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kickbacks alleged in suit
here we go again and it looks like it's in writing
http://news.bloodhorse.com/viewstory.asp?id=35240 |
I bet that this stuff goes on all the time, people that have alot of money that get around people that seem to be in the limelight tend not to ask alot of questions and be too trusting of these people. That is usally the total opposite of the way bussiness is usally done with people that have already amassed alot of money.:D
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I'm sure Mike will have some good comments for this thread.
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The story doesn't make the allegations completely clear.
Were the McKathans supposed to be working for McIngvale ... but taking kickbacks from the consignors of the horses they recommended? Took many "Mc" names in this McSuit. |
parasites
liquidate. |
Some of these white collar folks need hard time plus restitution. If proven guilty.
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"It's just a jail baby, Yea" not so groovy looks like they will shag him in there:D |
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There are some trainers who are known for totally ripping off their owners when they buy horses for them. It's amazing that everyine knows about it except for the owner. There is one trainer in particular who is pretty brazen about it. Any time you see that he bought a horse for $1 million at auction, everyone knows that he pocketed at least $100k on the deal.
This trainer usually picks out nice horses but the prices he pays are way out of whack. For example, you will see a horse with dead-average breeding that has a good workout at a 2 year old sale. It will be the type of horse that you would expect to go for somewhere around $300,000-$400,000, but it is always possible that the horse could go for a little higher. The horse will end up being bought by the trainer I was referring to for over $1 million. It is often times from the same consignor. All the insiders just shake their heads and say, "We all know that "Mr X" pocketed $100,000-$200,00 on that deal." The thing that is surprising about it is that often times there is a paper trail, so if an owner does decide to sue, his case will be easy to prove. |
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Check your message box. I'm going to send you a private message. |
I'd believe the suit a lot more if it were anybody besides McIngvale, who's a total nut of an owner.
All I have to say is what the hell did you spend $950K on a Menifee colt out of an average mare for in the first place?? |
Does not surprise me at all...happens every day in this industry and twice on Sundays....it is a damn shame and a cancer to our game :mad:
...dispicable |
Guys a kickback is defined if you take comissions on both sides without disclosing such things to the parties involved. Its not real bright.
Randall I have never purchased a horse at a sale. Its not my game and sadly I don't think it ever will be. Its a seperate talent from finding one who is already running. Just like Rup's talent of watching two year olds breeze at training sales is another seperate one. |
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It was only a matter of time until these kind of things came to light. I love the part where Baffert claims he knows nothing. Kinda like Sgt. Schultz from Hogan's Heros.
The real good one is where the trainer/agent actually takes part of the horse to "assure" the owner he is getting a good deal. |
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Private purchases are much tougher to get away with at a level like that. Sometimes you can get a bigger commission, but you really can't represent a 500 thousand dollar horse to be a million dollar horse. Its pretty obvious what a horse is in the ballpark of after it runs. What does sometimes happen, which is legal, is that an agent who has a lot of money(more than me, I don't have a half mill under the mattress) will buy one privately and then sell it to client at a markup. Thats not illegal, ist called arbitrage, or capitalism. There is no standard commission that someone has to pay you. You can agree on 10%, 5%, 20%, etc. As long as you only take the commission from one side then you are ok. If you take say, 10% from the seller, and then bill the buyer 5% without disclosing the 10% you took from the other side, you are on thin ice. Syndicates do this all time. One of those partnerships may buy a prospect for 350 grand and then sell pieces of it at a value of 500 grand. The auction thing is much different. In cases that Richi describes, its outright fraud and price fixing. |
Lets suppose an agent sees a horse run who he likes. He calls the seller and says, how much. The seller will sometimes say, 300 grand and we will take care of you. Meaning they will pay you a commission. Sometimes you call up and say how much, and they will say 300 grand TO US! meaning put your commission on top of that or bill the other side.
Most guys who buy privately are pretty sharp. They have a pretty good idea of what a horse is worth. |
You can also have more than one agent involved in the private buy transaction much like realtors act or an agent who refers to another agent who than finds the buyer. Not the most money making way to do it, but some guys have the windows to better buyers that another agent might not have.
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One more thing about buying privately, an agent may call a guy up and say how much? The seller might say 100 grand. The agent may send in a signed contract that gives him 5 days to pay the money and have the horse vetted. In the meantime someone else may think the horse is worth 200 grand. If he contacts the agent who has the horse under contract, the agent can commit arbitrage and sell his contract for cash. Meaning he can sell the contract for a chunk of cash to the guy who thinks hes worth 200 grand.
