10/14/2007 11:00PM

Sale panel issues proposals

EmailLEXINGTON, Ky. - The Sales Integrity Task Force called for self-regulation on Monday to address three contentious issues in the bloodstock world: potential licensing of agents, disclosure of sale horses' ownership, and disclosure of veterinary histories.

The recommendations were announced in a public forum at Keeneland's sale pavilion here and included a ban on the use of anabolic steroids within 45 days of a sale, printing an agents' code of conduct in the conditions of sale, and establishing a voluntary registry where sellers can detail the ownership of sale horses.

The recommendations were sharply criticized by Jess Jackson, a task force member and the owner of Stonestreet Stables, who called them "toothless." Jackson is one of a number of prominent owners to raise concerns about unethical practices in bloodstock sales. He sued several former bloodstock advisers and recently settled with one of them, Emmanuel de Seroux, who agreed to pay Jackson $3.5 million.

Jackson's position could set the stage for a showdown in the Kentucky legislature. Last February, he lobbied for legislation to require licensing of agents and mandatory disclosure of sale horses' ownership and veterinary histories. But the legislation's sponsors agreed to table the issue until Jackson and Kentucky bloodstock interests convened the task force and examined the three topics.

"We quite definitely consider legislation to be a viable and preferable alternative to the present recommendations," said Kevin McGee, Jackson's attorney and president of the Horse Owners' Protective Association, which Jackson founded in 2006. "We have not yet decided whether to push for the passage of legislation because the task force process is not yet concluded."

The task force must make a final report to Kentucky legislators by Dec. 31.

In general, the preliminary recommendations rely on revisions to auction houses' conditions of sale, which are printed in sales catalogs.

D.G. Van Clief Jr. of the Fasig-Tipton sale company, who is chairman of the task force's subcommittee on ownership, said the task force tried to balance a buyer's right to know with a seller's right to privacy. The task force recommended that auction houses establish a voluntary registry, in which sellers and consignors can place ownership histories. The sales companies would limit access to the ownership registry to registered buyers and authorized agents and require them to sign confidentiality agreements.

In a seven-page open letter, Jackson, who was unable to attend, supported the addition of a repository but added, "However, without a legislative mandate or a significant incentive to use it (or disincentive not to use it), the voluntary repository is a toothless gesture."

The task force opposed state licensing in favor of self-regulation. Recommendations include publication of a nine-point code of conduct in the conditions of sale; an independent and binding arbitration process for disputes between agents and clients; and the right of sales companies to bar from their grounds any agent found to be in violation of the code. The companies would also post a banned agent's name "in a conspicuous manner" during the time of exclusion, which is recommended to be up to two years for a first offense and up to five years for a second, with a possible lifetime ban for three or more violations.

Task force members cited budgetary woes for the Kentucky Horse Racing Authority as one reason to oppose state licensing. Keeneland's president, Nick Nicholson, a task force member, expressed concern that state licensing could discourage participation by overseas buying agents.

Regarding veterinary disclosure, the task force recommended adopting Keeneland's and Fasig-Tipton's new policy of banning anabolic steroids within 45 days of a sale and post-sale testing for anabolic steroids at a buyer's request. Horses with a positive test can be returned. The task force further recommended establishing a committee to review annually practices listed by sale companies. And it called for banning injections behind horses' knees to alter or hide conformational flaws.

"I think what they came forth with is a reasonable, well-thought-out process that will evolve," consignor Kerry Cauthen said. "A major benefit of self-regulation is that we can adjust and improve the process far more quickly and more effectively than legislation can."

Jackson praised the efforts of Fasig-Tipton and Keeneland. But, he said in his letter: "It is an open question whether these suggested conditions are legally enforceable and who they would be enforceable against. Among other problems is that enforcing and policing the application of the conditions would fall upon the sales companies who are poorly equipped to do any such policing and enforcement. Beyond all the enforceability and effectiveness issues is the fact that the idea of making minor changes to the conditions of sale has been tried and done for many years and has not solved any of the underlying problems."