Commissions are one of those whispered about subjects in the equestrian world. They are slippery, secret and often hidden. There’s nothing inherently wrong with commissions — it’s one of the ways that trainers make a living — provided it’s above board and spelled out so that all parties know the deal, it’s perfectly fine and it’s how trainers are rewarded for their connections and expertise.
It’s when commissions are taken under the table, or are undisclosed, that there is a problem.
There are many stories of trainers selling a horse for significantly more than they tell their clients. One of the most recent and high profile cases is the lawsuit brought against Olympian Ben Maher in December of 2013 by long-time backers Mike and Emma Phillips. Maher was sued for £700,000 ($1,199,485), who claimed he made secret profits from horse deals.
Tripple X III was sold to Eric Lamaze’s Torrey Pines stables in Canada in
An article on December 5, 2013 on BBC Sport, alleged that while acting as an agent for the Phillips, he pocketed significantly more than his commission by giving them incorrect details of the prices paid.
He is alleged to have told the Phillips one of their horses, Tackeray, had been sold to a buyer in the United States for $500,000 rather than what they say is the actual sum of $850,000.
“Mr Maher thereby made a secret profit of $350,000 of which Mr Maher is accountable and to which Quainton Stud is entitled,” says the court document.
It describes an invoice of $50,000 for third party commission on the deal as “a sham”.
The showjumper is accused of making a secret profit or benefit on five other horses: Quainton Quirifino (10,000 euros), Awanti (50,000 euros), Vigolo (152,000 euros), Robin Hood (£80,000) and Wonderboy (£222,496).
In current conversion rates, the total amounts to nearly £700,000, although the financial impact of the case could be double that if any costs and damages were to be awarded.
On July 11, 2014 it was announced by Mike and Emma Phillips on the Quainton Stud website that the case had been settled.
“Michael and Emma Phillips are satisfied that the financial settlement made to them is an acceptable amount that takes into account all the remaining areas of dispute and their legal expenses. The terms of the settlement are confidential but Ben Maher recognizes that Michael and Emma Phillips together with Quainton Stud LLP (of whom they are the sole members) were loyal owners who were instrumental in helping to advance his career to the highest levels in show jumping and for that he will always be grateful. With the benefit of hindsight, he accepts that there were aspects of his working relationship with them that should have been dealt with in a different manner.
“Ben Maher wishes to apologize sincerely for any inconvenience, distress or embarrassment that may have been caused to Michael and Emma Phillips and is grateful to them for their willingness to allow the matter to be resolved. Ben Maher wishes Michael and Emma Phillips continued success in their show jumping breeding program and their high level of involvement in show jumping as top owners and breeders. There will be no further comment on this matter.”
In addition to the settlement mentioned above, Maher’s Olympic horse, Tripple X (of which the Phillips owned a half share) was sold in April to Eric Lamaze’s Torrey Pines stable in Canada.
You can only hope that this lesson has resonated among the horse world, because it is more than just immoral to bilk your client out of their rightful profits, it is illegal. When a trainer becomes the selling agent for a horse, he or she has a fiduciary responsibility to the owners. This means that the trainer must act in the interests of his or her client must disclose all profits.
Unfortunately, this is not the first time this type of problem has occurred. In another high profile case, dressage trainer Sief Janssen was found guilty of breach of fiduciary duty and fraud for selling a horse called Aristocrat for $480,000 but telling the owners, John and Lea Neal, that he had received only $312,000. The Neals had agreed to pay Janssen a 10% commission on the sale of the horse — $31,200. That might seem like a lot of money, but in fact Janssen pocketed an additional $168,000. It was a move that cost him dearly. A jury awarded the Neals $250,000 in compensatory damages and $250,000 in punitive damages. The ruling was upheld on appeal.
Commission-related fraud can occur in several forms:
- The trainer sells the horse for more than he/she tells the owner and pockets the difference
- The trainer knows a client is interested in a horse, purchases it and then resells it immediately for a higher price
- The trainer accepts a commission from both the seller and the buyer without disclosure.
How can buyers and sellers protect themselves?
There are several things you can do
- Work with agents/trainers who have good reputations. Of course, based on the lawsuits referenced above, that may not always be enough. Even top trainers have been caught with their fingers in the cookie jar.
- Formalize the commission agreement in writing prior to the purchase or sale. If it is an expensive horse (which is a relative term) you might consider involving an attorney who specializes in equine law.
- Make payment directly to the owner of the horse, not to the agent. In Kentucky, every sale must include a written bill of sale that includes the purchase price and which is signed by both the buyer and the seller.
- Make it explicit that the agent cannot represent both the seller and the buyer without disclosure (this is another provision in the Kentucky law and is also required by law in several other states).