Guilty pleas in a federal tax fraud investigation in Oregon could have implications for a racketeering lawsuit and bankruptcy in Lexington involving a Thoroughbred breeding operation known as ClassicStar.
David Plummer and son Spencer Plummer, former executives of the ClassicStar operation in Woodford County, pleaded guilty Monday, along with accountant Terry Green, to conspiring to defraud the IRS.
According to the U.S. Attorney's Office in Portland, Ore., ClassicStar investors claimed false tax deductions of more than $500 million, resulting in a tax loss of more than $200 million.
Allan Garten of the U.S. Attorney's Office told the judge Monday that the Plummers and Green are cooperating with the government's continuing investigation of ClassicStar.
A sentencing date has not been set; they face a maximum of five years each.
The Plummers are embroiled in a complex set of lawsuits in Kentucky and several other states over the scheme at the heart of the tax case: fraudulent mare leasing. ClassicStar promoted investment opportunities in Thoroughbred horse breeding through its Mare Lease Program.
According to court documents, ClassicStar promised — and helped investors get — tax refunds using fake loans that inflated the value of the investments. To cover the fact that ClassicStar had leased mares multiple times, they substituted quarter horse mares. Loans were paid off with fictitious trades involving oil and gas interests, according to federal court documents.
"It's massive," John O. Morgan Jr., attorney for bankruptcy trustee James D. Lyon, said of the ClassicStar court actions, which involve dozens of plaintiffs and defendants.
Morgan said the guilty pleas mean that the Plummers will no longer be able to plead the Fifth Amendment to avoid testifying, as they have indicated they would.
Barry Hunter of Frost Brown Todd in Lexington said Tuesday that it isn't clear yet how the guilty pleas could affect his clients, two plaintiffs in the case, which could go to trial next year. "We've just learned of the plea, and we're currently trying to determine what it means for the case," Hunter said.
