NYRA and Vitali Reach Undisclosed Agreement

The New York Racing Association and trainer Marcus Vitali have reached a settlement regarding NYRA's effort to exclude the trainer from participating at its three tracks. According to NYRA spokesman Pat McKenna, the agreement requires that the terms of the settlement remain confidential.

The TDN reached out to both Vitali's attorney Brad Bielly Friday in an attempt to gather more information. By mid-afternoon, he had not responded. Vitali told the TDN that he was not aware of the terms of the deal.

In September, NYRA announced that it would begin the process of taking action against Vitali, alleging that the trainer had “engaged in conduct that is detrimental to the best interests of the sport of Thoroughbred racing or potentially injurious to the health or safety of horses or riders. Further, as detailed in the respective statements of charges, this conduct warrants revocation or suspension of their right to train horses, enter races, or engage in any racing-related activity at all NYRA properties including Aqueduct Racetrack, Belmont Park and Saratoga Race Course.”

In an official “statement of charges issued against Vitali, NYRA pointed to what it alleged was a long and lengthy list of suspensions and medication violations.

“From between in or about 2010 and in or about 2020, Respondent amassed an extensive record of medication violations, lengthy suspensions, improperly using 'program' or 'paper' trainers during suspensions and obstructing an investigation into alleged wrongdoing,” the statement read. “In the past five years, Respondent was denied entry, ejected and/or had license applications denied by regulators of Thoroughbred racing in Florida, Pennsylvania, West Virginia, New York and Delaware; and was sanctioned by the Jockey Club for violating a racing statute, rule or regulation relating to prohibited or restricted drugs, medications or substances seven times in a single year.”

Since the original statement of charges was issued, things have only gotten worse for Vitali. In February, he was hit with a one-year suspension by the Pennsylvania Racing Commission after a horse he trained allegedly tested positive for methamphetamine. Vitali appealed the suspension and has continued to train. With several tracks not accepting entries from his stable, he has raced primarily at Presque Isle Downs and Turf Paradise.

Vitali rarely runs in New York, but did have a starter at last year's Saratoga meet. He sent out Red Venus (Candy Ride {Arg}), who finished seventh in a $50,000 claimer.

As was the case with Bob Baffert, who was also issued a “statement of charges” in September, NYRA was required due to a court ruling to hold a hearing into the Vitali matter before it could take any action against the trainer. The hearing was originally scheduled for March 1, but was delayed. With Friday's announcement, a hearing is no longer necessary.

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$1.5m Zayat Settlement to Make Small Dent in Overall $19m Debt

The trustee in Ahmed Zayat's personal bankruptcy case has negotiated a $1.5-million settlement to be paid by the debtor's brother, Sherif Zayat, that a court document stated will “resolve all claims and causes of action” related to the multiple mortgages on Zayat's home.

The motion for approval of that settlement, if so ordered by a judge in a New Jersey federal bankruptcy court July 6, doesn't mean the end to the complicated, now 21-month-long Chapter 7 petition by the allegedly insolvent former Thoroughbred owner and breeder.

But it does mean some of that $1.5 million might trickle down to creditors once the case gets fully settled.

As an attorney for trustee Donald Biase put it in his June 6 court filing, the settlement will “provide a benefit for the Debtor's estate, which was otherwise uncertain.”

The settlement documents were filed exactly seven years and one day after Zayat's superstar homebred American Pharoah swept the 2015 Triple Crown.

The $19-million debt question for Thoroughbred trainers, horse farms, bloodstock businesses, veterinarians, and equine transportation companies who are among the 132 entities listed as non-secured creditors still hasn't changed much.

That's because the money owed to them is in the form of “non-priority unsecured claims,” which puts those people and businesses far down in the pecking order for repayment of Zayat's debts.

Under Chapter 7 bankruptcy laws, non-priority unsecured claims are at the bottom of the hierarchy to get paid–if they get paid at all–once a trustee liquidates assets and discharge debts. They get ranked behind “secured” loans in which property is pledged as collateral, like with liens and mortgages.

The June 6 filing stated that there are five known first-, second- and third-mortgage loans secured by Zayat's 7,714-square-foot home and two adjacent lots in Teaneck, New Jersey.

However, the same document stated that three of those mortgages–which were made by friends and family members and not lending institutions or banks–would be considered by the trustee as “avoidable transfers,” which means that they can be canceled and the proceeds returned to the estate for distribution to creditors. Avoidable transfers can also lead to fraud charges.

One of those property-secured loans that Biase wrote was “avoidable” was for $500,000 from the Egypt-based Sherif Zayat.

That loan was recorded as a mortgage with a New Jersey county clerk Sept. 2, 2020–six days before Ahmed Zayat filed for Chapter 7 bankruptcy protection while claiming that he had only $300 in cash and $14.22 in two checking accounts.

On September 14, 2020, an involuntary bankruptcy petition was initiated against Zayat's family racing business, Zayat Stables, LLC. That case is separate from this personal bankruptcy case, although many of the racing-related creditors overlap in both cases.

