07/01/2008 11:00PM

Deadlock in Curlin owners' trial

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A federal jury in Covington, Ky., deadlocked after six days on fraud charges against two lawyers who are the minority owners of 2007 Horse of the Year Curlin, was told to continue deliberating Wednesday afternoon.

Judge William Bertelsman of the U.S. District Court for the Eastern District of Kentucky issued the order after hearing arguments from defense attorneys and prosecutors, according to the Associated Press. Lawyers for William Gallion and Shirley Cunningham - two attorneys who have been in jail since late last year under criminal charges of conspiracy - asked Bertelsman to issue the order instead of declaring a mistrial, which could open up the two lawyers to a new trial.

The jury has been deliberating in the case since last Tuesday, after a six-day trial in which lawyers for Gallion and Cunningham argued that they made ethical mistakes but did not commit any crimes when dealing with the distribution of a $200 million settlement they reached against the manufacturer of the diet-drug combination fen-phen. Gallion and Cunningham are both facing one count of conspiracy in the trial.

On Tuesday, the jury declared a third attorney, Melbourne Mills Jr., 77, not guilty. The attorney for Mills had argued that Mills was an alcoholic at the time the settlement was reached and that he did not materially play a role in distributing funds from the 2002 settlement. Mills was hospitalized during the trial because of heart problems.

The case is being closely watched in the horse racing industry because of its potential ramifications on the racing career of Curlin, who is being pointed to the Arlington Handicap in Illinois or the Man o' War Stakes in New York for his next start. Both races are scheduled for July 12.

Gallion and Cunningham own horses under the name Midnight Cry Stable. That company owns 20 percent of Curlin. The remainder is held by Stonestreet Stables, which is owned by Jess Jackson and his wife.

Complicating licensing issues in Midnight Cry's case is a separate civil-court judgment against the three lawyers in which the judge ruled that the fen-phen clients were defrauded of tens of millions of dollars in the diet-drug settlement. The judge in that case has ruled that the clients are entitled to the assets held by Midnight Cry, but he has not issued a final order transferring the assets yet.

As a result of that ruling, Midnight Cry's earnings have been put in receivership. For the purposes of licensing in Kentucky, where Curlin is based and where he won his last race, the company's share of Curlin has been leased to Shirley Cunningham's wife, Patricia. Although Kentucky allows a license to be given to a leaseholder, other states, such as New York, require both a leaseholder and the owner to be licensed in order for a horse to be eligible to run. Shirley Cunningham's New York license expired several months ago.