During a hearing in Lexington Jan. 5, U.S. District Court Judge Joseph Hood ordered ClassicStar LLC, ClassicStar Farms, and parent company GeoStar to provide requested financial records and related material to four plaintiffs who claim they were victims of fraud while participating in nearly $60 million of lease programs.
Included among the materials ordered to be produced to the plaintiffs are some confiscated by federal agents during a Feb. 23, 2006 raid of ClassicStar Farm near Versailles, Ky. According to court filings, ClassicStar has been able to retrieve some of its seized documents from the U.S. Attorney’s office in Oregon, which is believed to be conducting a related criminal investigation.
An attorney for the plaintiffs told Hood the defendants have failed to supply all the materials requested during the discovery phase of the legal action, which was originally filed in July 2006. Plaintiffs’ attorney Robert Webb argued that the defendants had failed to comply with previous orders issued by Hood during a hearing last October.
Webb asked for help from the court, suggesting that when the Internal Revenue Service decided it wasn’t getting all of its requested documents from ClassicStar and others, it took a federal search warrant and ensuing raid to obtain them.
“We aren’t dealing with people who want to comply,” Webb said to Hood.
ClassicStar has argued in court filings it complied with Hood’s October orders by supplying all requested material, noting certain records were still held by federal officials. ClassicStar has separately asked for most of the lawsuit charges to be dismissed, in part because it claims the plaintiffs knew exactly what they were buying into.
Defense exhibits submitted during the hearing were aimed at refuting a primary claim that the plaintiffs expected lease packages involving Thoroughbreds only, and not ones that also combined Quarter Horses.
Included in the exhibits was a DVD presentation that allegedly showed some of the plaintiffs enjoying a “hands-on” instructional program in 2004 at the Utah performance-horse ranch of defendant David Plummer, the former marketing director of the ClassicStar program. Submitted copies of business plans allegedly authored by the plaintiffs also suggested knowledge of performance horses as part of the lease packages, defense attorneys argued.
“It’s clear that’s what they were looking into,” said attorney Brian Johnson, who is part of the legal team representing ClassicStar and GeoStar.
Hood closed the hearing by setting the Jan. 26 deadline. If it is missed, the judge said he might consider some kind of punitive action, including the possibility of fines.
In supporting pleadings filed with the court, the plaintiffs estimate in claims that ClassicStar “marketed” $600 million in lease programs to at least 120 participants from 2001-04. During that same general time period, ClassicStar and/or Plummer purchased more than $45 million in bloodstock at public auction, including many high-profile mares. The company was known for throwing elaborate parties and related marketing gatherings aimed at prospective investors, many of whom were new to the racing industry.
ClassicStar sold 65 broodmares for a combined total of $20,837,000 in a dispersal at the 2006 Fasig-Tipton Kentucky November winter mixed sale. Some or all of the proceeds realized from the dispersal were to be distributed to secured creditors, court documents suggest.
ClassicStar still owns more than 50 broodmares. The company’s managing partner, Tony Ferguson, told The Blood-Horse last year that the company has ceased offering lease packages, but would continue to operate as a traditional commercial breeder.
In other developments concerning ClassicStar:
-- Plummer and others have asked a Utah federal judge for a partial summary judgment in a separate lawsuit filed against GeoStar, claiming the company failed to act on agreements to advance funds for incurred attorney fees and related costs that result from various legal actions, including the criminal investigation by federal authorities.
The plaintiffs, who claim they have incurred more than $500,000 combined in legal fees, say they are due the advanced funds per exit agreements signed with GeoStar in February 2006. In its answer to the complaint, GeoStar claims, in part, that the plaintiffs failed to adhere to conditions outlined in the agreements.
-- ClassicStar and Plummer’s son, Spencer, have also been named as defendants in a separate federal lawsuit recently filed in Utah on behalf of California-based Beechglen Farms. The complaint claims Beechglen invested $1.2 million in a mare lease program in 2005, but was “never provided…the breeding mares promised,” nor refunded its payments.
While ClassicStar has yet to file a response to the complaint, which was filed Jan. 3, Ferguson told The Blood-Horse Jan. 8 that Beechglen missed a deadline to pull out of the program, and that the contracted matings had already taken place.
Ferguson claims Beechglen had successfully participated in two previous lease programs prior to the 2005 contract, and he said he was hopeful the matter could be settled in the near future.
-- At the time of the alleged Beechglen dealings, the lawsuit claims the younger Plummer was president, manager, and member of ClassicStar, which was registered in Utah in 2000. Spencer Plummer and David Plummer both exited ClassicStar in early February 2006, a few weeks before the IRS raid.
In late December, a plan was submitted to Kentucky’s Secretary of State that would merge ClassicStar LLC into a new Kentucky limited liability company called CS Interim, though the ClassicStar name would apparently be retained.
-- Another federal lawsuit involving ClassicStar was settled out of court in late 2006, according to documents filed with the U.S. District Court Western District of Washington at Seattle.
In the original suit, which was filed in 2005, plaintiff Anderson Corporate Finance & Investments claimed it was owed more than $6 million in unpaid commissions during the period it worked as an agent for ClassicStar. Terms of the settlement were not disclosed in the court documents.