☛ Who’s running the QH Industry? 1-19-14

WHO’S RUNNING THE AMERICAN QUARTER HORSE INDUSTRY?

 

By Glory Ann Kurtz
Jan. 18, 2014

Since the conclusion of the 2012 lawsuit filed by Jason Abraham and Dr. Greg Veneklasen against the American Quarter Horse Association (AQHA) in Amarillo, Texas, where a Federal Jury concluded that AQHA was guilty of anti-trust violations – both Federal and State, rumors and innuendoes have been circulating as to, “Who are the heavy hitters and big leaguers in the American Quarter Horse Association?”

 

I attended this trial and have reams of trial documents that reveal some of the inner workings of this association and who the players are. I have done hours of research from these documents, governmental documents and from the AQHA’s website and publications. There’s more to say than I can put in a single article; therefore, following is the first in a group of articles that will be published in the coming days and weeks.

 

In order to answer this question my research has concluded that the Stud Book and Registration Committee (SBRC) members are the ones requiring the most scrutiny.  It is the only Committee whose decisions cannot be overturned by the Executive Committee. If the SBRC turns a proposal down, the buck stops there and no other AQHA body even sees the proposal. If they pass a proposal, it goes to the AQHA Directors; however, after hearing and reading testimony from Directors, Directors on the stand could not remember ever turning something down that the SBRC passed. They also testified that they never saw a lot of proposals that were turned down  – including the registration of cloned horses and their offspring.

 

According to the AQHA Official Handbook of Rules & Regulations, Article III, Section 8, “Except as otherwise provided herein, the Bylaws and the rules and regulations pertaining to the registration of horses shall be subject to change only by the Board of Directors.

Also Article IV, Section 6, “All powers of the Board of Directors EXCEPT the power to change any bylaws and any rules and regulations pertaining to registration of horses be and are vested in the Executive Committee.

 

Therefore, only the Board of Directors and the Stud Book & Registration Committee can change or pass rules regarding the registration of Quarter Horses. This makes the Stud Book & Registration Committee the most powerful committee within the AQHA as it is the only Committee not regulated by the Executive Committee, although usually several members of the Executive Committee also sit on the powerful Stud Book & Registration Committee.

 

One of the major facts that came out of the trial was each SBRC member’s interaction and affiliation with the American Quarter Horse Racing Industry and Heritage Place Inc. Sale in Oklahoma City, Okla., which is described by SBRC members in their testimony as the largest sale for AQHA racehorses. Also coming out of the testimony was the enlightening fact that ten (10)  of the SBRC members from the last three terms (2011-2013, 2012-2014 and 2013-2015) or 36 percent of SBRC members, are heavily involved in the racehorse business themselves, owning stallions and/or racing them. Several SBRC members are even doing business with each other in the racehorse industry.

Click for link to SBRC members>>

Clink for link to AQHA EC>>

 

During trial proceedings, plaintiff attorney Nancy Stone, examined the witness Jeff Tebow an SBRC member 2011-2013, who is also the Chief Executive Officer of Heritage Place, Inc. Tebow also works for John Andreini as a manager of Andrieni’s Oklahoma Insurance, risk management and employer benefits company. From Tebow’s testimony, Stone was able to formulate a diagram of the key players at the Heritage Place, Inc. Sale Barn, with Tebow verifying under oath the information scribed on the chart was true and correct. The following is the handwritten diagram by Attorney Nancy Stone:

 

Click for link to Heritage Place Inc. chart>>

 

The above chart or diagram clearly indicates that the powerful AQHA Stud Book and Registration Committee Members who are responsible for deciding on rules impacting the Quarter Horse industry the most are:

 

1. All of those listed on the chart, are involved in the American Quarter Horse Racing     Industry,

 

2. All of those listed on the chart are also connected to the Heritage Place Inc. Sale,

 

3. All of those listed on the chart are in the American Quarter Horse breeding and or/racing business,

 

