He was a beautiful, proud thoroughbred, headstrong and demanding, the kind of horse who would snort impatiently if he decided the grooms were not paying him enough attention. Each day, his oak- paneled stall was swept, mopped, and replenished with fresh straw. His richly colored chestnut coat was constantly brushed. For his daily exercise sessions, he was taken to his own three-acre paddock, where he could frolic alone in perfectly tended bluegrass.His name was Alydar. To sports fans, he was known for the thrilling duels he staged with his rival, Affirmed, for the 1978 Triple Crown. But to the world’s wealthiest horse breeders, he was revered for a different reason altogether. Alydar was one of the greatest sires in Thoroughbred history—a 1,200-pound genetic wonder whose offspring often became champion racehorses themselves. Each spring, the breeders would come with their convoys of horse trailers to Kentucky’s Calumet Farm, one of the country’s premier horse-racing operations, willing to pay hundreds of thousands of dollars to have Alydar mount their finest mares. Day after day, more than two hundred times a year, he would strut into the breeding shed, eye his latest prize, rise up on his hind legs, and begin to dance forward. Within seconds, his tail would swoosh up, signaling the end of his encounter, and he would be washed and then led away, back to the stall with his name emblazoned on the brass doorplate.
But on a chilly November night in 1990, the great stallion was found in shock in his stall, his coat glistening with sweat, his right hind leg hanging by tendons, a shaft of white bone jutting through his skin. J. T. Lundy, the rotund, blustery head of the farm, told veterinarians that Alydar had shattered his leg by kicking his own stall door. He had kicked it so hard, Lundy said, that he had knocked loose a heavy metal roller that had been bolted into the floor just outside Alydar’s sliding door.
In emergency surgery, veterinarians were able to set the bone and put a cast on his leg. But within 24 hours, Alydar, hearing the whinnying of some mares in a nearby pasture, turned to look out a window in the Calumet clinic, put too much weight on the leg, and this time broke his femur. The sound of the break was like a gunshot. As he lay on the floor, an uncomprehending look in his eyes, Alydar was put down, and his body was taken to the Calumet cemetery, where he was buried with the farm’s other racing champions. Eight months later, Calumet itself unraveled, forced to declare bankruptcy with more than $127 million in debts. According to the stories splashed on the sports pages of almost every newspaper in the country, the farm could not begin to pay its immense bills and bank loans without the millions of dollars it had been deriving from Alydar’s stud fees. Calumet was so broke that its horses and equipment were going to be sold at public auction.
It was difficult for Kentucky horse people to believe that such a calamity could have happened. A few of them quietly said they were haunted by the strange circumstances of Alydar’s death. A foreman from the stallion barn, for instance, couldn’t remember Alydar having ever kicked anything hard enough to do any damage to his leg. And it was difficult to understand how even a powerful horse could have kicked that solid oak door with enough force to knock it off its hinges. Yet there was never an official investigation into the events of that night. No public accusations were made. As everyone in the horse business knew, horses could be unpredictable, and they could also be fragile. Alydar’s death, no doubt, was one of those accidental, heartbreaking tragedies that no one could have done anything about.
And that, by all accounts, was the end of the story—until one afternoon in 1996, when a young assistant U.S. attorney in Houston was sitting in her downtown office, flipping through some bank records. The attorney’s name was Julia Hyman (she now goes by her married name, Julia Tomala), and she knew nothing about horse racing. She spent her days investigating one of the worst financial scandals in American history: the widespread failure of hundreds of Texas financial institutions. Her job was to unearth the most complicated of white-collar crimes, such as money-laundering schemes and check-kiting operations.
On that particular afternoon, Tomala was studying the documents of the defunct First City National Bank of Houston, looking for evidence of fraud. She paused when she came to a document that mentioned Calumet Farm. She paused again when she came to a document that mentioned Alydar.
At the time, Tomala, an elegant woman with thick dark hair and a fondness for stylish black pantsuits, had no idea who or what Alydar was. She had never even been to a horse race. But by the summer of 1997, she was on her way to Kentucky to ask questions about how that horse had lived and died. She was accompanied by a rookie FBI agent out of the Houston office, Rob Foster, a former college baseball player who had never conducted a field investigation and who also knew nothing about horse racing.
Quickly, the word spread among the Bluegrass aristocracy that a couple of outsiders intended to pry into their private business. Tomala and Foster had been seen in Alydar’s stall at Calumet, at a veterinary clinic, even at a construction site, where a former Calumet groom had gone to work as a laborer.
What, people wondered, did this prosecutor think she was going to learn about Alydar that wasn’t already known? And why, after all this time, did it matter?
It would not be until October 2000, almost ten years after Alydar’s death, that Tomala would finally reveal what she had been doing. At a little-publicized hearing in a nearly empty federal courtroom in Houston, she stood before a judge and said that the death of Alydar was no accidental tragedy. Alydar, she proclaimed, had been murdered.
