American Pharoah lawsuit now targets Derby winner co-owners, other racing heavy hitters
A $23 million lawsuit involving American Pharoah breeding rights now includes some of the biggest names in Thoroughbred racing as an investment firm seeks to claw back money loaned to Ahmed Zayat’s stables.
On Tuesday, New York investment firm MGG amended its lawsuit against Zayat Stables, which raced the 2015 Triple Crown winner, to include global Irish breeding conglomerate Coolmore and Ashford Stud in Versailles, where the stallion now stands at stud for a reported $200,000.
The lawsuit, filed in Fayette Circuit Court in Lexington, accuses Coolmore and its affiliates of improperly buying seven of nine American Pharoah’s lifetime breeding rights that were part of the collateral on a loan MGG made to Zayat Stables in 2016.
According to the amended complaint, Ashford Stud and Coolmore, also known as Orpendale, knew that MGG had a security interest on all of the breeding shares as well as Zayat Stables’ horses.
Ashford Stud and Coolmore on Wednesday declined to comment on the filing.
In late January MGG sued for $23 million, and during an emergency hearing Judge Kimberly Bunnell granted a motion ordering a receiver to seize control of Zayat Stables, including its horses.
Also added to the lawsuit: LNJ Foxwoods, the Long Island-based stable of Marchon eyewear principle Larry Roth, his wife Nanci and daughter Jaime Roth. LNJ Foxwoods were partners in 2019 controversial Kentucky Derby winner Country House and last month won two Eclipse Awards for their sprinter Covfefe; they bought two American Pharoah breeding shares for $375,000 each from Zayat Stables in 2018.
Now MGG alleges that LNJ Foxwoods knew or should have known of MGG’s security interest, making these sales improper as well, according to the amended complaint. Foxwoods could not be reached immediately for comment.
The complaint alleges that the nine shares, which were sold for a collective $3.3 million, “did not reflect their fair market value and represents a deep discount from Zayat Stables’ own $14 million valuation of the Zayat AP Breeding Rights as reflected in the proposed Liquidation Plan ... as well as an independently appraised value commissioned by Zayat Stables in July 2019 that determined the Zayat AP Breeding Rights to be worth a total of $12.6 million.”
The lawsuit is seeking $10.89 million from Coolmore and Ashford Stud and the return of seven breeding rights in American Pharoah; it also seeks the return of the two American Pharoah breeding rights sold to LNJ Foxwoods, as well as a share in any offspring created in the use of the nine breeding shares.
The amended complaint also adds Ahmed Zayat’s his wife Joanne, sons Justin and Benjamin and daughters Ashley and Emma Zayat to the lawsuit, which seeks at least $14 million from Joanne, Justin, Ashley, Benjamin and Emma Zayat.
The Zayat family and Zayat Stables released a statement on the amended complaint on Thursday afternoon:
“We are disappointed but not surprised at MGG and Kevin Griffin’s aggressive attack on the horse industry. Zayat Stables said from the beginning that it wanted to liquidate certain assets to generate enough proceeds to pay off all of its creditors,” according to the statement. “Motivated purely by self-interest and greed, MGG, however, was more interested in litigating this dispute at the expense of other creditors. MGG has gone as far as filing baseless claims against reputable horse farms and bloodstock agents. This conduct demonstrates MGG’s fundamental lack of knowledge of the horse industry and complete lack of respect for the parties essential to its success. Zayat Stables is doing everything it can to ensure that all of its debts are repaid, but MGG has placed itself above all others and has made it nearly impossible for other creditors to be treated fairly.”
The amended lawsuit comes after a hearing last week before Judge Bunnell on a request to remove Zayat Stables from the hands of a court-appointed receiver. Bunnell has not yet entered an order. Zayat Stables has argued a receiver is unnecessary.
But documents filed by MGG in support of the receivership show that the stables owe more than $900,000, much of it to trainers, stables and farms, many more than 60 days past due. One trainer, Mike Maker, has filed a separate lawsuit against Zayat Stables and Ahmed Zayat, alleging Maker Stables, which trains Amandrea and other horses, is owed more than $120,000.
In a previous statement, Zayat called Maker’s lawsuit “absurd,” and said he “fully expects this lawsuit will be dismissed and intends to seek appropriate sanctions against Mr. Maker for pursuing this malicious action.”
In receiver Elizabeth Woodward’s initial report, filed Feb. 5, she and bloodstock consultant Gatewood Bell noted that through checking on horses listed on Zayat Stables’ collateral list, she had found several horses “were previously sold, apparently without notice to MGG.” Other horses apparently “have been traded in exchange for a write-off of board bills,” which the filing said apparently was a common practice of Zayat Stables.
