Another portion of the mammoth ClassicStar lawsuit, which hinges on allegations of fraudulent mare leases, has been settled.
Former parent corporation Geostar agreed to pay $2 million to the ClassicStar bankruptcy trustee to settle a portion of the ongoing multidistrict litigation filed in U.S. District Court in Lexington against Geostar executives Tony Ferguson, John Parrott and others.
John O. Morgan, attorney for bankruptcy trustee James D. Lyon, said he could not comment on the motion filed Wednesday except to say "the trustee is satisfied with the settlement."
The settlement must be approved by U.S. District Judge Joseph M. Hood before it becomes final.
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The other main defendants in the case are former ClassicStar farm operators David Plummer and his son, Spencer Plummer, whose legal representatives have withdrawn from the case.
The Plummers, Parrott and Terry Green pleaded guilty last year to $200 million in federal tax fraud charges in Oregon, and each faces up to five years in prison when they are sentenced.
This is the second major settlement in the ClassicStar case, which is set for trial in September. In November, a Geostar spinoff called Gastar Exploration agreed to pay $21.15 million to seven plaintiffs, including the bankruptcy trustee.
Dozens of investors sued the Plummers, Geostar and Gastar contending fraud of more than $500 million. 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. But as the Internal Revenue Service ruled the write-offs were fraudulent, the investors began to sue. ClassicStar entered bankruptcy in 2007.
Some of the investors were persuaded to exchange mare leases for shares in oil and gas investments, which also were allegedly fraudulent.