It is a blockbuster of a story, a sweeping saga of greed, fraud, and almost unimaginable cruelty that could have been lifted straight from a best-selling Dick Francis horse-racing novel. The settings range from the raucous pageantry of the Kentucky Derby to the hushed, baronial offices of Lloyd’s of London in England, and even the minor characters—from an uneducated, chain-smoking Kentucky farmhand tormented by a secret to a corrupt Texas banker living in luxury at Houston’s Four Seasons Hotel—seem right out of central casting. “This story has got blood and money, scandal and intrigue, and one hell of a beautiful horse,” says Allen Goodling of Houston, one of the many lawyers who became involved in the case. “What more does anybody want?”
<pTThe story begins at the fabled Calumet Farm just outside Lexington, Kentucky—a picture postcard of a place consisting of some eight hundred acres of lavish pastureland crisscrossed with pristine white fences. Horse-racing fans once regarded Calumet the same way baseball fans view the New York Yankees—as an almost sacred institution, its horses having won eight Kentucky Derbies, two Triple Crowns, and more than five hundred stakes races. Founded in 1924 by William Wright, who made his fortune as the head of the Calumet Baking Powder Company, and later run by his son Warren Wright, it was already a racing dynasty by the early forties, producing such champions as Whirlaway, Citation, and Tim Tam. In 1950, after Warren’s death, the farm was taken over by his widow, Lucille, an imperious grande dame who, like all proper Bluegrass ladies, wore white gloves to the track on racing day. She was devoted to the horses. She was not, however, devoted to her only child, Warren Wright, Jr., the sole heir to the farm. A likable but scatterbrained young man, he apparently forgot to pay his income taxes for a couple of years and was sent to prison. What earned him his mother’s deepest wrath, however, was his lack of interest in the horse business. When he died before she did, she mostly ignored his widow and his four children—the new heirs to the farm—because they too showed little interest in working at Calumet. They seemed more interested in the farm’s dividends.
But in the early sixties, one of Lucille’s grandchildren, her own namesake, Lucille “Cindy” Wright, made a decision that would have an enormous impact on Calumet’s future. She decided, at the mere age of sixteen, to marry a rambunctious good old boy who liked racing his souped-up car down the narrow two-lane roads that ran past the horse farms. J. T. Lundy, the 21-year-old son of a tenant farmer who worked a piece of land in an adjoining county, was to the Kentucky horse gentry what Jett Rink was to the Texas ranchers in the movie Giant—the classic outsider who dressed in old work clothes and usually couldn’t get through a conversation without letting loose a few choice cusswords. With a head the size of a gasoline can and a nose that looked as if it had been busted and reset by a plumber, he looked like a country bumpkin. As one disgusted Kentucky blueblood would later tell Austin journalist Carol Flake, who wrote an absorbing profile of Calumet Farm in 1992 for the now- defunct Connoisseur magazine, a big night for Lundy was “sitting in front of the TV with a bucket of buffalo wings watching reruns of The Dukes of Hazzard.”
Yet underneath that salt-of-the-earth personality lay a surprisingly fierce ambition. Lundy often told his friends that his dream was to run Calumet. Some of those friends even remember him boasting that he was going to marry young Cindy Wright just so he could get into Calumet’s founding family. If so, he made the right choice. Those who know Cindy say she was never much of a society girl—”She didn’t like those parties where people sipped mint juleps,” says a Lundy relative—and that she always preferred the company of plainspoken rural boys rather than the college-bound sons of Lexington’s aristocrats. To her, the down-home Lundy was ideal.
After their marriage, Lundy bought a small farm and started a breeding program to produce racehorses, perhaps to show Cindy and her family that he was serious about his desire to head Calumet. Throughout the sixties and seventies, however, the farm remained firmly in the hands of its matriarch, who by then had married a dashing retired U.S. Navy admiral named Gene Markey. Though approaching eighty, Lucille Wright Markey had not lost her resolve to produce one more Kentucky Derby winner. In 1976 she hired a brilliant young trainer, John Veitch, who began watching a horse named Alydar that had been born at Calumet the year before. At the Blue Grass Stakes in the early spring of 1978, Lucille Markey stood next to the outside rail, gripping it with her white gloves, as Alydar introduced himself to the world, sweeping around the final turn and racing victoriously to the wire. Then, at the Kentucky Derby, the Preakness, and the Belmont—the races that make up the Triple Crown—Alydar and another Kentucky Thoroughbred, Affirmed, staged what turf writers still describe as the greatest duel in horse-racing history. They literally raced side by side, eyeball to eyeball, their hooves pounding like cannon fire as they hit the home stretch. In their fight to the finish at Belmont, they ran dead even for the final seven furlongs.
To Lucille Markey’s deep disappointment, it was always Affirmed who got to the wire just ahead of Alydar. Yet once the two horses were retired to their stallion barns back on the farms where they were born, it was Alydar that everyone wanted to see. In the Thoroughbred-breeding business, there is no way to tell which stallion, regardless of its own pedigree, will be able to produce a new generation of winners at the track. The business is a crapshoot, based almost purely on luck. So when Alydar’s initial progeny turned out to be strong, fleet-footed foals, the word quickly spread that the most famous second-place finisher in the Triple Crown had semen as valuable as gold.
Initially Alydar’s stud fee was $40,000. J. T. Lundy told his in-laws that Calumet’s management team was forfeiting the chance to make millions off Alydar. His message to the heirs was clear: Calumet needed a new leader. And who better than Lundy himself? There was no question that he was a hard worker who knew how to make money in the horse business. At the time, Lundy’s farm was said to be worth several million dollars.