“The receiver, Mr. Bell, and the undersigned (attorneys) have fielded dozens of calls from farm operators, trainers, veterinarians, and transport companies reporting what they are owed and many are demanding payment in order to continue to provide services to Zayat Stables’ horses,” the receiver’s filing noted.
Some of the horses now are being drawn into MGG’s fraud lawsuit against Zayat Stables.
Besides the American Pharoah breeding rights, MGG also alleges that other Zayat Stables horses or shares of horses, which were listed as collateral on the loan, have been improperly sold or traded to pay off debts.
And it is suing the purchasers, all of whom, the complaint alleges knew or should have known that MGG had a security interest, meaning the horses could not be sold without the investment firms knowledge and consent.
The purchasers now added to the lawsuit include:
▪ Yeomanstown Stud in Ireland, which the complaint alleges bought El Kabeir in September 2017 in a private sale for $500,000 from Ahmed Zayat on behalf of Zayat Stables. El Kabeir was valued for $4.25 million in the July 2017 appraisal and $2.5 million in Zayat Stables liquidation proposal. El Kabeir now stands at stud at Yeomanstown for a listed fee of 8,000 euros, about $8,700.
▪ Hill ‘N’ Dale Farm, which the complaint alleges bought American Cleopatra in a private sale for $1.3 million from Justin Zayat, on behalf of Zayat Stables. The July appraisal valued the mare at $6.5 million. According to the complaint, American Cleopatra has since been bred to leading sire Tapit and given birth to a foal, also now at Hill ‘N Dale in Lexington. “Due to its perfected security interest in American Cleopatra, MGG also holds a security interest in the American Cleopatra/Tapit foal,” the complaint alleges.
On Wednesday, John Sikura, president of Hill ‘n’ Dale Farm, said he was unaware of any lawsuit regarding American Cleopatra.
“I bought the mare through the Fasig Tipton auction house in 2017. I have never spoken to the creditor or received any notice from them since purchase. If you don’t get clear title when you buy at public auction we have no horse business.”
According to a document filed with the lawsuit, American Cleopatra sold at Fasig-Tipton in a private sale agreement but at the November auction. The purchase agreement specifies that terms and conditions of the auction are incorporated into the deal.
“I’ve never had a case where I bought a mare at auction, and then had someone come up two years later and say, ‘you actually didn’t buy her,’” Sikura said. “The pillar of our industry is, when you buy something, you own it.”
▪ Flintshire Farm and Brad Sears of Houston, which the complaint alleges bought breeding interest in Lemoona in a private sale for $150,000 from Justin Zayat on behalf of Zayat Stables as president of Zayat Stables. The July appraisal valued these breeding interest at $925,000, according to the complaint.
▪ Thomas Clark Bloodstock in Lexington, which the complaint alleges bought Lemoona at the Keeneland January Horses of All Ages Sale last month from Flintshire and Sears.
▪ MyRacehorse.com, which the complaint alleges bought a 55 percent stake in Amandrea in October 2019 for $115,000. The July appraisal estimated the horse’s value at $375,000.
My Racehorse is a website where fans of racing can “discover the thrill” of owning fractional interests in racehorses.
Since My Racehorse owns the controlling share Amandrea, they’ve not yet felt the effects of a receiver being appointed to control Zayat Stables, said My Racehorse founder Michael Behrens on Wednesday. The group is aware of the amended lawsuit complaint that was filed naming them as a defendant, and are still working to determine what that will mean.
▪ McMahon of Saratoga Thoroughbreds, which the complaint alleges bought Solomini in a private sale for $250,000 from Zayat Stables and Orpendale, even though both parties knew that Zayat Stables only owned 50 percent of the horse and that MGG had a security interest on that share. In July 2019, Zayat Stables’ half share was appraised at $3 million. Solomini stands at stud in New York for $6,500 for a live foal.
▪ The amended complaint also alleges improper sales relating to Bodemeister, Eskendereya, Zensational, Justin Phillip, Grammajo, Danyelli, Lezendary, Old Glory, Ash n’ Em, Majid, and Prayer for Relief. No details on the purchases were listed in the lawsuit.
In many cases, the lawsuit is asking the court for the return of the horses; in others, the suit asks for a constructive trust for shares in potential offspring.
According to the Paulick Report, six of the Zayat horses were entered in the Fasig-Tipton Winter Mixed Sale in Lexington on Tuesday; four sold for a combined $366,000, well below the $1.9 million that Zayat had estimated their worth to be in a liquidation plan submitted to MGG in December.
This story was originally published February 12, 2020 at 3:13 PM.