very often, after buying privately, the guy who bought the horse will sell pieces of the horse at a higher value than he bought the horse for. I know for a fact that this happens often. Guy may buy one for 250 and sell half the horse to a partner for 175 before it runs. Although that may seem unethical, its really not. You are simply telling someone what they have to pay to get what they want. At a sale, its quite different. Auction means auction. Its supposed to mean that people bid against one another and that the guy with the highets bid gets the horse. If someone is planted in the crowd to run up the price who isn't really bidding, then thats wrong. What I don't understand is why guys do it the way that they do it and risk this. If the same guys just went to an owner before the sale and said "hey, we love this horse and can buy it before the sale for x amount" and the client does so, they can then get a legal commission from the seller(so long as they dont bill the buyer as well). If someone wanted to, they could pay a 50% commission on a private sale, its their money and they can do what they want with it. |
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Its like a chain. Guy calls an agent and says see if you can get me 200 grand for this horse. so the agent calls another agent, who calls another agent before someone has a client who wants the horse. By that time 3 guys are splitting the commission, which isn't exactly the best way to make money, but 1/3rd of a loaf is better than none of a loaf. You can't be greedy if you wanna sell. The more people involved the more ways that the money is split. A 20 grand commission may turn out to be 6666 to three guys. |
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Another evil of auctions is the horse entered who that was a foal share...certain farms will really run up a price to make their stallion look good. |
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When an offer is made and a contract signed, is there earnest money wired? If not, how does the contract get enforced upon the buyer? I.E., the horse vets fine then the buyer has remorse and doesn't pay? I assume the veting process is done and paid for by the buyer? Does the seller have any recourse if the buyer claims the horse did not vett out well? i.,e., another 3rd party review? I assume these contracts are generally written in favor of the buyer. Thanks again. |
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Horse has to be vetted, and it CAN'T be by the vet of the trainer selling, thats a conflict of interest and can lead to real problems if the horse is later found to have a problem. Vetting is paid for by the agent, who can then pass it on to the buyer. If the horse doesn't vet the deal is off. Oh yeah, agents get stuck with 500 dollar vet bills all the time. You have one vetted and he doesnt fly, so no deal. Can't pass it on to the buyer. You can go from waiting for a vet to call to tell you that you have made a great commission, then he calls and says no good, chip in the ankle and then not only did you just lose on a commission, you now owe 500 bucks to the vet. Its not exactly a business for those who can't take crushing blows and get up off the floor. |
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If a person were to buying or selling something for say $200,000 (or even $20,000) be it real estate, consulting services or a horse ... why would they do so without nominally reasonable terms? Or is it just "business as usual" for people to get screwed consistently when buying or selling a racehorse? |
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I know a lotta agents who have been stiffed on commissions that were verbally agreed upon before the deal. Its all on a handshake. Lots of times someone gets stiffed and the recourse is to spend more in legal fees to try and recover ten grand, then ten grand is worth. All you can do is mother**** the guy over the phone and tell everyone hes no good. I no longer speak to a guy I knew for years because of it. He gave me his word that I had 24 hours exclusively to sell a brrodmare of his at a set price for a 5% commission. SO I got on the phone and fax and email and worked hard, 22 hours later I had a client ready to wire the money. So I called the client. He said, well Mike I thought you werent gonna get it done so I let someone else sell her an hour ago. You never heard such profanity fly out of someones mouth like it did out of mine. It was an absolute tapestry of every four letter word you ever heard. Whats my recourse Stud? None. So don't make it out like the screwing only goes on one way. |
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How about the guy who has a verbal contract that says he gets a breeding right for any horse he buys the client who becomes a stallion. Guy sells the horse as a sire to interests in another country for a chunk of change. Agent says he wants the cash equivalent of a breeding right because the horse was sold. Client with a straight face tells him that the agreement was a breeding right and since he doesnt own him anymore that hes not entitled to anything? Yes, this has happened. |
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I've got an interesting auction story. A friend of mine, who's father is in the breeding side of the business, wanted to buy a yearling. He wanted something by a freshman sire who he thought would run well at a low cost.
So, he heads up to the auction with his personal trainer acting as agent and finds a very nice filly. Turns out the one the agent/trainer likes was bred by his father. She was consigned through a independent party. Good news for my friend since he can just call and ask if she has had any problems. He does, she hasn't and he bids. He lands her for X dollars. The next day his agent/trainer gets a call from the consignor saying he has someone who'll give 2X dollars for her. Needless to say where was this mystery buyer the day before. My friend tells his father and needless to say the consignor won't be getting anymore business from my friend's father. These and other shady things happen at sales, especially if one slips through the cracks at a low price. I even know of consignors who have purchased from their own consignment through a third agent if the price was right. |
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I get a referral for a 90 employee firm. I put a new plan in place, saving the guy $150k (Ann premium down from $750k to $600k). My end is 4% of $600 or $24k. I'll get paid by Humana. I had about 150 hours in. One week after it goes live, the guy names his nephew his "new consultant." I get nothing. Zero. It's been 10 months. I get a call from the guy. The whole thing is f'd up. The nephew's an idiot. Asks me if I'll work on it again. I told him yes, but he had to pay me $15k in advance every 6 months and I'd take zero from Humana. I sent him a contract. Haven't heard back. I am not holding my breath. I know it happens, believe me I know. |
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