A receiver appointed to take charge of the assets of Zayat Stables will remain in place, despite a motion by the stable's founder, Ahmed Zayat, to have her removed. That was the conclusion from Fayette County Circuit Court Judge Kimberly Bunnell Thursday afternoon after hearing arguments from attorneys representing Zayat and creditor MGG Investments over the types of information Zayat is required to disclose to the court-appointed receiver.
The receiver, Elizabeth Woodward of Lexington accounting and consulting firm Dean Dorton Allen Ford, was appointed by the court in late January to “take charge of, operate, preserve, maintain and care for all assets of” Zayat Stables.
Zayat Stables was sued for $23 million last month by MGG over allegations the stable defaulted on a loan.
A receiver is charged with managing a company's assets to maximize profits and help it fulfill debts when it's in bankruptcy or other financial trouble. In keeping with that mission, Woodward said she is in the process of assessing which horses should be sold and where, and which horses would do better to remain in training in hopes their value may increase. At least five Zayat Stables horses were entered by Woodward in the Fasig-Tipton Kentucky Winter Mixed sale, which begins on Monday.
Woodward's attorney provided an initial report of her findings to the court late Wednesday. In the two weeks since her appointment, Woodward's report said she has struggled to get basic information from Zayat (though Zayat's attorneys disputed the scope of her authority), including an up-to-date list of which horses the stable owns and which it has sold.
Zayat balked at Woodward's requests, declining to provide her certain information until his attorneys had a chance to challenge the receivership Thursday. Zayat's attorneys also objected to a request by the receiver to copy the contents of the company's computer server, which they claimed could contain personal or privileged information.
In the course of hunting for Zayat Stables assets, Woodward's report noted she had discovered just one active checking account for the operation, containing less than $2,000. A bank statement provided as an exhibit in court showed the account had a balance of over $300,000 at the start of December, prior to MGG filing its suit.
Woodward's report also revealed that she still had not located Zayat's portion of proceeds from the $250,000 sale of Solomini, who stands at McMahon Thoroughbreds in Saratoga. The son of Curlin, co-owned at the end of his racing career by Coolmore associates, finished second for Zayat in the 2017 Breeders' Cup Juvenile.
“The proceeds may have been deposited in an account believed to belong to an insider of Zayat Stables, and are currently beyond the receiver's reach,” the report states.
Danyelli and Lezendary, both trained by Rudy Rodriguez, were listed as having been traded for the value of board bills.
The report also characterized Woodward's task as being made more difficult by a string of racing industry professionals who claim they are owed money by Zayat. MGG attorneys mentioned Rodriguez was handed a $600,000 judgment for unpaid bills, which was later amended to $400,000 after the trade of the two horses for a portion of the balance. Trainer Mike Maker has also announced plans to sue Zayat for unpaid training bills.
“Of the horses that Receiver has located, almost all are under the care of farm owners or trainers who have not been paid in some time,” the report, filed by Woodward's attorney, read. “The Receiver, Mr. [Gatewood] Bell, and the undersigned 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.
“In the Receiver's view, while it is true that horses were and are being cared for, that is due to the goodwill of farm owners, who could not in good conscience allow any animal to bear the brunt of its owner's inability to pay bills when they came due. Their care for the horses was not due to Zayat Stables having the means to afford that care. The Receiver submits to the Court that despite their willingness to extend credit beyond their comfort level for the sake of the horses, most service providers' patience had worn thin – and many were at their breaking point. She is in receipt of notices from farm owners and veterinarians stating they want the animals in their immediate care removed, in the case of farm owners, or that they plan to drop horses from their patient roster, in the case of equine medical providers. Due to their trust in a court-established receivership however, some have now reversed those decisions and have agreed to continue providing quality care and training for these animals.”
(Bell is serving as a consultant to Woodward during the receivership.)
In court Thursday, MGG Investments' attorney, Craig Robertson, said the investment firm will pay horses' bills going forward to ensure they are cared for until they are eventually sold, though he hoped those expenses may be covered by purse money or sales of Zayat horses. Robertson clarified the investment group is not responsible for bills Zayat incurred prior to the appointment of the receiver — and mentioned there are trainers owed “hundreds of thousands” of dollars.
Ultimately, Judge Bunnell ruled Zayat was required to provide the receiver with a series of specified documents and records by Feb. 14. The stable was given until March 2 to turn over the contents of its servers, and the receiver was instructed to restrict her examination of the server to files that are relevant to the stable assets. Zayat attorney Jay Ingle suggested his client may appeal the ruling concerning examination of the server.
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