09/25/2008 11:00PM

Curlin stake faces auction


A 20-percent stake in 2007 Horse of the Year Curlin is likely to be offered in a sealed-bid auction in the near future as a result of a ruling on Thursday by a Kentucky state judge, although the status and outcome of any auction is unclear.

Judge Roger Crittenden of the Franklin County Court signed an order Thursday that will allow the 20-percent stake to be auctioned in a ruling on the assets held by Tandy Corp., the holding company for Midnight Cry Stables, the owner of the 20-percent share.

Earlier this year, Crittenden put the 20-percent stake in a receivership as a result of a $42 million civil-court judgment against Midnight Cry's co-owners, the Lexington lawyers Shirley Cunningham Jr. and William Gallion, for defrauding their clients in a 2002 settlement with the manufacturer of the diet-drug combination fen-phen.

How or when the auction may be held is unknown. In addition, an official with knowledge of the proposal doubted that the auction would attract any legitimate bids, based on the unusual nature of the stake and the legal uncertainties surrounding Tandy.

"I can't imagine a scenario in which there will be one bid," said the official, who spoke on the condition of anonymity because of ties to the parties involved. "No one has any real incentive."

Nevertheless, officials for the court-appointed receiver, Matthew Garretson, have reached out to the two largest Thoroughbred auction houses in the country, Keeneland and Fasig-Tipton, according to officials with both companies.

Harvey Wilkinson, the vice president of Keeneland, said on Friday that the Lexington auction house was contacted by the receiver on Thursday just before the hearing in Franklin County Court, but that the discussion merely consisted of a request to gauge Keeneland's interest in conducting the auction.

"We told them we'd be interested in talking to them about it," Wilkinson said. "This is a little different than anything we've done in the past, and so we don't know any details."

The receiver, said Wilkinson, "told us he'd get back to us next week."

Boyd T. Browning, the chief executive of Fasig-Tipton, said on Friday that the auction house was contacted by the receiver, but he said that "Fasig-Tipton does not anticipate participating in the auction at this time." Browning declined to give a reason.

Attorneys for the receiver did not return phone calls on Friday.

Curlin, who is approaching the all-time earnings record for a North American horse, was scheduled to run in Saturday's Jockey Club Gold Cup at Belmont Park in New York. A 4-year-old son of Smart Strike, Curlin, is expected to be retired at the end of this year, although any retirement plans may hinge on the sale of the 20-percent stake in receivership.

Curlin's majority owner, Jess Jackson's Stonestreet Stables, would have a right to submit a bid for the 20-percent stake, according to testimony during the hearing. In addition, it would appear that Stonestreet also has the ability to contest the winning bid under a prior ownership agreement with Midnight Cry that included a right of first refusal on any sale of Midnight Cry's 20-percent stake. That right is behind the doubts that bidders would participate in the auction.

An attorney for Stonestreet, Richard Getty, did not return a phone call on Friday.

Gallion and Cunningham are awaiting a November retrial on criminal charges that they defrauded their clients in the 2002 fen-phen settlement. Earlier this summer, a jury was deadlocked on charges against the two lawyers, although a third lawyer, Melbourne Mills Jr., was acquitted.