4. Of the top nine (9) American Quarter Horse breeding and racing stallions, seven (7) are controlled by AQHA Stud Book and Registration Committee members, via, ownership, syndication or other means, such as management of the ranch or a relative being on the SBRC. The nine Leading Sires of Money Earners for 2013 are: 1) Heza Fast Dash, (syndicated); 2) Corona Cartel (syndicated); 3 Valiant Hero (syndicated); 4) PYC Paint Your Wagon (syndicated); 5) FDD Dynasty (syndicated); 6) Mr Jess Perry (syndicated); 7) Walk Thru Fire, owned by Edward Allred and Mike Abraham; 8) One Famous Eagle, owned by Johnny Trotter and Burnett Ranches) and 9) First Down Dash (deceased) (syndicated).

 

5. The owners of the two top horses not associated with today’s SBRC are controlled by past “movers and shakers” of the AQHA, with Scoop Vessels (deceased in 2010), the owner and syndicator of the deceased greatest Quarter Racing sire of all time, First Down Dash (deceased in 2010), is a past AQHA President. Edward Allred, who is a co-owner of Walk Thru Fire, is the owner of Los Alamitos Race Track in California, and is an AQHA Honorary Vice President.

Click for list of 2013 Leading Sires of Money Earners>>
Click for Owners of Leading Sires of Money Earners>>

 

 

Heritage Place Inc. Chart explanation:

Heritage Place Inc., is a sale company in Oklahoma City, Okla., where large numbers of AQHA race horses are sold at sales held several times a year. The company was incorporated on July 2, 1977 with principals John Hastie, Donald Despain and Gail Denning. They also controlled the Haymaker Fall Sale, Haymaker Horse Sale, Haymaker Sale, Haymaker Sales Company and Haymaker Spring Sale that are no longer in the business.

 

Testimony indicated that Dr. Chas. Graham, owner of Southwest Stallion Station in Elgin, Texas, AQHA Director at Large, and the grandfather of SBRC member Tyler Graham, owns 25 percent of Heritage Place, and Bob Moore, Norman, Okla., whose Ranch Manager Frank Merrill is a SBRC member, also owns 25 percent. Moore currently stands FDD Dynasty, owned by the Vessels Ranch and is the 5^th leading QH Race sire with $2,981,557 in offspring earnings. The other 50 percent ownership in Heritage Place Inc. is currently unsubstantiated on the chart but thought to be the Gentry Brothers who are Directors of Heritage Place.  

 

The Board of Heritage Place includes Dr. Charles W. Graham DVM, President; his grandson Tyler Graham, Vice President; B. Davis Gentry, Second Vice President; P. Mark Moore, Secretary/Treasurer; Jeff Tebow, Assistant Secretary/CEO; Kirk Gentry; Robbie Force; Lindsey Gentry and Phillip Stewart.

 

The upcoming Winter Mixed Sale is to be held Jan. 23-25 and has an advertised 874 head of horses for sale. Of those 874 horses, 327 (37 percent) are being offered by members of the AQHA Stud Book & Registration Committee, or their Ranch Managers, as owners or agent for clients, as they are in the business of buying and selling racehorses for clients, or their children or partners.

 

 

THE PLAYERS:

 

Jeff Tebow, Piedmont, Okla., who testified under oath at the AQHA cloning trial, that everything on the chart drawn by attorney Nancy Stone is true. Tebow was Chairman of the Stud Book & Registration Committee and is also the CEO of Heritage Place Sales Co. While some of the individuals in the chart are listed on the SBRC, they are not all currently on that committee; however, these individuals revolve between the Executive Committee and SBRC as their three-year terms expire.

 

SBRC member Floyd E. “Butch” Wise, El Reno, Okla., is manager of Lazy E Ranch that recently sold to the Midland, Texas-based Reliance Ranches, owned by the family of Gary McKinney, president of Reliance Energy. McKinney’s son, Micah, is on the AQHA Racing Committee. Reliance Ranches is the leading owner of money-earning Quarter racehorses in 2013 that earned over $1.9 million. Wise has 170 head of horses in the Heritage Place Sale, as an owner or agent, which is close to 20% of all the horses consigned in the January Sale.

