07/02/2008 11:00PM

Mistrial declared for Curlin owners

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The criminal trial of the two Lexington, Ky., lawyers who own a minority share in 2007 Horse of the Year Curlin ended in a mistrial on Thursday when a jury told the judge in the case that they were deadlocked for a second day.

Judge William Bertelsman of the U.S. District Court for the Eastern District of Kentucky in Covington ordered the mistrial after the jury could not decide whether to declare Shirley Cunningham Jr. or William Gallion guilty on one charge each of criminal conspiracy. As a result, Cunningham and Gallion will be tried again on the charge, though no date for a second trial has been set.

The mistrial result fails to clear up lingering confusion over whether Cunningham and Gallion will be eligible to be licensed in the states where Curlin plans to race. The two lawyers own 20 percent of Curlin through Midnight Cry Stable, but that stake has been placed in receivership by a judge who presided over a separate but related civil-court judgment against Cunningham, Gallion, and a third lawyer, Melbourne Mills Jr.

Mills was declared not guilty by the jury in the criminal trial earlier in the week. He was released from jail on Tuesday. Gallion and Cunningham remain in jail without bail on the orders of Bertelsman, who has said the two lawyers are a flight risk.

Prosecutors in the case had alleged that the three lawyers intended to defraud their clients out of tens of millions of dollars from a $200 million settlement reached in 2002 with the manufacturer of the diet-drug combination fen-phen. Last year, the civil court concluded that the lawyers had defrauded the clients.

Angela Ford, the attorney representing the clients in the civil case, said that she believed the civil-court judge, Roger Crittenden, would issue a ruling next week to formally transfer the lawyers' assets to her clients as part of the settlement of the case. The assets will include Midnight Cry's 20 percent share in Curlin.

For his next start, Curlin is being pointed to either the Arlington Handicap at Arlington Park in Illinois or the Man o' War Stakes at Belmont Park in New York, both on July 12. Ford predicted that all licensing issues regarding Curlin would be cleared up once Crittenden issued the order to transfer the assets.

"As of next week, that should clear things up for regulators in New York and Illinois," Ford said. "I can understand their confusion right now, but the order should clearly define the authority and management issues."

On Monday, Crittenden reiterated in an order that all of Midnight Cry's earnings were to be managed by the court-appointed receiver. The order was issued after Ford filed a motion on Friday questioning whether a leaseholder arrangement reached by Midnight Cry was in violation of the initial order to put the stable's earnings under the control of the court. Earlier this year, Midnight Cry's stake in Curlin was leased to Cunningham's wife, Patricia, to enable the company to receive a license in Kentucky.

The other 80 percent of Curlin is owned by Stonestreet Stables, a racing company owned by Jess Jackson and his wife, Barbara Banke.

Marc Laino, the executive director of the Illinois Racing Board, said that the board had not yet received a license application from any of the principals that own Curlin. He reiterated that the board could not issue an opinion on whether Midnight Cry, the receiver, or the former plaintiffs in the civil case would be eligible for a license until an application was filed.

"Obviously the clock is ticking," Laino said. "No matter what the case, we'd need to review quite a bit of paperwork before we issue a license. This isn't an easy process."

New York regulatory officials did not return phone calls on Thursday. Richard Getty, a lawyer for Stonestreet, was said to be out of the country on Thursday and didn't respond to a phone message.