According to a history of Calumet, Wild Ride, by Ann Hagedorn Auerbach, Lucille Markey despised the overly ambitious tenant farmer’s son. She refused to let Lundy breed his horses with Calumet horses, and she even tried to keep him from visiting the farm—which only reinforced Lundy’s resolve to take over her kingdom. One story that circulated through Bluegrass circles was that Lundy had taken up jogging to stay in good enough shape just to outlive her. “Here was somebody who may have felt inferior his entire life,” says Gary Matthews, Calumet’s former chief financial officer. “And he wanted to get to the top just to show everybody he could do it.”
He got his chance on July 24, 1982, when Lucille Markey died at the age of 85. Soon afterward, the Calumet heirs announced an agreement with 41-year-old J. T. Lundy, granting him “full discretionary management powers” over the farm. The country bumpkin was now the lord of Calumet Farm.
Almost immediately, Lundy began a multimillion dollar restoration of Calumet. He had workers install iron gates across the main entrance, as if to signify to the world that a new man was in charge, and he had the farm’s 23 miles of fence repainted. He ordered the construction of a state-of-the-art veterinary clinic, complete with a treadmill and an equine swimming pool, which alone cost $1 million. He added new freeze-proof water troughs and a five-eighths-mile turf track, and he bought new stallions and racehorses, all in the hope that Calumet would regain the glory of its early days.Lundy was in such a hurry to get his projects under way that in 1983 he took out a $13.2 million loan. His bankers could not possibly have been worried about Lundy’s paying it back. The farm was then debt free. What’s more, Lundy soon raised Alydar’s stud fee to $250,000. He also did something never before heard of in the Thoroughbred business: He started selling what he called lifetime breeding rights to the stallion. For $2.5 million, an owner could send one mare to Alydar’s breeding shed each year for as long as Alydar was able to breed.
Lundy’s timing couldn’t have been better. In the early eighties the Bluegrass world was awash in money. Multimillionaire bidders—from Saudi sheiks to Japanese industrial titans and American oil barons such as Dallas’ Nelson Bunker Hunt—attended yearling auctions at Keeneland Park, waving their hands to push the prices higher and higher. And whenever a son or daughter of Alydar was led into the ring, the bidding occasionally topped $2 million—for a single, unproven young horse. In 1983 Alydar was the industry’s champion first-year sire: His offspring sold for an average of $760,000 each, at that time a record for a first crop.
Horse breeders who once rolled their eyes at J. T. Lundy were now slapping him on the back—hoping that he would look favorably on them when it came time to pick the new mares who would get to visit Alydar’s breeding shed. Lundy even found himself the object of adulation by a respected columnist for the industry’s journal, the Blood-Horse, who wrote, “While there has been some criticism of the methods of Lundy in his direction of Calumet, it seems to be based more on envy than fact. Lundy, in my opinion, is doing a great job in rebuilding a grand heritage.”But Lundy didn’t just want to rebuild a heritage. He wanted to create a Thoroughbred empire unlike any other. He too joined the bidding frenzy for new horses—spending between $20 million and $30 million for a half-interest in a stallion named Secreto. He continued renovating the farm, installing a gazebo and a tennis court and a swimming pool (this one for humans). He renovated his office, adding a second-story with a balcony from which he could survey the farm. Although he still wouldn’t buy nice clothes for himself—he continued to wear open-collar shirts, corduroy pants, and Top-Siders to formal events at which every other horseman was dressed in a jacket and tie—he did spend $30,000 a month of Calumet money to lease a private jet, which he didn’t hesitate to use for personal trips. (He once flew a group of friends to Maine for a lobster dinner.) He bought property for himself in the Florida Keys. In one of his most perplexing ventures, he made Calumet a sponsor of the Indy race car of A. J. Foyt, one of Lundy’s longtime heroes.
Suddenly, J. T. Lundy was a jet-setting wheeler-dealer, sitting in the finest boxes at the nation’s finest racetracks, cutting deals with other horse farm owners for horses and breeding rights, and paying himself a reported 10 percent sales commission on every deal he made. Perhaps because Lundy’s wife, Cindy, had realized that she would never be able to compete with her husband’s obsession with the farm, she began spending most of her time in the Virgin Islands, Scotland, and Colorado—which apparently was just fine with Lundy. He soon had a girlfriend, a young woman he had hired to work in the main office at the farm.
To pay for his newest ventures, Lundy took out a $20 million mortgage on the farm and received another $15 million line of credit from a Kentucky bank. Even in 1986, when the horse-racing industry went into a steep economic slump, due in large part to the collapse of the oil market and the restructuring of tax laws that eliminated one of the tax breaks for the purchase of horses, Lundy kept spending. He received an extra $10 million from the Kentucky bank that already had loaned him $15 million. And in 1988, just as the Thoroughbred market was really souring, Lundy got another bank loan for a staggering $50 million. It came from the flagship bank of Houston’s First City Bancorporation, one of the state’s largest bank holding companies, with more than sixty banks and $12 billion in assets.
Kentucky horse breeders who were scrambling to stay afloat were baffled. How did Lundy get a loan from a bank in Texas, where no one knew anything about horse racing? What bank officer did he find to approve that deal?
