Over the summer, I wrote about the legal troubles of Shirley A. Cunningham, Jr., William J. Gallion, and Melbourne Mills, Jr., the three Fen-Phen lawyers who are still in a Kentucky jail, following United States District Judge William Bertelsman’s decision to incarcerate them pending their trial on wire fraud charges in January 2008.
As I explained in June, Gallion and Cunningham purchased a thoroughbred named Curlin for $57,000 in 2005, then sold 80% of their interest in February for $3.5 million. Curlin has had a spectacular year as a three year old, winning the Preakness, running second in the Belmont, and third in the Kentucky Derby. Then, last Saturday, Curlin won the $5 million Breeders’ Cup Classic, which entitles him to 54% of the purse, or $2.7 million.
In my post, I had pointed out that there would likely be litigation about Curlin’s ownership, as Angela Ford, the lawyer representing most of the plaintiffs whom Gallion and Cunningham are accused of defrauding, alleged that Gallion and Cunningham bought the horse with money improperly withheld from her clients, which would make her clients the horse’s owners and would void the sale of the 80% interest.
The Daily Racing Form reports that last Thursday, Boone County (Kentucky) Circuit Court Judge William Wehr gave the 418 plaintiffs control over Tandy LLC, a corporation owned by Gallion and Cunningham, which owns Midnight Cry Stable, which in turn owns 20% of Curlin. According to the article, Angela Ford says her clients want to sell their interest in Curlin, as do his other owners. Curlin is likely to be named the Horse of the Year, which will increase his value even more.
What is not clear (at least from the DRF article) is how Judge Wehr could make this determination now, when Cunningham and Gallion (as Curlin’s part owners) have not gone to trial yet on the federal fraud charges, and thus have not been found guilty of anything. Typically, when criminal and civil actions arise from the same conduct, the civil action has to be stayed until the criminal proceeding is resolved. An acquittal in the criminal case is not necessarily a bar to a successful civil action (ask O.J. Simpson), but the criminal charges, which have a higher standard of proof, etc., take precedence.
This ruling also puts Curlin’s ownership in limbo, because I don’t know who would buy any interest at this point, until the issue of the identity of the true owners has been resolved finally. Having 418 co-owners of a 20% interest in a race horse is a recipe for disaster.