 

Wise also testified under oath that he syndicated three of the industry’s leading sires: No. 2 Corona Cartel ($3.6 million offspring earnings), No. 3 Valiant Hero ($3,571,826) and No. 4 PYC Paint Your Wagon ($3,564,724) and sold shares in the syndications. He also syndicated and sold shares in the No, 1 siring race stallion, Heza Fast Dash, with $3,752,917 in offspring earnings. Besides being a member of the SBRC on and off since 2007 (SBRC members are allowed three-year terms) and currently is again a member for 2013-2015. Wise is also an AQHA Director for Oklahoma, and a member of the AQHA Hall of Fame.

 

Other ties to Heritage Place include AQHA Past President and SBRC member James Helzer, Arlington, Texas, the owner of JEH Stallion Station. He has 11 consignments in the January sale.

 

Also, James Eller III, Wheelock, Texas, of Granada Equine, is an AQHA Director from Texas and a member of the SBRC and has 14 head in the January sale.

 

 

Gus Barakis, Jr., Weatherford, Texas, owns Scarlett Hills Farm. He is an AQHA Director from Texas, a member of the AQHA Racing Committee 2011-13 and has been a member of the AQHA SBRC. Barakis has eight horses consigned to the January Heritage Place Sale.

 

Dr. Vaughn Cook, Fort Collins, Colo., is the owner of Rio Vista Vet Clinic in Colorado and Royal Vista Vet clinic in Oklahoma. Following the death of Scoop Vessels, he became a partner in No Secrets Here, standing at Royal Vista Ranches near Wayne, Okla. He is currently an AQHA Director at Large and has been a member of the SBRC. Cook has 32 consignments in the Heritage Place January sale.

 

John Trotter, Hereford, Texas, is the First Vice President of the AQHA and will be President in 2014 following the Convention. He has been on the SBRC and a director from Texas for 10 years as well as on the AQHA Racing Committee. Along with the Burnett Ranches, he owns One Famous Eagle, the 8^th leading AQHA racing sire, a horse he bred. He is also the AQHA’s third highest money-earning owner (with Burnett Ranches) for $1.2 million in 2013. He and Burnett Ranches are also the 7^th and 8^th highest money-earning owners, earning $543,595 and $515,369 with their partnership horses.

 

Dr. Glenn Blodgett, Guthrie, Texas, is the manager and vet at Ann Burnett-Marion’s 6666 Ranch, who owned Mr Jess Perry, the 6^th leading Quarter Horse Race sire until he was syndicated – and still owns part of the Syndicate. Burnett Ranch is also the owner, along with Johnny Trotter, of One Famous Eagle, 8^th leading QH race sire, prior to being syndicated and still owns part of that syndicate. He is an AQHA Director from Texas and a member of the AQHA Executive Committee, in line to be President. When Scoop Vessels died in 2010, frozen semen for First Down Dash (9^th leading AQHA race stallion who is also deceased) went to the 6666 ranch. The ranch is the highest money-earning owner in partnership with Johnny Trotter in 2013 with $1.2 million in earnings. The Burnett Ranch is also the second highest money-earning breeder in 2013 with over $2 million.

 

Paul Jones, Cypress, Calif., is the AQHA’s leading horse trainer for 2013, training horses who won $3,765,965. He is an AQHA Racing Committee Member (2013-2015) and has been a member of the AQHA SBRC.

 

Ben Hudson, Morgan Mill, Texas, the owner of Track Magazine, is an AQHA Director at Large currently, a member of the SBRC (2012-2014) and an AQHA Past President.

 

It was also announced by the AQHA in the recent Ambassadors E-Newsletter that the Heritage Place Inc. will be providing the wine and John Andrieni will be providing lunch at the Upcoming AQHA Convention held in March in New Orleans. Also the 2013 AQHA Racing Champions Awards ceremony will be held Jan. 22 at the Heritage Place Sale.