Actually, it was no ordinary bank officer. The banker behind the Calumet loan was none other than the powerful vice chairman of First City, a big, burly, cannonball of a man named Frank C. Cihak.
According to stories Frank Cihak has told his friends, he was raised in an orphanage on the South Side of Chicago and became an amateur boxer. He must have been a formidable opponent: A Wall Street Journal reporter once wrote that Cihak was built like a Chicago Bears lineman. After college he entered banking, worked his way up the ladder at First Chicago Corporation, and in 1976 took control of a string of smaller banks, where he developed a reputation for his relentless pursuit of profits.In 1988 his old boss, A. Robert Abboud, the freewheeling former chairman at First Chicago, made a deal with the FDIC to take over First City in Houston, which then was on the verge of collapse because of hundreds of millions of dollars of bad real estate and energy loans. (FDIC officials, thrilled someone wanted the bank, agreed to spend nearly $1 billion to bail out First City if Abboud would raise $500 million in new capital.) Abboud asked Cihak, then 45 years old, to go to Texas and be his “right hand.” The two had a lot in common. Like Abboud, who once had been named one of the nation’s “ten toughest bosses” by Fortune magazine, cigar-smoking Cihak was aggressive and abrasive—and he didn’t like to be second-guessed. “His employees knew if they questioned what he was doing, they’d likely get fired,” says an attorney who knew him. “His modus operandi was to call in a loan officer to his office and say, ‘You are going to make the following loan to this guy. I’m vouching for him.'”
Cihak came barreling into Texas. His salary, as vice chairman, was $450,000 a year (he also got a $1 million bonus for taking the job), and most of his expenses were paid for, including an apartment at the Four Seasons Hotel and his dinners and $200 bottles of wine at the pricey Cafe Annie. He hired various consultants, many of them old friends, to work on various bank projects. He also started looking to make very large loans. According to the deal Cihak had made with Abboud, he could authorize a loan of up to $120 million without having to go through a traditional loan committee. And one of the first loans he made, less than four months after First City was recapitalized, was for almost $50 million to Calumet.
When Cihak told the First City loan officers not to check Calumet’s credit reference at the Kentucky bank where it already had a loan, they didn’t consider the demand unusual. First City certainly didn’t want to tip off the bank that it was trying to lure away a big client. But they were perplexed that he told them not to audit the financial statements or appraisals of the farm presented by Lundy and Gary Matthews, Calumet’s chief financial officer. Nevertheless, when the deal was completed, in July 1988, Cihak was treated as a hero by Abboud and the other executives. Texas had just legalized pari-mutuel betting, and First City officials believed the Calumet loan would bring them a host of new horse-racing clients. They even took out an advertisement in the Wall Street Journal trumpeting the bank’s addition of Calumet to its loan portfolio.
But within weeks, First City loan officers received a phone call from Matthews, asking for even more money. The officers couldn’t believe what they were hearing. Matthews was telling them that Calumet was already unable to make its loan payments. Cihak suddenly stepped in, signed off on the larger Calumet loans, and said the farm just needed more time to weather the depressed horse market. Cihak also said he was going to transfer the Calumet loan to Structured Financing, a bank section created by Cihak and headed by one of his handpicked associates.
And that seemed to take care of that. For the next two years, the loan was handled by Cihak himself. As for Calumet, no one could have imagined that it was already veering toward bankruptcy. As 1990 rolled around, the farm had new white fences and more than one hundred Calumet horses at racetracks all over the country. One of the horses, a son of Alydar named Criminal Type, was on his way to winning seven times in eleven starts that year, earning $2.2 million for the farm. Meanwhile, Alydar remained indefatigable in the breeding shed. Lundy had his great stallion serving one hundred mares a year, which meant Alydar went to the shed about two hundred times; it took him an average of two mounts per mare to get her pregnant. A normal stallion goes through only fifty to seventy mares a year. Alydar was known around Kentucky as J. T. Lundy’s ATM, a constant source of cash. The Calumet grooms called him the “cock of the walk.” Ironically, his old rival, Affirmed, was also at Calumet in 1990, leased by the farm to be one of its stallions. When the two chestnut-colored horses were out in their paddocks, they would stare at each another, their manes flicking in the breeze. Occasionally, Affirmed would start running on his side of the fence, and Alydar would take off after him on the other side. Even then, twelve years after their races, they remained competitors.
It was hard to imagine that anything could have shattered such an idyllic scene, certainly not the little piece of news that came out of Houston in October 1990 that one Frank C. Cihak had resigned as vice chairman of the First City Bancorporation. In the 29 months since First City had been restructured, the bank’s pool of bad loans had grown from nothing to $433 million. According to stories in the Houston newspapers, the bad loans had been generated by Cihak. Although he was being given a graceful exit—the bank would continue to pay him $450,000 a year as a consultant—other officers would be taking control of the loans he had made.
But Cihak’s resignation was to have immediate and catastrophic effects on Calumet. Lundy and Matthews were contacted by a First City vice president who told them their loan was being restructured. The time had come for Calumet to pay, he said. If Calumet didn’t come up with $15 million by February 28, 1991, then First City would foreclose, taking all the farm’s horses and assets.
That conversation took place on October 25, 1990. Less than three weeks later, Alydar was dead.
