03/17/2006 12:00AM

Jackson suit raises touchy agent-seller issue

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The newly amended lawsuit brought by Jess Jackson, which accuses several bloodstock agents and a farm owner of defrauding him in numerous Thoroughbred purchases, has raised a debate over the practice of some sellers to make payments to buyers' representatives.

Jackson calls these payments undisclosed kickbacks, but the sellers compare them to rebates or gratuities to thank an agent or his client for shopping with the seller. Either way, if pending legislation supported by Jackson is signed into law in Kentucky, such payments will have to be disclosed. The bill, which passed the state Senate last week, would prohibit a buyer's agent from accepting "compensation or another item of value" from a seller without obtaining consent from the buyer.

In California, where Jackson has sued his former agents Emmanuel de Seroux, Brad Martin, and trainer Bruce Headley, the state's Business and Professions Code bans hidden commissions or fraud in bloodstock transactions, allowing a victim to claim triple damages from such activity.

Jackson's suit alleges that de Seroux, Martin, and Headley all accepted payments from sellers without Jackson's knowledge. Jackson contends that these were undisclosed commissions and that his representatives were acting illegally as dual agents, pushing him to buy horses in their interests instead of his own.

The suit identifies three major sellers - Airdrie Stud owner Brereton C. Jones, Eaton Sales co-owner Tom Van Meter, and Hill 'n' Dale Farm owner John Sikura - as having paid commissions to one or more of Jackson's agents for purchases made at Keeneland in Lexington, Ky. Jones, Van Meter, and Sikura all deny having engaged in any improper behavior, and none has been named as a defendant in the suit. Jones is a former governor of Kentucky and board chairman of the Kentucky Equine Education Project, a horse racing advocacy group that has spent approximately $1 million on a marketing campaign in support of casinos at Kentucky tracks.

Keeneland's consignor contract does not allow consignors to pay buyers' agents "as remuneration for affecting the sale of any horses listed herein," raising the possibility that post-sale payments were improper even without the new legislation.

In a deposition taken Feb. 24 in Lexington and made public Thursday through a court filing, Jones, a former governor of Kentucky, acknowledged paying Headley 10 percent commissions totaling $44,000 on purchases by Jackson of a Deputy Commander weanling at the 2004 Keeneland November breeding stock sale and a Yankee Victor yearling at the Keeneland September sale in 2003.

"The great thing about the free enterprise system is that you have the right to market your product as you see fit, as long as you don't engage in dual agency or conspire to defraud someone," Jones said Friday. "If a car salesman wants to give a rebate to someone when he buys a new Ford, he can do that. The Chevrolet dealer down the road can do the same thing."

Jones said Headley never asked for the commission. "To give a gratuity, it's like tipping a waitress," Jones said. "It doesn't affect the sale of the food."

Sikura said that Jackson's agent, in this case de Seroux, did not ask for a commission when Sikura consigned horses for the late John Franks's dispersal at Keeneland's 2004 November sale. De Seroux, whose bloodstock company is Narvick International, purchased 11 lots for Jackson.

According to Jackson's complaint, filed in San Diego, "Unknown to Jackson, de Seroux and Narvick had an agreement whereby de Seroux and Narvick would receive a 2 percent commission on every horse in the Franks Estate dispersal purchased by Jackson at the sale" and later received "approximately $40,000 from Hill 'n' Dale on Jackson's purchases."

But Sikura said the payment was not pre-arranged. "There was no discussion of payment prior to the sale, and it was never demanded," he said. "There was no conversation at any time or any place regarding the purchase of any horses from the Franks dispersal. There was no market manipulation, as the horses sold without reserve. The consignor and the owner did not bid one time on any horse."

Van Meter paid Headley a $22,500 commission on Narvick's purchase of the $450,000 yearling Brahms Allegro for Jackson at the 2004 Keeneland September sale, according to the suit.

"I really feel that I did not do anything illegal and did not do anything improper," Van Meter said. "I did write a check for Mr. Headley, as I've shared with Mr. Jackson and his attorney."

Van Meter said such payments, as gratuities or rebates, could be a legitimate part of marketing a consignment.

"The problem is not in the gratuity, the tip, commission, rebate, or whatever you choose to call it," he said. "What's improper is that it wasn't disclosed to the buyer. I don't think there should be dual agency, I think it should be disclosed to the principal."

Van Meter and Jones both said they support the bill that would bring increased disclosure.

Narvick attorney Dan Platt has denied that his client engaged in dual agency or received excessive fees. On Friday, Platt filed a cross-complaint alleging that Jackson "has failed to pay Narvick the full amount he owes it" for its work in helping Jackson acquire bloodstock. The cross-complaint asserts that California law doesn't apply to transactions outside the state.

Jackson attorney Richard Getty said Jackson had paid all Narvick's invoices.