The soured relationship between the Thoroughbred Retirement Foundation and its key benefactor, the Paul Mellon Estate, withered further Jan. 5 when the TRF sued an executor of the endowment for libel and slander.
Attorney Frederick A. Terry Jr., with the international law firm Sullivan & Cromwell, is named individually and as an executor as the defendant in the suit filed with the Supreme Court of New York, New York County.
"As part of a misguided attempt to wrest control of the TRF from its Board of Directors and management, the Executors have engaged in a campaign of vilificaition of the TRF, including publication by Defendant Terry of false and defamatory allegations of impropriety to the TRF’s auditors, the Office of New York Attorney General, and others in the Thoroughbred breeding and racing industry," stated the suit.
The final straw that led to the legal action was a Nov. 10 letter from Terry stating that the TRF's annual financial report dated Dec. 31, 2010, was "incomplete and misleading" and that the TRF had improperly secured a loan by pledging future revenues from the endowment. The letter was also sent to New York Attorney General Eric Schneiderman.
"The only option we have here is to demand a retraction," said John C. Moore, TRF chairman. "We are being told our audited statement is a fraud and that we have been raising money by false pretenses, and he is telling this to the Attorney General. They forced us to do this."
Moore said neither he nor any of the TRF board members have talked with Terry or any other Mellon executor since the relationship became confrontational more than a year ago.
"It is my hope this suit will finally get the attention of the Mellon executors who have thus far refused to speak with us and instead have chosen to work through the attorney general," Moore said. "We would have preferred to have a conversation."
Terry could not be reached for comment. An employee answering the phone in his office said he was unavailable because he was in the hospital for surgery.
The TRF, founded in 1982, is one of the world’s oldest and largest equine rescue organizations. Its mission is providing homes and necessary medical care for Thoroughbred horses that have been retired from racing. Hundreds of these horses have been retrained for other horse careers. The foundation is currently caring for about 1,100 horses in 13 states.
When Paul Mellon died in 1999, his estate bequeathed a minimum of $5 million in an endowment to the TRF and added an $2 million more in 2001. Today the endowment provides the TRF with 12% of its annual budget (about $ 3 million).
Executors of the Mellon endowment were hands-off in the operations of the TRF from 2001 through 2005, according to the lawsuit. The level of involvement changed dramatically in 2010 when executors became more involved in the management of the TRF. The executors delayed payment of the annual endowment distribution in January 2011 and became more involved by communicating directly with TRF staff and not involving the TRF board in its decisions.
In February 2011, the lawsuit states, executors were discouraging TRF staff members from pursuing planned efforts to raise funds and garner support from prominent people in racing.
Mellon executor Beverly Carter, who is not named in the suit, allegedly objected to these efforts unless donors would be told "there are financial and horse care problems under review," according to an e-mail exchanged between TRF board members. The lawsuit goes on to say Carter told TRF staff if they did not follow the directions of the executors that the organization "would be faced with a public relations nightmare if any of the problems related to finances and horse care were reported to the media."
"It is doubtful," she reportedly continued, "that any amount of damage control would be able to save the TRF at that point."
Around the same time, the TRF was seeking a loan that it intended to secure with future revenues from the endowment. Before entering into the loan, the TRF got a legal opinion from the Virginia law firm Hunton & Williams that found the loan to be proper according to the terms of the endowment and to Virginia state law.
On March 2, 2011, Mellon executors had proposed an amendment to the endowment agreement that would have prohibited using any endowment funds to repay or be used as collateral for any loans.
The TRF board did not agree to the amendment and declined to sign it.
On March 18, 2011, an article appeared in the New York Times that reported TRF was negligent in paying for the upkeep of hundreds of horses under its care and that scores of horses were starved and neglected.
"We have never denied that the foundation has had great difficulty raising enough money to care for the herd," said Moore. "I can tell you right now the herd is fine and the herd has always been fine."
Moore said he has been told the veterinarian hand-picked by the executors to inspect the TRF herd, and a key source in the Times' story, "had minimal experience with herd animals or Thoroughbred racehorses. We've not been provided with her credentials."
However, Stacey Huntington, the Missouri-based veterinarian who conducted the inspections, said the TRF's description of her knowledge and abilities is simply wrong. Huntington said she is a graduate of Colorado State University and has had an exclusively equine practice for more than 25 years. She said she works regularly with both Thoroughbreds and show horses.
Because of pending depositions, Huntington said she could not talk in detail about her involvement in the herd inspections for Mellon executors or her subsequent treatment by the TRF.
The lawsuit states the allegations made by the executors and from the bad press have cost the foundation more than $400,000 in donations.
The foundation is seeking punitive damages in addition to compensation for lost donations plus attorneys fees that have been spent responding to inquiries from the New York Attorney General's office.
"The Mellon executors have said their primary goal is the health and welfare of the horse but all their actions have been contrary to that," said Charles Zehern, who handles communications for the TRF.