03/24/2011 1:49PM

Lane's End faces additional lawsuit involving Lemon Drop Kid syndicate

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LEXINGTON, Ky. – California Thoroughbred owner Jerry Jamgotchian’s KNC Investments has filed suit against Lane’s End, alleging that the farm has refused to provide accounting records relating to the Lemon Drop Kid syndicate, in violation of the syndicate agreement.
KNC Investments joined the syndicate on Jan. 28 after paying $350,000 for a share in Lemon Drop Kid.

In the March 23 lawsuit filed in U.S. District Court in Lexington, Jamgotchian raises “the possibility of improper conduct on the part of Lane’s End as syndicate manager and has insisted on Lane’s End providing full, complete, and unredacted financial information and unfettered access to the LDK Syndicate books and records in order to establish whether or not Lane’s End has acted appropriately as to the fiduciary obligations that it owes to all syndicate members and with respect to its handling of syndicate funds.”

In a press release, Jamgotchian said his belief that Lane’s End is handling syndicate funds improperly inspired him to file suit for the documents. He alleges the farm is “commingling syndicate funds, making ‘insider’ loans,” and diverting syndicate funds improperly.

Jamgotchian’s suit cites wording in the syndicate agreement saying the syndicate manager will make “the books and records” available to syndicate members. “Lane’s End has refused KNC’s request for a complete, unredacted, and unaltered copy of the General Ledger, instead agreeing only to provide redacted portions of the General Ledger,” according to the lawsuit. Jamgotchian is seeking judgment that KNC is entitled to review and copy all books, records, and information pertaining to the syndicate, including a complete contact list of syndicate members. He also seeks unspecified compensatory and punitive damages.

“Mr. Jamgotchian requested various syndicate books and records and sent Lane’s End Stallions over 50 e-mails in 15 days,” William Hoskins III, attorney for Lane’s End, said in response to the suit’s filing. “Lane’s End Stallions provided Mr. Jamgotchian with copies of each and every document he was entitled to receive under the syndicate agreement, and he made an appointment to review other records at our offices on March 21. Mr. Jamgotchian cancelled that appointment and has not availed himself of the opportunity to review those records before filing suit.

“Lane’s End Stallions suggested an audit of the books of the syndicate by an independent accountant. Mr. Jamgotchian has not acted on that suggestion.

“Mr. Jamgotchian requested a list of the syndicate members and a meeting of the syndicate. Lane’s End Stallions sent his request to the members of the syndicate for their consideration. It is our practice not to release confidential information without permission from the person involved. Under the syndicate agreement, a meeting of the members requires the affirmative vote of 18 members. As of today, we have not received permission from any member to release his or her contact information to Mr. Jamgotchian, nor have we received a single vote, other than Mr. Jamgotchian’s, in favor of his request for a meeting. In our opinion, Mr. Jamgotchian’s opinions are baseless. We look forward to a court of law resolving these issues.”

Jamgotchian’s suit is the second court case related to KNC’s share in Lemon Drop Kid. Last September, Lane’s End filed a petition against Jamgotchian, KNC, and the share’s sellers, Ashley Andrews and Robert Raphaelson, claiming the sellers had violated the syndicate agreement by consenting to sell their Lemon Drop Kid interest to KNC without allowing other shareholders a right of first refusal. Lane’s End also alleged Jamgotchian had violated Kentucky’s law against dual agency because the purchase price included a commission to Jamgotchian as dual agent for both the share’s buyer and seller. In late January, U.S. District Court judge Karen K. Caldwell allowed the sale to go forward.