 

 

On one hand, these powerful members are voting on the adoption and implementation of AQHA rules and regulations that impact the other members, even non-racing members but at the same time, it seems some of them are directly controlling the lucrative racing industry. While the halter and performance individuals on the SBRC are representing members who are receiving trophies, points and ribbons for their wins, the SBRC members and the individuals they are representing are making millions of dollars.

 

Of the 28 members on the SBRC from 2011-2013, 2012-2014 and 2013-2015, 10, or 36 percent represent the Quarter racing industry.

 

 

IRS REGULATIONS:

The IRS requires much more information from 501(c)(3) or 501 (c)(5) non-profits these days. One area that gets tremendous attention is potential “financial conflicts of interest,” especially in regard to board members. In fact, the new IRS Form 990 specifically asks for disclosure of potential conflicts of interest. The following is a link to An IRS Form 990 – The Conflict of Interest Policies are In Part V, Section B, 12 a,b,c.

Click for IRS Form 990 for Non-Profits>>

 

STATE OF TEXAS CODE:

Equally, the State of Texas, the state of incorporation for the AQHA, specifically states the following:

 

TEX CV. CODE ANN. § 1396-2.18 : Texas Statutes – Article 1396-2.18:

Committees:

If the articles of incorporation or the bylaws so provide, the board of directors, by resolution adopted by a majority of the directors in office, may designate one or more committees, which, to the extent provided in such resolution, in the articles of incorporation, or in the bylaws, shall have and exercise the authority of the board of directors in the management of the corporation. Each such committee shall consist of two or more persons, a majority of whom are directors; the remainder, if the articles of incorporation or the bylaws so provide, need not be directors.

 

The designation of such committees and the delegation thereto of authority shall not operate to relieve the board of directors, or any individual director, of any responsibility imposed upon it or him by law. Any non-director who becomes a member of any such committee shall have the same responsibility with respect to such committee as a director who is a member thereof.

 

Other committees not having and exercising the authority of the board of directors in the management of the corporation may be designated and appointed by a resolution adopted by a majority of the directors at a meeting at which a quorum is present, or by the president thereunto authorized by a like resolution of the board of directors or by the articles of incorporation or by the by-laws.

 

Membership on such committees may, but need not be, limited to directors.

Click for link to Texas Code on Board of Directors>>

 

Article I

Purpose:

The purpose of this Conflicts of Interest Policy (this “Policy”) is to protect the interest of the (THE ORGANIZATION) when it is contemplating entering into a transaction or arrangement that might benefit the private interest of an officer or director of (THE ORGANIZATION) or might result in a possible excess benefit transaction. This Policy is intended to supplement but not replace any applicable state laws governing conflicts of interest applicable to nonprofit and charitable organizations.

Click for sample of Conflict of Interest Policy>>

 

Article II

Definitions:

Section 2.1. Interested Person. Any director, officer, or member of a committee with board-delegated powers who has a direct or indirect financial interest, as defined below, is an “Interested Person.” In addition, family members (i.e., spouses, brothers or sisters, spouses of brothers or sisters, ancestors, descendants, and spouses of descendants) of an Interested Person and any entity in which 35% or more of the combined voting power (in the case of a corporation), profits interests (in the case of a partnership), or beneficial interest (in the case of a trust) is owned by an Interested Person also is an Interested Person.

 

Section 2.2. Financial Interest:

A person has a Financial Interest if the person has, directly or indirectly, through business, investment or family –

a. An ownership or investment interest in any entity with which (THE ORGANIZATION) has a transaction or arrangement,

b. A compensation arrangement with (THE ORGANIZATION) or any entity or individual with which (THE ORGANIZATION) has a transaction or arrangement, or

c. A potential ownership or investment interest in, or compensation arrangement with, any entity or individual with which (THE ORGANIZATION) is negotiating a transaction or arrangement.

 

Compensation includes direct and indirect remuneration as well as gifts or favors that are substantial in nature. A Financial Interest is not necessarily a conflict of interest.

 

Under Section 3.2, a person who has a Financial Interest may have a conflict of interest only if the appropriate board or committee decides that a conflict of interest exists.

