NEWS
ClassicStar operators plead guilty to tax fraud
Posted: Tuesday, October 27, 2009 4:06 PM
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by Jeff Lowe
In the largest criminal tax case in Oregon history, the operators of the ClassicStar broodmare-leasing program pleaded guilty on Monday to conspiracy to defraud the U.S. government by running an illegal tax shelter.
David Plummer, his son, Spencer Plummer, and accountant Terry Green each pleaded guilty to the charge, more than three years after the Internal Revenue Reserve raided ClassicStar’s farm in Versailles, Kentucky.
According to the Justice Department, investors in ClassicStar’s mare lease program filed tax returns claiming more than $500-million in false deductions that either reduced or eliminated their taxes, resulting in a tax loss to the government of more than $200-million. Many investors received tax refunds, including refunds for years before they actually invested in the program.
The Justice Department said the deductions were fraudulent because, among other things, the program used fraudulent loans to finance investor participation and engaged investors in leasing mares that ClassicStar knew it could not provide.
To justify the deductions, ClassicStar substituted Quarter Horse mares for some of the more valuable Thoroughbred mares it promised.
Kent Robinson, acting United States attorney for the District of Oregon, said it was by far the largest criminal tax case in Oregon history. ClassicStar was based in Utah, where Spencer Plummer and Green both lived.
In a lawsuit filed by West Hills Farm and Arbor Hills Farms, both of Portland, Oregon, and Nelson Breeders of Bellevue, Washington, against ClassicStar in 2006, the plaintiffs claimed that the operation “deliberately sold mare lease programs with a total value of tens of millions of dollars greater than the Thoroughbred interests owned by [the] defendants.”
The lawsuit said ClassicStar sold more than $160-million of mare lease programs in 2004 alone, when it owned only approximately $40-million of Thoroughbred bloodstock.
In 2002, ClassicStar was the leading buyer of broodmares at public auction spending $17,535,000 for 27 mares. ClassicStar paid $4-million at that year's Keeneland November breeding stock sale for Bless, a full sister to 2000 Kentucky Derby (G1) winner Fusaichi Pegasus, and also bought champion female Xtra Heat privately for $1.5-million.
The operation ranked second in 2003 with purchases of 24 mares for $14,542,727.
In 2004, ClassicStar was the third-leading buyer, spending $9,835,000 for 12 mares.
Following the filing of the lawsuit and IRS raid, ClassicStar dispersed much of its stock in the 2006 Fasig-Tipton Kentucky fall mixed sale, selling 65 horses for $20,837,000, most of them offered with modest reserves or no reserves at all. The top price was $2.9-million for Grade 1 winner Hookedonthefeelin, by Citidancer.
In September 2007, ClassicStar filed for Chapter 11 bankruptcy protection in Kentucky federal court, a few months after selling about 305 acres of the Versailles farm to Woodford Thoroughbreds.
ClassicStar still faces multiple lawsuits from investors.
To view the Justice Department press release, click here.
Jeff Lowe is a Thoroughbred Times staff writer
