Zayat Lawsuit Broadens to Include Prominent Bloodstock Business Partners
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THURSDAY, FEBRUARY 13, 2020 ZAYAT LAWSUIT ANCHOR AND HOPE FARM REBUILD AFTER FIRE By Bill Finley BROADENS TO INCLUDE The day it happened, Aug. 12, 2019, Louis Merryman didn=t know what to expect, only that the next several months would PROMINENT BLOODSTOCK not be easy ones. The main barn at his Anchor and Hope Farm had burned to the ground, and the list of problems seemed to BUSINESS PARTNERS stretch on forever. The only thing that he knew for sure was that this was not the end of his farm. AI look around and think that a small group of us have accomplished an awful lot in the last several months,@ he said. AIt was out of necessity; we didn=t have much choice. We had to rebuild and it wasn=t like we had unlimited finds to get rebuilt. That meant we had to do whatever we could. I=m pretty proud of all of us@ Less than six months after the fire, Anchor and Hope is fully functional. The barn has largely been rebuilt, there=s a new sire on the farm and this year they will be able to take their yearlings to the sales. Cont. p6 IN TDN EUROPE TODAY PRINCESS LEADS ARQANA CLOSER A full-sister to Group 1 winner Prince Gibraltar (Ire) (Rock of Ahmed Zayat | Susie Raisher Gibraltar {Ire}) led proceedings at Arqana’s February Sale on by T.D. Thornton Wednesday. Click or tap here to go straight to TDN Europe. The New York lending firm that last month initiated a $23- million lawsuit against Ahmed Zayat and his financially troubled Zayat Stables, LLC, has broadly amended its civil complaint in a Kentucky court. As of Tuesday, the suit now additionally targets 10 prominent bloodstock individuals and entities that the plaintiff alleges played a role in the Afraudulent scheme@ orchestrated by Zayat family members Ato sell at a steep discount several millions of dollars of Zayat Stables= assets@ that had been pledged as collateral for $30 million in loans. The wide-ranging updated complaint filed Feb. 11 by MGG Investment Group, LP, in Fayette Circuit Court is seeking the return of individual horses previously owned by Zayat Stables to the court-appointed receiver now handling the case, plus the return of any breeding shares that changed hands. In instances where matings have already taken place based on the transfers of those breeding rights, the plaintiff also wants any proceeds related to future offspring held in Aconstructive trust for the benefit@ of MGG. Cont. p3 PUBLISHER & CEO Sue Morris Finley @suefinley [email protected] SENIOR VICE PRESIDENT Gary King @garykingTDN [email protected] EDITORIAL [email protected] Editor-in-Chief Jessica Martini @JessMartiniTDN Managing Editor Thursday, February 13, 2020 Alan Carasso @EquinealTDN Senior Editor Steve Sherack @SteveSherackTDN Racing Editor Brian DiDonato @BDiDonatoTDN Deputy Editor Christie DeBernardis @CDeBernardisTDN Associate Editors Christina Bossinakis @CBossTDN Joe Bianca @JBiancaTDN News and Features Editor In Memoriam: Ben Massam (1988-2019) ADVERTISING [email protected] Director of Advertising Alycia Borer Advertising Manager Lia Best Advertising Designer Amanda Crelin Advertising Assistant/Dir. Of Distribution Rachel McCaffrey Advertising Assistants Amie Newcomb Kristen Lomasson Photographer/Photo Editor Sarah K. 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Sponsored by gn.com-G3, MEY AM Wager PPs TVG [email protected] European Editor Emma Berry [email protected] Associate International Editor Heather Anderson @HLAndersonTDN Newmarket Bureau, Cafe Racing Sean Cronin & Tom Frary [email protected] 60 Broad Street, Suite 100 Red Bank, NJ 07701 732-747-8060 | 732-747-8955 (fax) www.TheTDN.com TDN HEADLINE NEWS • PAGE 3 OF 12 • THETDN.COM THURSDAY • FEBRUARY 13, 2020 Zayat Lawsuit Broadens (cont. from p1) AThere is an actual and justiciable controversy between Plaintiff and Defendants Orpendale [Coolmore Stud], Ashford Stud, LNJ Foxwoods, Hill >n= Dale, Yeomanstown Stud, My Racehorse, Flintshire Farm, Brad Sears, Thomas Clark Bloodstock, and McMahon Thoroughbreds in that Plaintiff holds priority security interests over all of the assets that Zayat Stables held when it entered the Loan Documents,@ the complaint states. AMGG also brings claims for intentional interference with contract against two affiliated horse breeding organizations, Orpendale [Coolmore] and Ashford Stud, for their facilitation of the purported sales which they knew would cause Zayat Stables to breach its loan agreements,@ the complaint states. To remedy this alleged interference by Coolmore and Ashford- -which the suit claims is related to the Zayats= purported sale of nine lifetime breeding shares to 2015 Triple Crown winner American Pharoah--MGG is requesting an award of damages against Coolmore and Ashford Ain an amount to be proven at trial, but no less than $10.89 million.