It started out as a feel-good story on the week before Christmas – two racetrackers in Southern California working together to retire an aging Grade 1 winner and millionaire who'd fallen to the bottom claiming levels. But that sweet story turned sour when one of the parties involved was accused of attempting to conceal and misappropriate funds being raised to purchase the horse and retire him to a good home. A complaint was filed with the California Horse Racing Board to look into the matter.
The horse at the center of the controversy is the now 11-year-old Cost of Freedom, winner of the G1 Ancient Title Stakes in 2008 and earner of $1,018,799. When he was entered in an $8,000 claiming race at Betfair Hollywood Park Dec. 21, John Malone, a former trainer and current head clocker at Santa Anita Park and Del Mar, made some inquiries about getting the horse retired.
Those efforts escalated after Cost of Freedom ran poorly, beating just one horse, though he was claimed out of that race.
Enter trainer Carl O'Callaghan, who Tweeted shortly after the race: “Retire cost of freedom hasn't he done enough? Runs 2nd last for $8000 (greed)”
Malone and O'Callaghan talked and hatched a plan to raise money to buy the horse, using social network platforms like Twitter and Facebook to reach potential donors. With assistance from an acquaintance, O'Callaghan opened an account on PayPal, and money started flowing in. Dozens of people donated to the cause on Dec. 22, the first day the PayPal account was set up and several wrote checks in increments as large as $500.
Malone, meanwhile, worked out a deal with Cost of Freedom's new trainer, Robertino Diodoro, paying him $8,666 out of his own funds while waiting to see how much could be raised. Mission accomplished: Cost of Freedom was retired.
An individual who'd heard about the fund-raising effort was concerned that O'Callaghan was handling the money, and contacted Thoroughbred owner Maggi Moss, an Iowa attorney who had found homes for numerous ex-racehorses and personally funded their retirements. The individual had heard stories about financial responsibility issues involving O'Callaghan, whose rags to riches tale was widely celebrated during the successful run of top sprinter Kinsale King, winner of the 2010 Golden Shaheen at Meydan in Dubai.
On Dec. 30, after talking with Malone, Moss put out a request on her Facebook and Twitter pages for anyone who had made donations to the Cost of Freedom retirement fund to email her with details. She received numerous responses.
The following day, Dec. 31, in a text message Malone asked O'Callaghan if he could provide an accounting of donations made via check, cash and PayPal. O'Callaghan replied: “Everything that has come in to me I will add up and send you.”
Two days later, on Jan. 2, O'Callaghan texted Malone that everything was ready to be picked up: checks, cash, and printouts showing what he said were all of the PayPal transactions. “I will send you the only two checks and all I have at PayPal,” O'Callaghan texted to Malone.
O'Callaghan had transferred $3,225.38 of PayPal donations to Malone on Dec. 30, made a second transfer of $300 to Malone later that same day, and a third payment of $70 on Dec. 31. The packet O'Callaghan sent to Malone included $225 in cash from three checks made out to O'Callaghan that he had deposited in his personal bank account, along with two uncashed checks for $90.
Included were two sheets of legal-sized paper with printouts from PayPal documenting a total of 57 transactions, separated into six different blocks, all of varying lengths. Malone shared the PayPal documents and other information with Moss, who could not find the names of numerous people who had contacted her saying they sent donations to the account O'Callaghan was managing. Furthermore, there were at least two unaccounted checks made out to O'Callaghan of $500 each.
That same day, Jan. 2, Moss wrote a letter to Rick Omieva, supervising special investigator for the California Horse Racing Board, asking the CHRB to try and determine whether O'Callaghan, a licensed trainer, had misappropriated funds sent by members of the public with the intention to purchase and retire Cost of Freedom.
“I am very hopeful,” Moss wrote, “that regardless of how this works out, that his bank accounts are subpoenaed, to try and rectify the monies people sent for this horse that is now missing. In my short time, I have now been able to locate at least six people that the money they sent (usually larger denominations) is missing.
“I have thru texts between John Malone and Carl…he has stated that he has now turned over everything that he has received thru Jan. 2, 2014.
“Please do not hesitate to contact me if you need further information. This only hurts all the people that give to help the horses, and ultimately, I would like it to be revealed so this does not happen again.”
Two days later, on Jan. 4, not satisfied that the CHRB would act quickly enough, Moss went public, making allegations on Facebook and Twitter that she had “assembled the proof that Carl O'Callaghan has misappropriated money donated” for Cost of Freedom.
“What the (deleted) is going on with Maggi Moss?” O'Callaghan texted Malone. “She is saying you didn't get the money.”
