10/23/2007 11:00PM

ClassicStar cases put on hold

EmailA judicial panel has consolidated numerous lawsuits against the former ClassicStar commercial breeding operation and ordered that they be transferred to the Eastern District of Kentucky. But the judge who will take over the cases has ordered a stay because of ClassicStar's Chapter 11 bankruptcy proceedings.

ClassicStar filed for bankruptcy on Sept. 14, estimating it owed creditors $69,708,624.

The seven-member panel ordered consolidation of cases in Utah, Pennsylvania, Florida, California, and Kentucky that are pending against ClassicStar; its parent company, Gastar; and ClassicStar executives. The panel assigned the consolidated cases to Senior U.S. District Judge Joseph M. Hood in Kentucky. On Monday, Hood ordered a stay on all proceedings against ClassicStar, citing its bankruptcy.

The cases arise out of complex mare-lease programs ClassicStar offered investors beginning in 2001. The company marketed the programs as money-making tax shelters, but the Internal Revenue Service raided ClassicStar's Kentucky headquarters in 2006 and opened an investigation of the mare leases. Since then, investors in the program have sued ClassicStar and its former executives, alleging the company inflated the program's value by overselling lease packages and falsely claimed the program was acceptable under IRS guidelines.