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Zayat’s Brother Ordered To Comply With Subpoena, Or Risk Contempt

Judge Vincent Papalia has ordered Ahmed Zayat's brother, Egyptian businessman Sherif El Zayat, to comply with the court's subpoena to turn over documents relating to the family's businesses and finances, reports the Thoroughbred Daily News.

Since Sherif El Zayat is not a U.S. resident or citizen, the order stipulates that if he does not comply with the subpoena, the court will hold him in contempt, requiring U.S. Marshalls to detain him upon U.S. arrival.

The trustee in the bankruptcy case, Donald V. Biase, believes that Ahmed Zayat has assets in Egypt being controlled by his brother. Biase wrote in a July filing: “Documents obtained by the trustee from third parties strongly suggest that the debtor still possesses significant assets in Egypt.”

Ahmed Zayat, best known in horse racing as the owner of 2015 Triple Crown winner American Pharoah through his Zayat Stables, filed for Chapter 7 bankruptcy protection on Sept. 8, 2020. Zayat and his racing operation were previously named in a civil lawsuit in Fayette County Circuit Court from New York investment firm MGG Investments, stemming from a $30 million loan he took out in 2016. MGG won a summary judgment in the amount of $24.5 million.

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Report: MGG Brings New Motion In Bankruptcy Case Alleging Zayat Committed Fraud

The lengthy legal battle between New York firm MGG Investment Group and Triple Crown-winning trainer Ahmed Zayat continued with a new move last week, according to Thoroughbred Daily News.

Zayat declared bankruptcy earlier this year, seeking Chapter 7 protection. Now, MGG is asking a federal judge to order that Zayat can't get his debts to the investment group forgiven because the company says the $24 million in loans Zayat still owes were acquired fraudulently.

“[I]t is a debt…that was obtained by use of a series of statements in writing that were materially false, respecting an insider's (Zayat Stables) financial condition, on which MGG reasonably relied, and that Ahmed Zayat caused to be made or published with the intent to deceive MGG,” read a complaint filed by MGG. “[I]t is a debt for willful and malicious injury caused by Ahmed Zayat to the property of MGG within the meaning of [the] Bankruptcy Code.”

MGG's suggestion that Zayat was dishonest in his representations to the company isn't new; the basis for its much-publicized suit against Zayat in Fayette Circuit Court in Kentucky is based partly on allegations that Zayat failed to disclose the sale of nine breeding rights to American Pharoah or turn over the proceeds to the lender.

Still Embattled In Civil Suit, Ahmed Zayat Files For Chapter 7 Bankruptcy, Listing String Of Racing Creditors

Ahmed Zayat, best known in horse racing as the owner of 2015 Triple Crown winner American Pharoah through his Zayat Stables, filed for Chapter 7 bankruptcy protection on Sept. 8. Paperwork filed in United States Bankruptcy Court for the District of New Jersey lists a long string of trainers, veterinarians, transport companies, and others as creditors for expenses totaling tens of millions of dollars.

Unlike Chapter 13 or 11 bankruptcy, Chapter 7 does not involve the filing of a repayment plan. Rather, a bankruptcy trustee is appointed to gather and sell assets and pay creditors when possible. Some of the debtor's property may be exempt, but anything nonexempt will be liquidated.

A lengthy list of creditors attached to the filing revealed a number of horse trainers owed amounts in the six figures, among them Bob Baffert, who is owed $227,884.17, Brad Cox ($194,836.19), Mike Maker ($120,921.88), Richard Baltas ($316,070.12), Steve Asmussen ($102,541.10) and Todd Pletcher ($125,598.69). Rudy Rodriguez, who was awarded a judgment by a New York court for $394,437.19, is also listed. Jorge Navarro's JN Racing is owed $63,822.01.

Veterinary hospitals Hagyard Equine Medical ($38,999.53), Rood and Riddle ($54,346.77), and Kentucky Equine Medical Associates ($19,937.32) are also on the list, as are numerous therapists, individual veterinarians, van companies, and others.

Several financial advisement companies and individuals are listed, with notes they are owed six or seven figures each. One $250,000 debt is listed for the PMG Operating Account, whose address corresponds to Meadows Gaming.