O'Callaghan began calling Malone, as comments critical of O'Callaghan on social media mounted. In reactions on Twitter, O'Callaghan said it was all a “misunderstanding” and “just a small hiccup” because some of the money donated had not yet “cleared.”
“I turned over what I had at the time,” O'Callaghan Tweeted. “There was still checks in the bank that have cleared now.”
Moss wasn't buying it.
She sent a text message to O'Callaghan: “I have your text that you have turned over all the money you have on Thursday (Jan. 2). I have the printouts of people that have PayPal-ed you money and so much more. The only way this is ever going to be cleared up is if you fax me the original PayPal account and your bank accounts.”
The following day, Jan. 5, O'Callaghan faxed five pages of a complete transaction history of the PayPal account, which documented 101 not 57 transactions between Dec. 22 and Dec. 31, along with some deposit records from his bank account.
Comparisons of the complete PayPal transaction history with the PayPal printouts supplied by O'Callaghan to Malone on Jan. 2 show the latter documents were incomplete.
On the complete and accurate PayPal transaction history there were $5,518.18 in donations designated for the Cost of Freedom fund between Dec. 22 and Dec. 31. In the printouts O'Callaghan provided Malone on Jan. 2, the total PayPal donations from Dec. 22-31 amounted to $3,507.98. Also missing from O'Callaghan's printouts was $1,911 in transfers made to his personal bank account.
On Dec. 30, five checks designated for Cost of Freedom were posted on O'Callaghan's personal bank account. On Jan. 2, in a note to Malone, he listed only three of those checks ($100, $100, $25) and turned over $225 in cash. He did not list two separate checks for $500 each posted on the same day as the three smaller checks.
O'Callaghan denies that he concealed anything from Malone on Jan. 2. “She's making a big (deleted) song and dance about stuff missing,” O'Callaghan said of Moss on Jan. 4. “I've been busy with my family, and it's not like I need the money.”
Two days later, however, on Jan. 6, O'Callaghan turned over $2,911, representing the $1,911 he had transferred from PayPal to his personal bank account and the two $500 checks he deposited into his bank and that were posted Dec. 30.
O'Callaghan also denies that he “doctored” the PayPal printouts sent to Malone on Jan. 2, which he represented at the time as complete.
Yet, when asked by the Paulick Report, why the PayPal printouts were so irregular in length, O'Callaghan had no explanation other than to say, “The documents were not doctored. It's what I printed up in the racing office. The things (transactions) should have been in there.”
Upon closer inspection, it's apparent the PayPal printouts given to Malone were “cut and pasted” onto a legal sheet. Printouts from the PayPal website list 20 transactions per page. Comparisons between the printouts O'Callaghan gave Malone with the actual PayPal activity history show how the documents were accidentally or intentionally altered:
–On the first page, detailing the most recent transactions, eight of 20 transactions were cut off from the bottom, beginning with $1,411 withdrawn and transferred to O'Callaghan's personal bank account and continuing with seven donations.
–The second page was complete and unaltered, with 20 transactions, all donations.
–The third page listed just three donations, with 16 donations and one $500 withdrawal to O'Callaghan's personal bank account cut from the bottom of the original printout.
–The fourth page listed 11 donations, with nine cut off from the bottom of the original printout.
–The fifth page listed 10 donations, with 10 transactions deleted from the bottom.
–The sixth and final page had just one donation, made when the account was activated.
In a note faxed by O'Callaghan to Moss on Jan. 5, he said the reason for the withdrawal of funds to his bank account was “to see how the heck we were going to do this.”
It wasn't until after being confronted that O'Callaghan told Malone about the two withdrawals totaling $1,911. The amount is similar to the total donations missing from the six pages of PayPal transactions O'Callaghan sent on two legal sheets to Malone on Jan. 2.
Malone, like Moss, is convinced O'Callaghan was trying to conceal or misappropriate donations designated to retire Cost of Freedom. Malone is considering legal action against O'Callaghan to determine if any other checks designated for the Cost of Freedom fund may have been cashed. The PayPal account that O'Callaghan told Moss and Malone had been closed was still active as of Jan. 6.
“I was hoping that some of the stuff I saw wasn't true,” Malone said of the transactions that were not included in the paperwork he received Jan. 2. “It's sad to think that this could happen in a situation that could have been a good story. I'm trying to focus on the positive, but this is really eating me up. I do not want to be associated with something like this.”
The good news, Malone said, is that the horse is enjoying being let down as he enters retirement at Malone's Temecula ranch. “My daughter Megan even said it seems like he's always been there. He's happy and in good hands.”
The CHRB on Jan. 9 said it would not comment on the matter.
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