01/26/2006 12:00AM

Kentucky bill addresses sale fraud


LEXINGTON, Ky. - Jess Jackson, owner of Stonestreet Stables, has formed a nonprofit organization to help investigate owners' claims of fraud in transactions for horses, and he is lending his support to state legislation designed to prevent such fraud.

Jackson, who sued California-based bloodstock agent Emmanuel de Seroux and two of de Seroux's associates last year for alleged fraud in a number of horse purchases - the case has yet to come to trial - is pushing the Kentucky legislature to approve HB 446, sponsored by Rep. Denver Butler, a Democrat from Louisville. The bill would prohibit agents from receiving undisclosed commissions in horse sales. It also would require disclosure of the agreed price for any horse or stallion season on a bill of sale to be signed by both buyer and seller. It also would prohibit undisclosed and unapproved dual agency, a practice in which an agent represents both buyer and seller without disclosing that arrangement to the parties involved.

Finally, the bill calls for awarding triple damages plus costs and attorneys' fees to victims who were defrauded in a transaction for a show horse, racehorse or racehorse prospect, interest/share, or stallion season.

To help support small owners alleging fraud, Jackson has incorporated the nonprofit Horse Owners' Protective Association. Jackson's attorney, Richard Getty of Lexington, said the group would "be involved in trying to educate people within the Thoroughbred industry and also assist in making resources available to investigate complaints of dual agency, undisclosed commissions, and those sorts of things."

Getty said the Horse Owners' Protective Association initial board consists of Jackson, WinStar Farm co-owner Bill Casner, and Three Chimneys Farm owner Robert Clay. Getty said the group is "receiving contributions from other significant interests in the Thoroughbred business who want to see the business benefit from this." Getty declined to name contributors or the amounts of their contributions but called early industry support of the legislation and the owners' group "amazing."

Prodded by a prominent buyer and farm owner, Satish Sanan, the Thoroughbred Owners and Breeders Association established its Sales Integrity Task Force in the summer of 2004. The panel developed a code of ethics that December, but the code did not include penalties for violations.

Although existing anti-fraud laws also protect buyers involved in horse sales, Getty said the new proposed legislation could help small owners with its provisions for triple damages plus costs and attorneys' fees if they win their case.

"This legislation really helps the small owner who may have been cheated and really can't afford to pursue a claim," he said. "What's the little guy going to do when the amount he'd get does not justify pursuing it? This gives incentive to a lawyer to take the case.

"If you look at it historically, every industry that has ever had problems, ultimately, the way that industry has been cleaned up or the problems eliminated is by adopting specific legislation to address those problems that has some teeth in it. Everybody pays lip service to a code of ethics, but unless somebody enforces it, it doesn't change a thing."