Julia Hyman Tomala missed the news that Alydar was dead. She also missed the news, eight months later, that Calumet Farm was declaring bankruptcy and that its president, J. T. Lundy had resigned. She was then thirty, consumed with her career as a white-collar-crime prosecutor for the U.S. attorney’s office in Tampa, Florida, where she had been born and raised. In late 1991 she moved to the U.S. attorney’s office in Houston, which desperately needed prosecutors to deal with numerous criminal allegations that were flooding into the office regarding the huge number of Texas bank failures. For her, Texas was where the action was: From 1986 through 1992, 485 banks and 238 savings and loans in Texas went under, including First City Bancorporation. And the first case she was handed concerned the activities of the infamous Frank Cihak. Tomala began investigating the transactions between Cihak and his cronies whom he had hired as bank “consultants.” Within months, she had bank documents not only piled up on her desk but also stacked in the hallway outside her office. “What’s required in this kind of work is a tenacity to follow very complex paper trails,” says Jim Powers, a chief prosecutor at the U.S. attorney’s Houston office who initially supervised her First City work. “And Julia was about as tenacious as they come.”
Tomala discovered that Cihak had set up a complex scheme to steer more than $4 million in First City loans and fees to his consultants, who then gave Cihak part of the money as kickbacks. At Cihak’s 1993 trial she told the jury that he had come down to Texas to use First City as his “personal piggy bank,” which in turn helped lead to First City’s own failure, putting thousands of people out of work. Although the once-swaggering Cihak, wearing a gray suit, royal blue tie, and unlaced white athletic shoes, offered a rambling courtroom plea for leniency, even mentioning that he had made a halfhearted suicide attempt, an unsympathetic federal judge sentenced him to prison for twelve years and seven months. Tomala immediately went back to work investigating Cihak, and in 1995, she had him indicted again for another series of multimillion-dollar kickback schemes with other “consultants.” This time, he got a 22-year sentence. Cihak was probably going to prison for the rest of his life.
Still, Tomala wasn’t finished. After Cihak’s second trial, she decided to find out why Cihak, a racehorse investor himself and a Kentucky Derby fan, had been so determined to get the bank into the equine-lending business. She knew that a few months after the First City loan to Calumet was funded, Cihak had received a personal $1.1 million loan from a Kentucky entity called Equine Capital Corporation (ECC). Curious, she started retracing the money coming in and out of the ECC and learned that the money had not come from the ECC at all. Through a series of convoluted check-kiting maneuvers, Lundy and Gary Matthews had provided the $1.1 million to the ECC, which was run by Lundy associates, and the ECC had then passed on the money to Cihak, which he wasn’t asked to repay. Cihak then used that money to lease two Calumet mares and pay for them to get into the breeding shed with Alydar. He also had arranged a deal with Lundy to buy one-time breeding rights to another Calumet stallion, Secreto, which were worth $125,000 on the open market, for a mere $1.
In return for access to Calumet’s best horses—and the possibility of getting a foal of his own that might someday be a successful racehorse—Cihak agreed to become J. T. Lundy’s financial patron, pushing through the $50 million loan at First City and then protecting Lundy when loan officers became anxious about Calumet’s financial condition. To Cihak, it must not have seemed like a particularly perilous deal. He no doubt assumed, as everyone else did in the horse business, that Alydar’s stud fees would generate the money necessary to pay back any bank loan. Calumet itself had drawn up a document showing that Alydar’s “stud fee revenue potential” could be nearly $25 million a year.
Actually, it was journalist Carol Flake who first learned that Alydar’s earnings were not even close to what Lundy suggested they were. After poring over Jockey Club records, she discovered that Alydar was often performing on mares for free. Either the mares’ owners had already paid for the trips to the breeding shed years earlier through one of the lifetime breeding rights that Lundy had been selling, or they had received free breeding rights from Lundy in exchange for something Lundy wanted. To pay for a stallion, for instance, Lundy offered that stallion’s owner a series of visits to Alydar’s breeding shed. In other instances, Lundy simply gave his closest buddies free passes to Alydar. By 1990 the free passes to Alydar were outnumbering the ones that were paid for with stud fees.
In her 1992 Connoisseur story, Flake hinted that Alydar’s death might not have been accidental. After learning that the farm’s insurance policies on Alydar totaled $36.5 million, making him the most heavily insured horse in history, she went so far as to suggest that Alydar might have been worth more dead than alive. Yet no law enforcement official had shown any interest in pursuing the issue—until Tomala began flipping through records about Calumet in 1996.
What she realized was that Lundy had to have been frantic in the months before Alydar’s death. There was no way he was going to be able to come up with that $15 million payment to First City by February 1991. An accountant who had studied Calumet’s records told Tomala that the farm was then losing almost $1 million a month. Lundy was unable to find new bankers to loan him money, and he was equally unsuccessful in persuading investors from as far away as Japan to purchase a minor interest in Calumet. What’s more, Lundy couldn’t get any more income out of Alydar, who was already being bred so often that, according to one veterinarian, the muscles of his hind end were constantly sore. And Lundy suffered another blow in 1990 when his best horse that year, Criminal Type, who was favored to win the Breeders’ Cup, the most lucrative purse in horse racing, was injured just before the race, depriving a clearly distraught Lundy of the chance to receive millions.
