McIngvale Suit Charges Kickbacks to Trainer and Agents

By Ryan Conley, Leslie Deckard,
and Dan Liebman
Prominent racing owner James McIngvale on Thursday filed a federal lawsuit in Texas that in part charged trainer Bob Baffert and Florida-based sales agents J.B. McKathan and Kevin McKathan with receiving secret commissions and kickbacks on "various Thoroughbred racehorses" the Houston furniture industrialist purchased at public auction.

The lawsuit, which was filed in the U.S. District Court in Galveston, Texas, specifically details a transaction involving the sale of Work, a $950,000 purchase on behalf of McIngvale at the 2003 Keeneland April 2-year-olds in training sale. The civil action alleges that the McKathans received a 10% commission from consignor Murray Smith for the purchase of the son of Menifee-Pacific City, by Carson City.

A copy of a $95,000 canceled check paid to Our Team LLC, a Florida corporation affiliated with the McKathan brothers, was included as an exhibit with the lawsuit. The check, which was signed by Smith, had included in the memo line, "10% Comm. On Menifee-Pacific City."

According to the lawsuit, McIngvale had an oral agreement with the McKathans to pay them 5% of the purchase price of horses bought on his behalf during the term of their relationship, from 2001-2004.

The lawsuit - which seeks a variety of unspecified damages - goes on to allege that, during the course of an investigation by McIngvale into the dealings with the named defendants, J.B. McKathan "confessed to McIngvale that he did in fact receive secret commissions and kickbacks on Thoroughbred racehorses defendants recommended and purchased on behalf of McIngvale."

Neither J.B. McKathan nor Kevin McKathan immediately returned calls made by The Blood-Horse on Thursday. The siblings operate the McKathan Brothers Training Center near Citra, Fla.

Baffert's role in the lawsuit is defined as an adviser and trainer to McIngvale, who admittedly spent millions on horses during the four-year association with the McKathans.

But Baffert told The Blood-Horse on Thursday that the McKathans handled the sales end of the relationship with McIngvale.

"I just trained the horses," Baffert said in a brief interview. "J.B. was in charge of the sales. I don't know anything about the lawsuit, but I am going to find out."

Smith was not named as a defendant in the suit, and was mentioned in the complaint only as the "seller" in the discussion of the sale of Work, who has three wins from 29 lifetime starts, earning $53,173. Baffert trained the horse for McIngvale though four starts, never finishing better than fifth. McIngvale no longer owns the horse.

When asked about the check cited in the lawsuit, Smith told The Blood-Horse, "I would have to review it and ask my bookkeeper." Smith declined further comment, noting that "the McKathans are friends of mine."

McIngvale told The Blood-Horse that he didn't want to comment specifically about the lawsuit and preferred to "to let the facts speak for themselves as they come out. But I would like to say that it's a moral imperative to protect the 99% in this industry that are good, honest and transparent." He declined further comment.

The McKathans and Baffert have worked as a team in acquiring horses for various owners, and their recommended purchases included such runners as champions Silver Charm, Real Quiet, and Silverbulletday.

Transcript of McIngvale Suit (PDF)