02/19/2008 12:00AM

Curlin case to continue March 21

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FRANKFORT, Ky. - A Kentucky circuit court judge granted a continuance on Tuesday to 418 plaintiffs who are seeking control over a 20-percent interest in Curlin, the reigning Horse of the Year, that is currently held by William Gallion and Shirley Cunningham Jr., jailed lawyers who have been ordered to pay the plaintiffs $42 million in connection with a class-action suit over the diet drug fen-phen.

Judge Roger Crittenden set March 21 for a hearing to delve further into the complex issues in an often contentious case that has focused primarily on whether Gallion and Cunningham are using financial shelters such as family foundations and limited liability corporations to delay paying the judgment, which was handed down last fall.

Angela Ford, the lawyer representing the 418 plaintiffs, is seeking foreclosure on Gallion's and Cunningham's holding company, Tandy LLC, for the purpose of "a liquidated receiver," she told the court. Ford is seeking to have the 20-percent interest in Curlin put up for public auction as a means of partially settling the judgment. Curlin's value could exceed $50 million, the price that Sheikh Mohammad al Maktoum is believed to have paid for Street Sense, last year's Kentucky Derby winner.

Ford has repeatedly alleged that Gallion and Cunningham have subverted the legal system by hiding or sheltering assets. But Mary Meade-McKenzie and Andre Regard, attorneys for Gallion and Cunningham, countered during lengthy arguments Tuesday at the Franklin County Courthouse that they have complied with everything asked of them.

Crittenden said he is contemplating mediation by involving the U.S. Attorney's Office but has stopped short of ordering it.

"At some point during the next two months, it might be appropriate for the parties" to enter mediation, he said.

Gallion and Cunningham have been jailed in northern Kentucky since August while awaiting their May 12 criminal trial on fraud charges stemming from the fen-phen settlement.

Gallion and Cunningham, along with another lawyer not involved in horse racing, Melbourne Mills Jr., are accused of misappropriating tens of millions of dollars in a $200 million settlement they reached on behalf of the plaintiffs with the maker of the diet drug.

Eighty percent of Curlin is owned by the Stonestreet Stables of Jess Jackson, who has already bought out two previous partners in the horse, Padua Stables and George Bolton. Gallion and Cunningham race together under the name Midnight Cry Stable. In addition to its share of Curlin, the stable owns several other horses, including the Grade 1 winner Einstein. Midnight Cry falls under the Tandy LLC umbrella of financial interests.

Curlin arrived Sunday in Dubai, where he is pointed for the $6 million Dubai World Cup on March 29, the world's richest race.