Tomala also verified that Lundy had a big problem with the insurance companies that held multimillion dollar “equine mortality” policies on Alydar. In 1990 they were threatening to cancel those policies because of Calumet’s slowness in paying its premiums. Lundy had been forced to send Matthews and his own sister, who handled the insurance on Calumet’s horses, to London to beg exasperated Lloyd’s representatives to give them one more chance—which they did. But the head of another equine insurance company, Golden Eagle Insurance out of California, told Lundy’s sister in the early fall of 1990 that he had reached the end of his patience with Calumet’s delinquent payments. He said the company’s policy on Alydar would not be renewed when it expired in December.
Tomala realized that if there was a perfect time for Alydar to die, it was precisely in November 1990, just after Frank Cihak’s resignation and just before one of Alydar’s insurance policies expired. She looked at another record. Calumet had indeed used Alydar’s insurance proceeds to make its payment to First City Bancorporation and staved off foreclosure for a few more months.
For Tomala, there was only one person who could have had Alydar killed: J. T. Lundy. And she was determined to prove it.
The question was, how could anyone prove, seven years after the fact, that a racehorse had been murdered? Tomala had no experience investigating murders. Neither did Rob Foster, the young FBI agent assigned to work with her. Yet here they were in Kentucky, and it didn’t take them long to understand that they were not welcome. Few people wanted to speak to them. Those who did said that Lundy couldn’t possibly be a horse killer. They pointed out that on the night of Alydar’s injury, November 13, 1990, Lundy got on the phone and begged the best veterinary orthopedic surgeon in Kentucky, Larry Bramlage, to try to save Alydar’s life.
One of the first people Tomala and Foster interviewed was Tom Dixon, a mild-mannered, churchgoing Lexington insurance adjuster who had been hired by Lloyd’s of London to handle its equine claims. Dixon was one of the first non-Calumet employees to arrive the night Alydar was injured, and according to the notes he took, it was Lundy who told him that Alydar was known to kick his stall violently and that he had no doubt broken his leg kicking the stall. Dixon had taken some photos and had conducted a few interviews, including one with the night watchman, Alton Stone, a muscular farmworker with shaggy blond hair. Sitting in on that interview was one of Lundy’s assistants, Susan McGee, who occasionally interrupted Stone to explain to Dixon what Stone meant to say. Dixon asked few follow-up questions of Stone or anyone else. He was a sympathetic man who felt bad for what had happened to the horse. He quickly filed a report saying the death was accidental, and he had Lloyd’s of London’s money to Calumet within thirty days. “The fastest payoff in history,” he later said proudly.
There was another Lexington insurance adjuster who had tried to get into the farm the night of the injury, but he was prevented from getting past the front gates by a security guard, who said he was not allowed to let anyone in. When Terry McVey, representing Golden Eagle (the company that was not renewing its coverage of Alydar), was finally allowed in the stallion barn the next afternoon, he was amazed to find that Alydar’s stall had been mopped and swept and that the heavy roller outside the door, the one that supposedly had been knocked loose from Alydar’s kicks, had already been repaired and rebolted to the floor.
Why, he wanted to know, would Calumet employees so quickly clean up the evidence that suggested how Alydar had died? And why, if Alydar had been such a kicker as Lundy had said, were there no marks on the stall door consistent with heavy kicking? All horse farms would regularly add padding to the stalls of horses that kicked. Surely if the prized Alydar had been a kicker, Lundy would have had pads on Alydar’s walls for his own protection.
Yet in the end, Golden Eagle officials decided not to challenge the circumstances regarding Alydar’s death, and they too paid off the claim. “It was as if those who made a living off the big horse farms—like the insurance adjusters and the veterinarians—realized it was not in their best interests to rock the boat,” Tomala says now. “Why risk losing any future business by asking too many questions?” Even breeders from competing farms were hesitant to talk about an event they knew could make the entire industry look bad. “There was this fear that a scandal about Alydar would deeply hurt the public’s perception of horse racing,” says Tomala. “So people started circling the wagons.”
The veterinarians who had examined Alydar said they were firmly convinced that his injury was accidental: The horse had kicked the door, and the busted roller was proof. The roller was contained in a heavy metal bracket, about six inches long, that was bolted to the floor just outside Alydar’s sliding stall door. The roller kept the stall door on its track. Because Alydar’s fracture was the “torquing” type that happens when a horse twists its leg, the veterinarians theorized that when he knocked the roller loose with his kick, the stall door moved outward, thus opening a gap between the dislodged door and the wall of the stall. Alydar must have caught his leg in that gap, and in his struggle to get free, twisted his leg until it broke.
When Tomala and Foster asked to see an x-ray of Alydar’s fracture, Lynda Rhodes Stewart, a former veterinarian at Calumet, told them it had mysteriously disappeared from her files less than a year after Alydar’s death. They asked her if she remembered anything else about that night that seemed unusual. Well, she said, when Alton Stone had called her to say that something was wrong with Alydar, he had never indicated that Alydar’s condition was serious. He told her only to come up when she had a chance.