Some, though not all, of these creditors' claims are marked as disputed.

Zayat and his racing operation were named in a civil lawsuit earlier this year in Fayette County Circuit Court from New York investment firm MGG Investments, stemming from a $30 million loan he took out in 2016. MGG won a summary judgment in the amount of $24.5 million earlier this year, representing the remaining balance Zayat Stables owes on the loan. Zayat Stables has countersued, and the bankruptcy paperwork listed the final amount owed to MGG as unknown for the moment. Control of Zayat Stables has been placed into the hands of a court-appointed receiver, who has raced a few of the stable's remaining horses and sold many of them, with an aim to maximize profit in the court of liquidating the operation.

Cedarview Capital, a New York hedge fund, is owed $7.9 million. In documents filed as part of the MGG suit, Zayat indicated he had paid over $1 million in interest to Cedarview, and stated it was one of the lenders he took on alongside MGG. In emails dated January of this year, Zayat claimed to have traveled to China in an attempt to attract investors to inject cash into the stable in order to “make the company fiscally functional” and to repay MGG and Cedarview.

In 2009, Zayat Stable filed for Chapter 11 bankruptcy protection after Zayat was sued by Fifth Third Bank for allegedly defaulting on $34 million in equine loans.

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Unpaid Bills And Disappearing Horses: Court Filings Detail Dispute Between Navarro, Zayat Receivership

As the court battle between Triple Crown-winning owner Zayat Stables and New York investment firm MGG Investments rages on, court documents filed this week show the receiver tasked with managing the diminishing stable has faced a challenge from indicted trainer Jorge Navarro.

Elizabeth Woodward, director of forensic accounting and litigation support at Dean Dorton Allen Ford, was appointed by a Fayette Circuit Court in January to manage the stable's assets. This primarily involves selling horses at public auction or overseeing the continued racing careers of some in hopes of increasing their value. As news spread earlier this year of the suit, which is based on more than $24 million in loans MGG claims Zayat Stables did not repay, other creditors began to emerge

Woodward filed a motion before Judge Kimberly Bunnell this week, asking the court to certify her calculation of money Navarro is owed by the stable. Woodward claims she was in contact with Navarro over the training of Zayat runners Paynted, Mony, and Perlman after being appointed to run the stable in January. Days before his federal indictment in March on charges related to doping of racehorses, Woodward says Navarro asserted a legal claim on the horses for unpaid bills by Zayat. Upon news of his arrest, Woodward said she immediately sought to remove the three horses from Navarro's barn.

Ten days after his arrest by the Federal Bureau of Investigation, Navarro informed Woodward through attorney Bradford Beilly he planned to sell the horses to pay off the debt, which he claims exceeds $51,000.

“Contemporaneously with sending its Claim Notice, Navarro transported the Zayat Horses to an undisclosed location, without notice or permission from the Receiver, and in direct violation of the [Court] Order on or around March 19, 2020,” read Woodward's motion. “Escalating the conflict, on April 7, 2020, Navarro then scheduled a public sale for April 17, 2020 … Though it was unclear how Navarro could hold a commercially reasonable public sale as required by Florida statute at a time in which the state was closed for commerce by executive order and the horses themselves were secreted away to an unknown location, the Receiver took immediate steps to stop the proposed sale.”

Woodward secured a bond for the amount Navarro claimed he was owed and secured the horses nine days later and sold them at the Fasig-Tipton July Horses of Racing Age Sale for a combined $112,000.

Because of the specific expenses allowed and disallowed by Florida laws governing liens, Woodward now says the stable owes Navarro less than he claims. Previous findings in the case suggest the receiver isn't subject to bills incurred by the stable under Zayat's control, and only certain types of expenses such as feed and stabling (but not training) are permitted for agister's liens in Florida, according to Woodward's motion.

Rudy Rodriguez was awarded a $394,437.19 judgment for unpaid training bills by a New York court, and is hopeful he can collect his money before MGG is paid back from proceeds of sales or race purses by Zayat horses.

In other news related to the case this week, Judge Bunnell dismissed with prejudice MGG's claims against Bemak International, which facilitated a sale of American Pharoah breeding rights from the Zayat family to Orpendale. MGG is appealing that dismissal.

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