Several lawsuits, including the bankruptcy trustee's case, involving the ClassicStar mare leases will go to trial Nov. 30 in Lexington.
U.S. District Judge Joseph M. Hood on Tuesday set the trial date for the suits against the former Woodford County Thoroughbred breeding operation known as ClassicStar; its operators, including David and Spencer Plummer; its parent company, GeoStar; GeoStar's operators; and a publicly traded spinoff called Gastar, among almost 100 defendants.
The Lexington suits are among about two dozen filed in Kentucky, California, Florida, Pennsylvania, Utah, Michigan, Colorado, Wisconsin and Texas against the breeding operation since 2006.
ClassicStar has been in bankruptcy since 2007 and is no longer in business. More than $1 billion in claims, including potential triple damages, have been filed against the debtor; a settlement is pending in bankruptcy court in Lexington to fix the claims at out-of-pocket expenses, which could still amount to hundreds of millions of dollars.
The original plaintiffs — West Hills Farms and Arbor Farms, both of Portland, Ore.; Nelson Breeders of Bellevue, Wash.; and MacDonald Stables of Wisconsin — alleged fraud of more than $500 million.
Four of the defendants — the Plummers, Terry Green and John Parrott — have pleaded guilty in federal court in Oregon to $200 million in tax fraud.
The Plummers, who managed the breeding operation, and Green, an accountant, pleaded guilty in October to conspiring to an elaborate, multilayered fraud that is at the heart of the civil suits. They have not been sentenced and are cooperating with the Department of Justice's investigation.
Parrott, who was an executive with and part owner of GeoStar, primarily an oil and gas exploration business, pleaded guilty April 1. In Oregon court documents, the Justice Department said that from 2001 to 2007, GeoStar moved about $330 million from the mare lease sales program out of ClassicStar's bank accounts and into GeoStar's.
Parrott is tentatively scheduled to be sentenced June 28. He and the others each face up to five years in prison.
The Plummers have alleged that GeoStar took the money; GeoStar's operators, including fellow defendant Tony Ferguson of Tampa, Fla., have blamed the Plummers.
According to federal court documents and filings in the lawsuits, ClassicStar allegedly lured investors, including professional athletes, into Thoroughbred breeding with the promise of huge tax write-offs, which later proved illegal.
Investors leased Thoroughbred mares for breeding and were to get foals they could sell or race. Unknown to the investors, the leases were financed through fake loans from a ClassicStar alter ego that recycled the money back and forth to inflate the investment on tax returns and create fraudulent tax savings.
But according to the prosecutors, ClassicStar never had enough Thoroughbred mares to cover the leases.
In some cases, quarter horse mares and performance mares allegedly were substituted.
In other instances, investors were persuaded to swap their equine interests for fraudulent oil and gas interests.
The breeding operation established a high-flying profile at the horse sales. David Plummer and ClassicStar quickly became some of the leading buyers at the November auctions, buying 65 horses for more than $40 million, and paid a sale-topping $4 million for Bless, full sister to Kentucky Derby winner Fusaichi Pegasus and in foal to Storm Cat, at the 2002 Keeneland November Breeding Stock Sale.
But their leases far outpaced their purchases. According to court filings, in 2004 alone ClassicStar sold more than $160 million worth of leases when it had $40 million worth of bloodstock.
By 2006, when the IRS was closing in, the Plummers abruptly left ClassicStar. The Versailles farm offices were raided by IRS agents with federal search warrants in February 2006. Many of the mares were sold in dispersals later that year.