On June 4, 1997, when Foster and Tomala finally tracked down Stone at a construction site where he was working, he nervously recounted for them the same story he had told insurance adjuster Tom Dixon. He said the regular night watchman, Harold “Cowboy” Kipp, had asked him to work for him that evening so he could have a night off. Between eight-thirty and nine-thirty in the evening, Stone said, he was sitting on a turned-over, five-gallon bucket in an office of the stallion barn, talking to a security guard whose job it was to drive the perimeter of the farm. Around nine-thirty, they drove over to the canteen to buy some sodas and returned ten to fifteen minutes later. Stone went back inside the stallion barn while the security guard returned to his rounds. It was then that he saw Alydar.
To verify Stone’s story, Foster interviewed the security guard, Keed Highley, who told him he had never been interviewed by anyone about Alydar’s death. Foster was stunned when Highley told him that he had not sat in that office with Stone but that he had stopped by the stallion barn at about ten to call his wife from a telephone there. When he approached the barn, he said, he saw Stone leaving. Highley noticed that the lights were on in the farm office—Lundy’s office—which was attached to the barn. As he spoke to his wife on the phone, Highley heard the stallion whinny. He investigated, saw the horse’s leg dangling, and then radioed Stone to call a veterinarian. For the first time, Foster realized there was a cover-up going on. It was Highley, not Stone, who had found Alydar.
Foster also found the original night watchman, Cowboy Kipp. Kipp’s primary job was to take care of the stallions, specifically Alydar, and he had rarely missed a night of work since starting at the farm. He loved his job so much that he wouldn’t even take vacations. In fact, when Foster found him, Kipp was still working as a night watchman at Calumet. (After filing for bankruptcy, the farm had been sold at auction for a mere $17 million to a Polish born investor named Henryk deKwiat- kowski, who lived there only part-time and who maintained a skeletal staff.)
Once again, no one—no insurance adjuster or reporter—had talked to Kipp. If they had, they would have been told a chilling story. About five days before Alydar’s injury, Kipp said, he was at work on the farm when a dark blue Ford Crown Victoria with tinted windows drove up. A large man got out of the car. Kipp said he had seen the man in the main office a couple of times, but he didn’t know his name or what he did for Calumet. The man told Kipp that the farm’s management was worried he was getting burned out. Kipp needed to take a day off. “How about Tuesday, November 13?” the man said. Although Kipp didn’t think he needed a break, he was the kind of employee who followed orders and didn’t cause trouble. He did take that evening off, but he insisted to Foster that he never asked Stone to substitute for him.
Throughout 1997, Tomala had several of the witnesses—including Alton Stone, Keed Highley, and Cowboy Kipp—flown separately to Houston to tell their stories to a federal grand jury that had been secretly convened just to hear evidence about Alydar. In January 1998 that grand jury indicted Stone for perjury for telling numerous false stories to federal agents and to the grand jury itself. Obviously Tomala’s strategy was to squeeze Stone (few people are indicted for perjury in federal court) to see if he would reveal what else he knew. Stone’s court-appointed defense attorney said Tomala had become obsessed with conspiracy theories about Alydar’s death. It was a charge Tomala could not deny. In a trial brief, she said that Stone was part of a plot to harm the horse.
As for Lundy, he had kept a low profile since his resignation from Calumet, staying mostly in Florida, where he was training horses at a small farm. Although he had declared personal bankruptcy in 1992, few people imagined he was really broke. An accountant who had studied the Calumet books said Lundy had paid himself nearly $6 million during his tenure. He did show up at a Lexington lawyer’s office for a deposition regarding his bankruptcy. He took the Fifth Amendment more than two hundred times while fidgeting, rubbing his eyes, and chewing on his fingernails. Irritated, an attorney asked Lundy if he would just tell him the color of the shirt he was wearing. “I think it’s red,” Lundy said after consulting with his attorney.
Lundy had been subpoenaed by the defense to testify at Alton Stone’s perjury trial, but U.S. marshals couldn’t find him. Still, he was hardly ingnored during the trial. Outside the presence of the jury, Marsha Matthews, who was married to Lundy’s chief financial officer at the time of the horse’s death, took the stand to say that she had overheard Lundy say during a conversation at the Matthewses’ home about Calumet’s deep debts, “There are ways to get rid of the horse.” The judge ruled the testimony was inadmissible. But he did allow writer Carol Flake to testify that Alton Stone, whom she went to see again in 1992 after her magazine story was completed, suddenly had become very emotional in her presence and blurted out that J. T. Lundy “knew something was going to happen to Alydar.”
Yet Tomala didn’t get what she really wanted from that trial. Stone didn’t cooperate with her, and he didn’t testify. He decided to take his lumps, which weren’t that bad: He received only five months in prison and five months of home confinement.
By 1999, it seemed, Tomala’s investigation had run out of gas. After more than two years of interrogations and grand jury hearings, she hadn’t been able to prove Alydar had been murdered. She had been able to prove only that Alton Stone couldn’t keep his stories straight.
But she still had one more card to play.
