Ray Paulick<br>Editor-in-Chief

Ray Paulick

Agents for Change

The movement for reform in the business of bloodstock sales began in earnest nearly two years ago when Florida Thoroughbred owner and breeder Satish Sanan rallied support for a code of ethics, elimination of dual agency, and increased transparency. Sanan, in a letter to this publication, said "kickbacks and other fraudulent behavior are something the industry professionals know about, participate in, and encourage, but turn a deaf ear to when someone brings it to their attention."

To stimulate change, Sanan created the Alliance for Industry Reform, then put the organization in mothballs when the Thoroughbred Owners and Breeders Association created the Sales Integrity Task Force to address his concerns. Under the chairmanship of Cot Campbell, the task force issued a report in December 2004, opting against most of Sanan's calls for transparency. It did, however, adopt a code of ethics dealing with dual agency, crafted a model buyer-agent disclosure agreement, established disclosure guidelines for certain veterinary procedures, and created a buyer education program.

The momentum for reform slowed in 2005. Complaints from consignors led to a delay of veterinary disclosures. Medication guidelines for sale horses (including a proposed ban on anabolic steroids), requested by the task force and developed by a committee representing the American Association of Equine Practitioners, were met with disdain from sale company officials over the suggestion they be the chief enforcers of medication policies. Buyer education placards were pulled from public display by some sale companies after consignors said they were scaring people away. The new Sales Integrity Program and its three-person monitoring committee (which included Sanan) lacked any power of enforcement.

Then, in September, California winemaker Jess Jackson, who like Sanan several years earlier entered the industry with deep pockets and big dreams, filed suit in California against three former advisers. Jackson claimed he'd been defrauded in private acquisitions through deception and in public auction purchases through undisclosed commissions paid to his advisers by consignors or sales agents.

Depositions and discovery in the case allege several major consignors or their clients paid undisclosed commissions to Jackson's advisers. One of the consignors, Airdrie Stud's Brereton C. Jones, called the secret commissions part of the "free enterprise" system--even though a consignor's contract with Keeneland prohibits such payments if they are made with the intent of "affecting the sale" of a horse.

Consignors who paid these commissions are likely to say the payments were not pre-arranged, came after the fact as a way of saying "thanks" to the agents, and did not affect the sale of any horses.

Jackson, meanwhile, pledged to change how Kentucky's Thoroughbred industry conducts its business. He pushed for a horse industry ethics bill similar to a California law governing bloodstock transactions. That legislation has cleared the Senate and is awaiting passage in Kentucky's House of Representatives.

It's curious that Sanan and Jackson, two relative newcomers to the horse industry, have been forced to do the heavy lifting on reform. Their efforts are designed to make the industry more reputable and welcoming to people with similar backgrounds to theirs: successful careers in business, competitive fires, and a desire to build a first-class Thoroughbred racing or breeding operation. These are the kind of people breeders, consignors, and sale companies need to maintain demand for their products.

Through Sanan and Jackson's efforts, the bloodstock business is as close to true reform as it has ever been. What happens next depends on the industry's leaders.