11/18/2008 12:00AM

Legal woes may affect Curlin stud plan

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Adam Coglianese/NYRA
Jess Jackson, through the J & B Bloodstock operation owned by him and his wife, Barbara Banke, has offered $4 million for Gallion and Cunningham's 20 percent stake in Curlin.

LEXINGTON, Ky. - The ongoing legal wrangling by majority owner Jess Jackson to buy out his partners' 20 percent interest in Curlin might alienate farms who are interested in striking a stud deal for the colt, bloodstock experts say.

Jackson is attempting to buy out William Gallion and Shirley Cunningham, two disbarred attorneys from Lexington who face a $42 million civil judgment and a criminal retrial for alleged mishandling of their clients' $200 million settlement in cases relating to the diet drug fen-phen.

Jackson, through the J & B Bloodstock operation owned by him and his wife, Barbara Banke, has offered $4 million for Gallion and Cunningham's 20 percent stake in Curlin, putting a $20 million total value on the colt. But Gallion and Cunningham will argue in a Dec. 1 hearing in Frankfort, Ky., that the colt is worth substantially more.

Their attorney, Andre Regard, declined to discuss his clients' estimation of Curlin's worth, saying only that it is higher than Jackson's estimate and would be revealed in bloodstock experts' testimony on Dec. 1. A court-appointed receiver has asked Judge Roger Crittenden to approve the sale to Jackson, but Gallion and Cunningham oppose a private sale to Jackson and have called for auctioning the colt to dissolve the partnership. A sealed-bid auction for the 20 percent share of Curlin, a son of Smart Strike and Sherriff's Deputy, held earlier this month, failed to attract any qualified bids, in part because Jackson had the right to refuse any bid.

As the majority owner with an 80 percent stake in the horse, Jackson is free to hammer out a stallion deal with any farm that is interested, say many bloodstock advisers. He also is free to stand the horse himself at his own Stonestreet Stable property near Lexington. But if his goal is to sell the horse outright, he would need to acquire Gallion and Cunningham's 20 percent interest first.

The cloudy future for that 20 percent probably is giving some farms pause, many breeding pundits agree.

"The best way to have a new stallion come to your place is to have the ownership get behind him with their mares," said John Stuart, a principal in The Stallion Company. "Clearly, the minority owners aren't going to be supporting him with mares. Obviously, having the thing all wrapped up in the legal process doesn't help.

"Most farms would want to own part of the stallion, because it's a lot of work to manage a stallion, so they want to get something for it," he added. "Most want to invest in it, rather than just earn breeding rights, and they want some guarantee that they'll have the horse to stand for a period of time. I think the ideal thing would be for J & B Bloodstock to buy the 20 percent and then get a farm to come in with them and manage and promote the horse."

Even if there is no technical reason that Jackson can't strike a stud agreement now with a third-party farm, the ongoing legal processes involving Gallion, Cunningham, and their 20 percent share could convince farms to stay away until the ownership is resolved.

"This just adds another few codicils to the contract," said Michael S. Brown, a bloodstock adviser and owner of SireAverages.com, which tracks stallions' commercial data. "There's lot of 'iffing' going on. What if Jackson doesn't buy the 20 percent? What if he or someone else does and Gallion and Cunningham challenge the purchase? There's a lot of litigation going on, and, if you're a stud farm, you're probably concerned you'll be named a party to that. People are having enough problems selling seasons right now - why would they want to add more heartache? You might be able to sell seasons to him, but you might not see the money soon if the litigation goes on five, 10, 15 years. These questions just aren't answered yet."

Regard says the most important question remains the actual value of Curlin and his clients' 20 percent stake in him, not whether he can go on to stud.

"My clients have done everything they could to facilitate an orderly transition of Curlin from a racehorse to a stallion," Regard said. "We've done nothing to impede that and everything to encourage Stonestreet to sit down with us and come up with a process so Curlin can go to stud. We've never argued that Stonestreet doesn't have control of the horse's racing career, and to a certain extent his stallion career. We never stood in the way of retiring the horse.

"Their point to the court has been that the colt's value is diminished every day he doesn't go to stud, yet they've had control over that decision the whole time."