By Bill Finley
Submitting an initial report to the Fayette County (Ky) Circuit Court, lawyers for Elizabeth Woodward, who was appointed the receiver for Zayat Stable, claimed that Zayat has not turned over financial information necessary for her to catalogue the assets of the stable.
“The Receiver has made considerable progress, but initial set-up of the receivership accounts and the collection and sales process was hampered by the Receiver’s lack of accounting
information,” the filing read. “Despite the language of the Order granting the Receiver possession and control of the Property, her personal request to Mr. Zayat and her counsel’s formal demand for the turnover of books and records have yet to result in her receiving basic financial information from Zayat Stables.”
Referring to language Zayat’s side used in a motion to dissolve the order that appointed the receiver, the filing states that “Zayat Stables continues to display unfounded paranoia regarding the Receiver’s reasonable requests for even basic business information from Zayat Stables.”
The receiver’s report was just one of several developments concerning Zayat’s case that have unfolded over the last few days.
In response to Zayat’s motion to dissolve the receivership, MGG Investment Group, which is seeking $23 million in unpaid loans from Zayat, called his motion a “long-winded conglomeration of misstatements, irrelevant details, and unsupported arguments.”
In a “Reply Memorandum in Support of Motion to Dissolve Order Appointing Receiver,” Zayat’s team countered, arguing that MGG and the receiver have been granted too much power.
“The Order tendered by MGG and entered by this Court, however, goes well beyond maintenance and sale of collateral. It allows for a full takeover of a company and all of its operations,” Zayat’s reply reads. “In doing so, it provides MGG and the Receiver unfettered access and unchecked discovery that MGG seeks in an order to pursue its fraud claims. MGG’s actions make it clear that it intends to go well beyond its contractual rights and do so in a way that infringes on due process protections afforded to the Defendants in this manner.”
The two sides have been battling it out in court after MGG came forward and claimed that Zayat had defaulted on loans made to him. The court made a ruling favorable to MGG in ordering a receiver to take over his assets and begin the process of dispersing them so that Zayat’s bills could be paid. Zayat has asked the court to allow him to sell off his assets as he sees fit, arguing that turning over control to a Receiver was unnecessary.
The Receiver’s report shed more light on the state of Zayat Stable, which campaigned 2015 Triple Crown winner American Pharoah (Pioneerof the Nile). Woodward tells the court that the Zayat-owned horses she has located are “all under the care of farm owners or trainers who have not been paid in some time” and that those who are owed money “are demanding payment in order to continue to provide services to Zayat Stables’ horses.” That has created a situation, she reports, where the well-being of the horses could be in jeopardy.
“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,” the report read. “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.”
Woodward reported that she was able to track down just one active bank account for Zayat Stables and that it held less then $2,000.
Woodward, who has been assisted by bloodstock consultant Gatewood Bell, said that she, despite not receiving requested information from Zayat, is close to putting together a “go-forward operations budget through which she plans to pay for vital services.” Some Zayat horses have been entered in the Fasig-Tipton February Sale and others will be sold at other auctions.
“In sum, there is certainly work still to be done, but the Receiver is pleased with the progress made, despite the continuing difficulties in gathering information. It is the Receiver’s intention to continue on this path of liquidation, or in any manner the Court directs, as transparently as possible,” the report concludes.