Originally Published: September 17, 2011 9:58 p.m.
PRESCOTT - The trustee overseeing the Yavapai Downs racetrack's federal bankruptcy case has filed suit against the track's board of directors and top former employees.
The lawsuit accuses them of breach of fiduciary duty and negligence.
Trustee Brian Mullen filed the civil suit Sept. 9 against former track general manager Gary Spiker; former track finance director Sharon Fischer; Yavapai County Farm & Agriculture Association board members Jeff Wasowicz, Rod Cordes and Kevin Keighron; and former board members Laurie Boaz, Phil Bybee and Charles Krause.
The suit does not name board members from the Yavapai County Fair Association that created the Farm & Ag Association in late 2009 to take over the operations of the racetrack in Prescott Valley. And it does not name longtime general manager Jim Grundy. Mullen's attorney did not return a phone call Friday afternoon asking why the suit named only those connected with the Farm & Ag Association.
The suit accuses the board of "failing to properly oversee day-to-day operations of debtor" (the Farm & Ag Association), and "failing to implement reasonable and necessary financial controls," among other things.
Wasowicz, who chairs the non-profit Farm & Ag Association, said he had not been served with the suit.
"I completely disagree with everything in there," Wasowicz said after hearing a description of the allegations against the board.
The suit accuses Fischer of misrepresenting the association's finances and accounting practices, among other things.
And it accuses Spiker of breaching his supervisory obligations.
Spiker did not return a phone call Friday, and Fischer did not answer her home phone.
The association's attorney, Alex Vakula, had not yet seen the suit, either.
Vakula said it appears the trustee, responsible for recovering as much money as possible for the association's creditors in the Chapter 7 bankruptcy liquidation, is trying to cover his bases by filing a claim against the board's insurance policy before it expires this month.
The policy covers the officers and directors of the association and is worth more than $1 million, Vakula said.
"The bankruptcy trustee is probably trying to find a pile of cash, and the insurance policy is the obvious one," Vakula said.
The trustee has refused to return numerous calls from The Daily Courier since the Farm & Ag Association filed for Chapter 7 bankruptcy on July 13.
Vakula said it's unfair for the trustee to go after volunteers who came in to try to save the horse racetrack.
The national decline in racetrack attendance and the Yavapai County Fair Association's decision to go into debt to build a huge new PV facility a decade ago were what caused the track's downfall, Vakula said.
"It has nothing to do with the last year or two," Vakula said.
The Farm & Ag Association cancelled this summer's race meet just a few days before it was scheduled to begin on Memorial Day Weekend.
The fair board under the association also cancelled this year's Yavapai County Fair because of the bankruptcy.
Wasowicz has stated that at least one group of investors remains interested in taking over the racetrack.
The association's largest creditor is the U.S. government, which granted a $14.5 million loan for the construction of the track and grandstands.
The association's bankruptcy filings say its debt exceeds $500,000 to other creditors.
Those other creditors include Prescott Valley and Coconino County, which was forced to cancel its county fair horse race meet this year because the association didn't pay Coconino its share of the revenues from last year's races.