Wednesday, January 19, 2000

Storied Calumet focus of trial


Former top execs charged with fraud, bribery, false statments

BY MEGAN K. STACK
The Associated Press

        HOUSTON — When Gary Matthews was hired as chief financial officer at Calumet Farm, he couldn't believe his luck.

        Season after season, prize winning stallions came charging from the Lexington, Ky., stables. With stuffed trophy cases and decades of acclaim, Calumet was touted as the best breeding and racing farm in the world.

        It's been a tough tumble for Mr. Matthews, and for former Calumet President J.T. Lundy.

        The pair face charges this week of fraud, bribery and making false statements. Jury selection was under way Tuesday in their Houston trial.

        U.S. District Judge Sim Lake said proceedings were expected to last two weeks.

        The dramatic downfall of Calumet had all the fixings of a racetrack soap opera. One of the world's most treasured stallions died under mysterious circumstances.

        A bank that was at one time Texas' largest financial institution failed. Calumet itself crashed into bankruptcy.

        Lavish spending and risky borrowing by Mr. Lundy and Mr. Matthews are blamed for driving Calumet into the dirt.

        During jury selection, the two defendants sat at opposite sides of the defense table and did not look at each other.

        The pair are accused of paying a Houston-based bank a $1.1 million bribe.

        In exchange, the now-defunct First City Bancorporation handed the stables $65 million in unsecured loans without checking the farm's credit or appraising the horses, federal prosecutors charge.

        Calumet claimed eight Kentucky Derbies, seven Preakness Stakes, two Belmont Stakes and two Triple Crowns.

        When Calumet declared bankruptcy in 1991, the farm was more than $100 million in debt.

        “It was more than a shock,” said Lexington attorney John O. Morgan. Mr. Morgan represents the descendants of Calumet matriarch Lucille Wright Markey.

        “It was just unbelievable that a farm of that stature could go under.”

       



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