other ClassicStar/GeoStar officials.
David Plummer, who was formerly ClassicStar’s president and GeoStar’s marketing director, told The Blood-Horse in a phone interview from his Texas home that he is confident the truth will eventually come out in his favor.
“I have come to the realization that it is a blessing that the IRS has the truth, has copies of all the documents,” said Plummer, noting materials confiscated by agents working for the Internal Revenue Service during raids on ClassicStar facilities in February 2006.
“I have told all the clients, we received a 1-2% sales commission -- you can read that in my contract. But that’s not the way the counterclaims read. It claims we got all the money. We got 1-2%; that’s what we were being paid. The other 98-99% went into GeoStar.
“I wrote no checks. I got no financial statements. I did no tax returns. I was not an officer. I was not a director.”
Plummer said he sent a letter in May to ClassicStar’s former clients to tell his side of the story. A copy of the letter obtained by The Blood-Horse accuses GeoStar of taking $137 million out of the ClassicStar operation for its own benefit.
The letter also indicates the Plummers were told the IRS has disallowed all deductions made by clients through the mare lease program. The letter suggests clients could “sue for a refund” in federal court, and that the Plummers would help them in that endeavor.
“Spencer and I want to support you as much as possible,” David Plummer said in the letter. “To the extent that we know facts that can help your cases, we are willing to share them. This is equally true regarding either your battles with the IRS or your efforts to get paid what you are owed by GeoStar.”
In the interview, David Plummer said he is sickened by all of the litigation.
“I am devastated,” he said. “I don’t know how much longer I can hold out with paying $25,000 a month in attorney’s fees. It’s killing me.”
Separately, ClassicStar petitioned the federal Judicial Panel on Multidistrict Litigation to transfer the various federal lawsuits – which include complaints filed in California, Florida, Kentucky, Pennsylvania, and Utah – into Kentucky’s U.S. District Court Eastern Division in Lexington.
Established in the late 1960s, the judicial panel, which is comprised of appointed judges from various federal districts across the U.S., has the ability to transfer related lawsuits with similar characteristics to a single jurisdiction. A ruling on this matter isn’t expected for several months.
ClassicStar was formed in 2000 when GeoStar, an energy company headquartered in Michigan, acquired assets of the former Classic Breeders operation run by David Plummer in Kentucky. Plummer was retained as an executive with ClassicStar, which threw elaborate marketing events to attract new investors into the Thoroughbred industry, touting lease programs that featured both valuable foals and tax savings to investors.
The Plummers and ClassicStar parted ways in February 2006, just weeks before the IRS-backed raids at ClassicStar’s farm in Kentucky and the Plummers’ ranch in Utah.
Claims in lawsuits filed on behalf of clients estimate investors lost hundreds of millions of dollars in the lease programs.
Efforts to contact principals or attorneys affiliated with NELC were unsuccessful. The complaint claims the company owes GeoStar about $200 million.