10/25/2006 11:00PM

Filly's sale tests ethics guidelines

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LEXINGTON, Ky. - Fasig-Tipton Kentucky's fall yearling sale, which ended Wednesday evening with declines across the board, unexpectedly provided a test of the Sales Integrity Task Force's code of ethics. The company acknowledged that, under a new policy it formulated after the code's 2004 unveiling, it should have scratched a Chief Seattle filly that had been sold privately on the auction grounds within 24 hours of entering the sale ring.

The filly, a daughter of Kwik as a Wink, sold at auction to agent Buzz Chace for $270,000 and was the sale's second-highest-priced lot.

Fasig-Tipton's chief operating officer, Boyd Browning, said pinhooker John Brocklebank notified the auction house prior to the auction that he had purchased the filly for $29,000, but a Fasig-Tipton employee mistakenly advised Brocklebank and consignor Paul Sutton that the filly should go through the auction despite the ownership change. Brocklebank was underbidder.

After the filly's sale in the ring, Fasig-Tipton convened Chace, Chace's unidentified client, and Brocklebank by phone. Brocklebank offered to keep the filly, but Chace's client instead agreed to buy her for an undisclosed price between Brocklebank's original $29,000 purchase price and the $270,000 auction price, Browning said.

"Before the Sales Integrity Task Force rules were put in place, some of those things could take place and they could go through the office," Browning said of the pre-sale private purchase. "There were no restrictions on it. So that employee absolutely was acting in the best faith. They just didn't realize the rules had changed."

The code of ethics states: "In any case in which a horse entered in a sale changes hands after publication of the catalog, the sale company will make this announcement from the stand prior to the horse being sold." The code offers recommendations, but not requirements.

The Chief Seattle filly's situation, first reported Thursday by the Blood-Horse, points out the confusion that can occur when sales companies implement differing policies regarding ethics issues.

Keeneland has added the code's suggested policy of announcing ownership changes into the conditions of sale that it publishes in the front of its sale catalogs. Fasig-Tipton does not announce ownership changes, instead requiring that privately sold horses be withdrawn if company officials become aware of the private transaction.

"We intend to comply with the recommendations of the Sales Integrity Task Force," Browning said. "It says the change of ownership has to be announced. But, frankly, from a practical standpoint, our general rule in house has been that if it's pre-sale private-sold, we're not going to be involved in it."

However, Fasig-Tipton's published conditions of sale make no reference to that policy.

Brocklebank, who operates BC Thoroughbreds with partner Shane Chipman, said such gaps in guidance are what led him to ask Fasig-Tipton officials for advice in the first place.

Brocklebank said a mutual friend, Glenn Brok, helped him arrange to purchase the Chief Seattle filly privately from breeder Harvey Clarke for $29,000.

"Brok said, 'A handshake's good enough,' but I said, 'No, with all the scuttlebutt out there nowadays, we need to document this. We need to go and get advice from Fasig-Tipton on the proper way of doing this.' I wanted everything on the up and up," Brocklebank said, adding that he had intended to scratch the filly and resell her as a juvenile. "They said we had to run her through the sale."

Brocklebank provided Daily Racing Form with a copy of the private purchase agreement - including an illegible signature on the line designated for a Fasig-Tipton representative - that he, Brok, and consigning agent Sutton filled out before the auction. Brocklebank said he opted to sell when Chace bid high against him, partly because Brocklebank knew he'd owe Fasig-Tipton a commission on the high price even if he bought the filly back.

Browning said that this was a case in which the ethics code worked, because Fasig-Tipton brought the parties together for a resolution after discovering the error. Browning said the company will "re-educate" staff on proper procedures under the code.

The market also needs consistent policies, Brocklebank said.

"From what I can understand, Fasig-Tipton should have made an announcement," he said. In the meantime, Brocklebank said he'll continue to follow the code's most prominent advice: to document every transaction.

* Fasig-Tipton Kentucky's three-day fall yearling sale sold 635 lots for total receipts of $9,747,000, down 12 percent from last season, when 610 horses sold. Average fell 16 percent to $15,350, and median dropped 12 percent to $7,500. The buyback rate was 31 percent, compared to 29 percent last year.