Fifth Third Bank is pursuing personal bank records of Thoroughbred owner Ahmed Zayat to see if repayments of loans or the proceeds of bets made with stable money ended up in his personal accounts.
A hearing on Zayat's motion to quash that portion of the subpoena is scheduled for Tuesday in U.S. Bankruptcy Court in New Jersey. Zayat is scheduled to be deposed Wednesday.
Zayat is opposing the release of his personal records, which were requested in a subpoena served April 1. Zayat said the request is harassment.
In motions filed late Tuesday in New Jersey, the bank said that Zayat "has exploited corporate assets, including Fifth Third's cash collateral, for personal and other non-business-related uses."
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Pointing to loans made to relatives, friends and insiders from 2006 to 2009, Fifth Third said it is seeking to determine whether any of those loans were repaid directly to Zayat rather than the stables.
The bank also alleged that Zayat has used stable cash to pay personal credit card bills, for "personal Internet gambling accounts," and for non-residential lodging for family in Florida.
To support its argument that the bankruptcy court should allow a subpoena for Zayat's personal accounts going back to Jan. 1, 2009, Fifth Third filed records of a $100,000 wire transfer in November 2009 from Zayat Stables to nhplay.com, a betting Web site.
"Likewise, there are many tens of thousands of dollars transferred from Zayat Stables to New Jersey Account Wagering ... 'for Ahmed Zayat's account,'" the bank said.
Fifth Third attached copies of checks, dating from February to December 2009, to NJAW totalling $1.22 million.
Among the loans Zayat Stables made, according to court documents, were more than $600,000 to members of the Jelinsky family; Zayat has said the money was to help family friends through difficult times.
Fifth Third filed bank records and checks showing payments of $127,500 for the Jelinsky family legal fees in October 2007. Brothers Jeffrey and Michael Jelinsky were subsequently convicted of illegal bookmaking.
According to Fifth Third's filing, "There appear to be other loans on the schedule to what may be personal acquaintances of Mr. Zayat, such as a 'Mad Mike,' listed as M. Mike." The bank included records of a $4,700 check to Cordelia Albanese, listed as "Mad Mike's wife."
Fifth Third also alleged that Zayat used company funds to pay personal credit cards, including $515,248.24 transferred from stable accounts to American Express on behalf of Zayat.
"There are numerous transfers that appear related to down payments on real estate, payment for Mr. Zayat's children's hotel stays, and similar personal expenses," according to the bank filing.
In his motion to quash the subpoena, Zayat said the request is "a gross invasion of ... Zayat's personal, private information which simply has nothing to do with the Debtor or this Chapter 11 case," referring to Zayat Stable's bankruptcy.
According to Zayat, "Fifth Third's insistence on obtaining Zayat's private bank records can only be intended to discover information unrelated to the Debtor to gain an advantage in pending litigation ... or simply to harass."
Fifth Third has sued Zayat in U.S. District Court in Lexington, alleging he defaulted on $34 million in loans. To block a potential bank takeover of his 200-plus horse stable, Zayat filed for bankruptcy protection in February.
Since then, Zayat has countersued the bank and has filed an adversarial motion in the bankruptcy. Zayat alleged the bank reneged on agreements to extend and restructure his loans, driving him into financial trouble.
Fifth Third denied that.