 

Another interesting revelation in my research revealed the American Quarter Horse

Association openly and actively engages in promoting the Heritage Sale Inc. on their letterhead on their web site, further revealing a close relationship with the Quarter Horse

Racing Industry.

 

…AND THERE’S MORE

 

I’ve received information from an individual in the Quarter Horse Racing Industry who has stated the top Quarter Horse Racing Stallions are controlled by AQHA SBRC members and to breed to one of these stallions requires a syndication membership that costs up to $500,000, which allows the member to breed two (2) approved mares a year to the syndicated stud. No outside mares are allowed to breed, i.e., non-syndicated horse owners cannot breed to the stallion, unless they buy a breeding from a syndicated shareholder.

 

In turn, those offspring of a syndicated stallion usually guarantees a $20,000 sale price tag for the breeder at the Heritage Place, Inc. Sale. On the other hand, if the breeder breeds to an outside racing stallion, i.e., a stallion not controlled or owned by the SBRC member, the usual sale price for an offspring is in the $5,000 to $10,000 range.

 

Of the top nine racing sires for 2013, all of them have 198 offspring and/or are the covering sire of mares selling in the January Heritage Place Sale. The 198 head of offspring or bred to the leading stallions make up 23 percent of all the horses in the Heritage Place January Sale.

 

First Down Dash, the AQHA All-Time Leading Sire of Money earners, leads the list with 33 offspring sired by him and two mares selling that are bred to him. The 1984 stallion by Dash For Cash by Rocket Wrangler and out of First Prize Rose by Gallant Jet by Jet Deck, owned by Vessels Stallion Farm, Bonsall, Calif., died in November 2010 just over three months after his owner, Scoop Vessels, an AQHA President, was killed in an August 2010 airplane crash.

 

The stallion was bred by A. F. Stanley and B. F. Phillips Jr., and sold to the Vessels Stallion Farm as a yearling in July 1985. He was syndicated in November 1993 for $7 million, the first successful syndication in Quarter racing industry since the late 1970s early 1980s.

 

However, it’s interesting to note that following the death of First Down Dash and Vessels, the use of frozen semen from deceased horses was quickly and quietly passed by the SBRC. In 2012, First Down Dash had 68 foals from frozen semen and in 2013, he sired 28 foals (some 2013 foals are still being registered.)

 

It’s also interesting to note that the AQHA spent millions of dollars fighting the rule allowing multiple embryos in a single year out of a single mare to be registered, yet there was little discussion passing the rule to register foals sired by stallions following their deaths using frozen semen.  It just appeared in the AQHA handbook.

 

Another interesting concept of the information revealed is the number of racing Quarter Horses are registered as the result of being a multiple embryo, which was put into the rule book after the Kay Floyd et al lawsuit was settled by the AQHA in 2002.

 

 

So essentially, the AQHA SBRC members not only control the most important registration rules of the AQHA but they also control the top Quarter Horse Racing and

Breeding Stallions and quite possibly the largest Quarter Racing sale company.

 

In conclusion, on one hand the AQHA asks for donations from its members and free donated time while the select powers to be are lining their pockets with millions of dollars and the upper echelon of the non-profits are making lucrative salaries in the hundreds of thousands of dollars plus benefits and perks.

 

BUT I STILL HAVE MANY QUESTIONS:

 

1. Could these SBRC members possibly be involved in a conflict of interest?

 

2. How many on the SBRC are top money earners on the race track?

 

3. How many foals are produced by members of the SBRC that sold in the Heritage Place Sale (ie) a percentage vs other AQHA racehorse sales?

 

4. Number of foals produced by SBRC members by rules adopted (ie) frozen semen, ICSI, embryo transfer etc. that would further their financial position by adopting and implementing such rules from insider information?

 

5. Number of SBRC members voting to eliminate or prevent cloning, thus hypothetically protecting each one’s revenue-generating capability by excluding the reintroduction of past deceased or sterile stallions, which would diminish each one’s revenue-generating capability by a reduction of syndicated-share generation by the offering of breeding to such cloned stallion at a reduced breeding fee?