A key defendant in the complex ClassicStar mare-lease litigation has agreed to a multimillion-dollar settlement that could lead to more settlements.
Gastar Exploration, a publicly traded energy company spun off from ClassicStar's parent, Geostar, has agreed to pay seven plaintiffs, including the U.S. bankruptcy trustee for ClassicStar, a total of $21.15 million, according to motions filed Friday in U.S. Bankruptcy Court in Lexington.
The other six sets of plaintiffs were all investors in ClassicStar's fraudulent mare leasing programs and are among dozens involved in a mass of tangled lawsuits alleging fraud of more than $500 million.
The deal means that Gastar will be dismissed from claims in the ongoing federal lawsuits, some of which are now set for trial in April in U.S. District Court in Lexington.
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In a news release Monday, Gastar admitted no liability and said the company entered into the settlement "to avoid the risk and expense of continued litigation."
According to the trustee's motion, the Gastar settlement could "stimulate further settlements" with other defendants.
The settlement could be approved by the bankruptcy court after Nov. 19. As part of the settlement, the parties agreed not to comment on the deal.
The bankruptcy trustee, James D. Lyon, will receive $7.75 million for the ClassicStar estate, which has had more than $1 billion in claims filed against it.
ClassicStar entered bankruptcy in 2007 amid a storm of lawsuits across the country against the Versailles farm and its related business entities.
Beginning in 2001, ClassicStar marketed leases of Thoroughbred mares for breeding and bought more than $40 million in high-profile mares at Keeneland. Potential investors were told they could lease the mares and claim millions in tax write-offs. The Internal Revenue Service later ruled the write-offs were fraudulent.
But ClassicStar apparently never had as many mares as the farm leased, so in some cases, the farm persuaded the investors to exchange mare leases for shares in oil and gas investments, including stock in Gastar Exploration.
The investors suing ClassicStar allege that former Gastar officers made stock in the company available "to conceal a shortage of mare lease interests and to perpetuate a fraud scheme," according to court documents.
Previously, ClassicStar farm operators David Plummer and his son, Spencer Plummer, and two others, Terry Green and John Parrott, pleaded guilty to $200 million in federal tax fraud. They each face up to five years in federal prison.