@ The amended complaint also newly names five Zayat family members as defendants based on Aintentional interference with contract@ for their alleged roles in the American Pharoah breeding rights sales. They are: Ahmed Zayat=s wife, Joanne; his sons, Justin and Benjamin, and his daughters, Ashley and Emma. The complaint seeks from them Aan amount to be proven at trial, but no less than $14 million.@ In response to the expanded lawsuit, Elizabeth Woodward, the case=s court appointed receiver, issued the following statement Wednesday night. AThis morning, the receiver was notified that MGG amended its complaint to add several additional parties. Neither the receiver, nor her consultant Gatewood Bell, participated in the preparation or filing of the complaint. She takes no position on the issues raised in the original complaint or the amendments to it and does not intend to do so. The Circuit Court's Order appointing the receiver directs her to take possession of the collateral and maximize its value, which is the work she is doing. The receiver works for and reports to the Court, not MGG, or any other party.@ The Back Story The initial lawsuit MGG filed Jan. 22 relates to a 2016 loan agreement with Ahmed Zayat to finance his existing debt, which has been well documented in the racing press and in the courts over the past decade. On its corporate Linked In page, MGG describes itself as Aa private direct lender focused on the deeply under-served and less competitive lower-middle market.@ TDN HEADLINE NEWS • PAGE 4 OF 12 • THETDN.COM THURSDAY • FEBRUARY 13, 2020 In September 2019, Zayat allegedly began defaulting on his The court denied the Zayat motion to dissolve that order, and loan payments. The lawsuit alleges that as the two parties began the amended Feb. 11 version of the lawsuit appears to be based discussing liquidation proposals that involved selling off Zayat upon a deeper dive by the plaintiff that now involves the buyers Stables= equine collateral to bring the payments current, the in those purportedly fraudulent sales of equine assets. firm found out that starting in 2017, Zayat family members had already begun selling off shares in breeding rights and in horses Who=s being Sued and for What? that, three years later, Ahmed Zayat was claiming were still on Beyond the claims against Zayat family members and the the books as security against his loans. parties involved in the Aintentional interference with contract@ In the original filing, the lawsuit stated, AEven though MGG is cases listed above, MGG is seeking other remedies aimed at not aware of all of the deceptive actions of Zayat Stables and getting equine assets returned to the receiver. Mr. Zayat, it has already uncovered several million dollars of Several of the counts involve legal terms that don=t surface equine collateral...that Zayat Stables and Mr. Zayat have regularly in horse-related litigation. purported to sell out from under the agent's security interests in One is replevin, which according to the website FindLaw is violation of the Loan Agreements.@ defined as Aan action to recover personal property that was A Jan. 22 court order granted MGG=s motion to appoint a wrongfully taken or detained. Unlike other forms of legal receiver Ato take charge of, operate, preserve, maintain and recovery, replevin seeks the return of the actual thing itself, as care for all of the assets of the Defendant Zayat Stables, LLC.@ opposed to money damages (the more commonly-sought after On Feb. 6, Ahmed Zayat asked the judge in the case to dissolve remedy).@ the receivership order. His attorney argued that the order to Another is constructive trust, which FindLaw defines as appoint a receiver went well beyond the sale of collateral, something Aimposed by a court in order to prevent unjust allowing for a full takeover of Zayat=s company and all of its enrichment by someone who has wrongfully obtained an assets. TDN reported that the defendants= fear was that giving interest in another person's property by obligating them to Aunfettered and unchecked@ access would allow MGG to pursue return the property to its original owner.@ fraud claims. TDN HEADLINE NEWS • PAGE 5 OF 12 • THETDN.COM THURSDAY • FEBRUARY 13, 2020 A related component in these claims centers on MGG=s filing of Uniform Commercial Code (UCC-1) statements.