In a riches-to-rags case brimming with fraud allegations since its onset, Biase's filing stated that he has attempted to trace the tangled web of Zayat family finances via the “issuance of numerous Rule 2004 Subpoenas, reviewing thousands of pages of documents, including bank statements and tax returns, and conducting Rule 2004 depositions and extensive motion practice, including numerous motions to obtain access to the Debtor's real property, and the contents of same, by my appraisers.”

Beyond not having his Chapter 7 bankruptcy protection granted by the court if he isn't being truthful, Zayat faces a possible federal investigation and/or charges if the U.S. Department of Justice believes crimes have been committed.

Biase has repeatedly claimed the Zayat and his family have hindered his investigation with evasive tactics and non-compliance.

Zayat has consistently denied that he has engaged in any illegal activity or that he is hiding money. He has also insisted that neither he nor his family members are trying to obstruct the work of either of the trustees who are assigned to vet his personal finances and business operations.

The June 6 filing revealed one new nugget about Ahmed Zayat that had not been previously contended: “The Debtor has an ownership interest in a farm located in Egypt,” the Biase filing stated.

If true, it is unclear whether that alleged property interest could be also attached as an asset to pay creditors. The filing did not elaborate either way.

The settlement document, which was signed by all parties May 26, stated that “the Debtor, the Zayat Parties, and Sherif, and any entity they have an interest in shall waive any claim against the Debtor's estate [and] the Parties shall have released each other from any and all claims and causes of action and the Trustee shall be deemed to have abandoned the Debtor's estate's interest in the NJ Property pursuant to Section 554 of the Bankruptcy Code.”

Biase's filing stated that this type of settlement was preferable to continuing to fight the matter in court and/or by forcing a sale of the real estate.

“Though the Trustee believes that he would likely prevail on the claims against the Debtor, the Zayat Parties, and Sherif, the Trustee wishes to settle the claims, in order to save the Debtor's estate time and money that would otherwise be spent on litigation of the claims,” the filing stated.

“With respect to the NJ Property, even if the Trustee could obtain an offer of $4.8 million and avoid [the three mortgages with individuals] after deducting the first and second mortgages totaling $3.4 million and the broker's commission of $240,000, there would be non-exempt net equity in the approximate amount of $580,000…” the filing stated.

“This amount also does not include the Debtor's potential homestead exemption, the cost and time to seek approval under [the] Bankruptcy Code to sell the NJ Property, and the time and cost to avoid the [individual mortgages],” the filing stated.

“The Settlement Amount of $1.5 million greatly exceeds the potential non-exempt equity in the NJ Property,” the filing summed up.

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Fair Grounds Must Pay Record Fine in Clean Water Act Settlement

In an attempt to resolve years of federal Clean Water Act (CWA) violations at its Fair Grounds racetrack in New Orleans, Churchill Downs Louisiana Horseracing Company, LLC, has agreed to pay a $2.7 million penalty–the largest civil fine ever paid by a concentrated animal feeding operation in a CWA matter.

Under the terms of the settlement announced Sept. 29 by the United States Environmental Protection Agency (EPA) and the Department of Justice (DOJ), the limited liability company that runs Fair Grounds must also implement $5.6 million in operational changes and construction projects to eliminate the unauthorized discharges of manure, urine, and wastewater from the track’s stable area.

“We are pleased to announce an agreement with Churchill Downs to address years of CWA violations at its Fair Grounds racetrack in New Orleans,” said principal deputy assistant attorney general Jonathan Brightbill of the Justice Department’s Environment and Natural Resources Division. “This consent decree will stop the flow of untreated process wastewater into the local sewer system, which leads to local waters used for fishing…in a way that recognizes the challenges presented by the racetrack’s urban location.”

According to the joint EPA/DOJ press release, the federal complaint alleges that Fair Grounds violated the CWA, “including the terms and conditions of its Louisiana Pollutant Discharge Elimination System permit. Specifically, the complaint alleges that since at least 2012, Fair Grounds has regularly discharged untreated process wastewater into the New Orleans municipal separate storm sewer system that leads to the London Avenue Canal, Lake Pontchartrain, the Mississippi River, and ultimately to the Gulf of Mexico.”

According to the release, Fair Grounds’s permit prohibits any discharge unless there is a significant rain event (i.e., when 10 inches of rain falls in 24 hours).

“In violation of their permit, Fair Grounds has discharged wastewater after as little as a half-inch of rain, as well as in dry weather,” the EPA/DOJ release stated. “The complaint alleges that unauthorized discharges of contaminated wastewater occurred more than 250 times between 2012 and 2018. The untreated wastewater contains manure, urine, horse wash water, and other biological materials that are ‘pollutants’ as defined by the CWA, the facility’s permit, and the applicable EPA and Louisiana Department of Environmental Quality regulations.”

The release stated that the consent decree “includes a provision requiring Fair Grounds to implement additional remedial measures if these measures do not successfully eliminate unauthorized discharges.”

The settlement was lodged Tuesday in the U.S. District Court for the Eastern District of Louisiana and is subject to a 30-day public comment period. The penalty is due within 30 days of the effective date of the consent decree, the release stated.

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