By Bill Finley
Steven Crist and three other former employees of the Daily Racing Form have filed a suit against the former owners of the paper alleging that Arlington Capital Partners L.P. and its affiliates misrepresented the financial condition of the paper when inducing the Plaintiffs to invest into the Form, according to legal documents filed Friday in the Supreme Court of New York, County of Nassau.
According to the suit, filed by attorney Drew Mollica, Crist and former DRF Editor in Chief Rich Rosenbush each invested $100,000 in the company Sports Information Group LLC, an affiliate of Arlington that oversaw the operation of the Form. The court filing also maintains that Vice President of Marketing Amanda (Mandy) Minger invested $75,000, as did former DRF Vice President Jeffrey Burch. Before retiring in 2016, Crist held the title of Editor and Publisher Emeritus at the DRF.
The Plaintiffs maintain that none of them have received as much as one cent of return on their investment, which was made in 2007, and that they were told that their investment is now worthless. They also alleged that Arlington stonewalled their attempts to receive updates on their investment and pertinent tax information.
“Plaintiffs had been fraudulently induced to invest in SIG Holdings and defendants had fraudulently concealed that fraud and other related malfeasance for 12 years,” the suit reads.
Crist and the other former employees are seeking $1 million in punitive damages, plus a full refund on their investment.
The former employees made their investment concurrent with Arlington's purchase of the paper. The suit alleges that the defendants would not have made the investment had they known the precise details of the transaction and Arlington's financial situation at the time, details that the suit alleges were kept from them. The suit calls Arlington's purchase of the DRF “reckless” because the company had taken out a “huge loan” in order to make the purchase and paid “approximately $200 million” when the plaintiffs said they believed the paper was worth only $80 million. They also claim they were promised an annual return of 12 percent on their investment, that the investment was as safe as putting the money into a savings account at the bank, and that Arlington had the resources to pay cash for the paper.
“These people were kept in the dark and told to shut up and mind their own business,” Mollica told the TDN via phone Friday. “That's not how these things work.”
In 2017, Arlington sold the paper to Z Capital Partners LLC. Z Capital is listed as a defendant in the suit as are Arlington/SIG executives John Hartig and Jeffrey Freed, the co-founder and managing partner of Arlington Capital. Hartig was the CEO of SIG prior to the sale.
Crist and the others have claimed that, because of the money they invested, were part owners of the DRF and were entitled to, but never received, a portion of the proceeds of the sale to Z Capital.
After what they claim were unsuccessful attempts over the years to get information concerning the status of their investment, the former employees say that in 2018 the Form's owners sent them K-1 tax forms for some, but not all, of the year since they made their investment. The suit maintains that the K-1 forms revealed the “Defendants' malfeasance and breaches.”
“The suit speaks for itself,” said Crist, who declined further comment.
The TDN left a message with Arlington seeking comment, had not heard back from anyone at the company at the time this story was filed.
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