09/24/2007 11:00PM

Jackson to receive $3.5M in settlement

EmailLEXINGTON, Ky. - Stonestreet Stable owner Jess Jackson and his former bloodstock advisor Emmanuel de Seroux have reached a settlement agreement in the fraud case Jackson filed against the agent in 2005 over a number of horse sales, both sides said Tuesday.

The case had been set for trial in San Diego on Friday.

The settlement terms call for de Seroux to pay Jackson $3.5 million, according to Jackson attorney Kevin McGee. In exchange, Jackson will drop his suit alleging that de Seroux defrauded him by inflating prices and receiving secret commissions in a number of horse sales and in the $17.5 million purchase of Buckram Oak Farm in Lexington. De Seroux also will drop his counter-claim, which alleged that Jackson, the founder of Kendall-Jackson winery, had failed to pay de Seroux and his Narvick International bloodstock agency for its services.

Jackson filed suit in October 2005 against de Seroux, trainer Bruce Headley, and advisor Brad Martin, alleging the three had defrauded him "of at least $3.2 million" by inflating the value of horses Jackson purchased and by receiving secret commissions on those transactions. De Seroux had denied those charges. Headley and Martin settled their part of the suit in March and May, respectively, with Headley paying $900,000 and Martin paying $250,000.

The settlement does not affect Jackson's suit against French bloodstock agent Frederic Sauque and Buckram Oak Holdings over the Buckram Oak purchase.

"Although we were prepared to present a winning case, the grim reality is that the relentless churning of legal skirmishes in multiple states, through discovery, trial, and appeal, made resolution by settlement the lesser of two evils," de Seroux's attorney, James Morgan, said in a statement issued Tuesday afternoon. Morgan called Jackson's suit "a well-funded effort to destroy Emmanuel de Seroux professionally and personally" and the settlement "a ransom fee to liberate Narvick International and Emmanuel de Seroux from the shackles of being held hostage to a never-ending litigation process."

"In addition," Morgan added, "this settlement is the result of a multitude of facts that developed during discovery and ultimately impacted each side's decision to reach a settlement. There is no admission of any fault or wrongdoing by either party. There is a negotiated peace."

The lawsuit against de Seroux launched Jackson's vigorous public crusade for increased transparency in bloodstock transactions and has been a catalyst for legislative reform in the bloodstock sales industry. Jackson lobbied successfully for Kentucky legislation to outlaw dual agency in public and private horse sales. That law passed in 2006, and Jackson has since been instrumental in reconstituting the Sales Integrity Task Force to tackle such issues as full disclosure of ownership and veterinary records of sales horses.

The current push for increased transparency and a specific ban on dual agency - when an agent receives commission from both buyer and seller without disclosing it - began in 2004, when Padua Stables owner Satish Sanan called for reforms in the bloodstock sales industry. At Sanan's behest, the Thoroughbred Owners and Breeders Association established the Sales Integrity Task Force, which issued a proposed code of ethics but no penalties for infractions in December 2004.

Jackson renewed the call for reform when he filed his suit against de Seroux, and, at the urging of Jackson and Kentucky legislators, the owners and breeders named a larger, reconstituted Sales Integrity Task Force in April. Its recommendations for sale reforms are due to Kentucky lawmakers by Dec. 31.

Thoroughbred owner James McIngvale cited Jackson's suit as his inspiration in examining his own agents' bloodstock transactions. McIngvale sued his former advisors, J. B. and Kevin McKathan, in 2006. That suit was settled in May.

McIngvale was criticized by some for settling his suit instead of letting the facts come out at trial. Asked whether he expected the same criticism, Jackson attorney McGee said he believed Jackson's case had already served a valuable purpose.

"If people expected us to make an example of them, I think we did that," McGee said of de Seroux and the other original defendants. "I think the dollar amount speaks for itself."