In March 1999 Tomala persuaded a Houston federal grand jury to indict Lundy, who was finally found in Florida, and Gary Matthews, who was working as a lawyer in Lexington since his resignation from Calumet, on charges of bank fraud, conspiracy, bribery, and lying about the $1.1 million bribe they had offered to Frank Cihak. When the trial finally got under way, in February 2000, the most interesting case for Lundy’s innocence was made by Dan Cogdell, one of Houston’s most colorful defense attorneys. During his closing argument, he told Lundy, who was sucking on candy, to stand up and face the jury. Cogdell then asked jurors if they thought this man looked smart enough to pull off a massive fraud. The jurors did. They took less than three hours to find Lundy and Matthews guilty. The story was barely covered by the press. By then the financial shenanigans involving Cihak, Calumet, and Lundy were old news. At Lundy’s sentencing this past October, only a handful of spectators were in the courtroom gallery. But Tomala suddenly called FBI agent Foster to the stand to recount the questions and suspicious stories regarding Alydar’s death. Then she called a surprise witness: a tall, silver-haired man with a deep Bostonian accent.
His name was George Pratt, and he was a full professor of electrical engineering and computer science at the Massachusetts Institute of Technology. He also was an avid horseman and the chairman of the National Association of Thoroughbred Owners Racetrack Safety Committee. Pratt testified that he had been contacted by Foster about a year earlier asking if he would analyze some evidence. Soon, a large box arrived at Pratt’s cluttered MIT office. Inside was a section of concrete, about one square foot in size. It was a piece of the floor that had been cut out from the front of Alydar’s stall.
Foster and Tomala had always been bothered by the busted roller story. There had been two bolts that had connected the roller to the floor, which a Calumet maintenance supervisor had told Foster were broken in half from the force of the kick. The supervisor said he threw the top half of the bolts away, then he had simply moved the roller over from its original location, drilled new holes in the floor and installed new bolts. He told Foster that the bottom portions of the broken bolts were still embedded in the floor.
Foster noticed later that Tom Dixon, the insurance adjuster, had taken a photo of that roller while it was still lying on the floor. Clearly visible in the photo were the top halves of the bolts. It occurred to Foster that the upper part of the bolts should match the bottom part of the bolts. If they didn’t, then there was finally physical evidence that the bracket had been removed before Alydar’s accident, with the intention that it later be found to serve as an explanation of how Alydar broke his leg. With other agents, Foster cut out the section of the floor that included the original bolts, and he sent it to Pratt along with Dixon’s enlarged photograph.
Almost immediately, Pratt noticed that the bottom half of the bolts were cut off evenly at the same height, while one of the top bolts was a little long and the other a little short. Then he noticed that the top parts of the bolts in the photograph were rusty and heavily corroded, while the bottom parts of the bolts had little or no corrosion. There was no way the upper and bottom halves of those bolts matched. He also noticed that if the concrete block was put back in its proper place in the floor, the shear on the bottom part of the bolts was parallel not perpendicular to the stall door—which meant the force applied to them had to have come from somewhere outside the stall, not from inside.
Then Pratt flew to Calumet, studied the stall, took measurements, and went back to MIT to devise an equation to determine how much force would be required from a horse to kick that roller off its hinges. He determined that 6,600 pounds of force would have to hit the stall door exactly three feet off the floor. The strongest stallion, Pratt concluded, could generate only 1,000 to 2,000 pounds with a kick.
Alydar, Pratt said in his Houston testimony, had to have been killed. He speculated that someone had tied the end of a rope around Alydar’s leg and attached the other end of the rope to a truck that could easily have been driven into the stallion barn. The truck then took off, pulling Alydar’s leg from underneath him until it snapped.
There was a long, long silence when Pratt finished. At the defense table, Lundy, who was wearing a poor-fitting sports coat, a thin tie, and soft brown walking shoes, kept his head down, writing on a notepad. From the government’s table, Tomala, in her black Prada pantsuit, gave Lundy a lingering look, her eyes squinting in disgust. She had presented the evidence hoping the federal judge would tack a much larger sentence to Lundy’s bribery conviction. In her summation, she said that only Lundy had “the motive and opportunity” to have the horse killed. He wanted the horse dead, she said, to collect the insurance windfall to forestall First City’s takeover of the farm. And his false statements to the insurance adjusters, as well as the lies told by Stone, only confirmed that Lundy was responsible for the injury. “To believe otherwise, one would have to accept a string of coincidences that defy common sense,” she declared.
There were still many unanswered questions. If Lundy had wanted Alydar dead, then wouldn’t he have made sure the horse was killed that first night? And didn’t the fact that Lundy was apparently so distraught throughout that night, begging doctors to operate on the horse, suggest that Lundy wanted Alydar to live? Tomala later said, “What was he supposed to do at that point—cheer?” It could also be assumed that Lundy had to have known from the extent of that first injury that it was unlikely Alydar would survive. Thus, he could pretend to be distraught to mislead others.
Still, the death of Alydar didn’t accomplish anything for him in the long run. Calumet still went under. Lundy still lost his job. Yet as Gary Matthews himself says, Lundy had to have been terrified of going down in racehorse history as the man who ruined Calumet. “I can’t imagine him doing something so drastic as to kill his best horse,” Matthews told me after his trial. “J.T. loved animals. But he was in a desperate situation. I remember we discussed that if the First City debt was cut in half, the Japanese would be far more interested in investing. Maybe he thought this was the thing to do. I just don’t know.”
The federal judge overseeing the case eventually decided he didn’t know either. He said he wasn’t comfortable about a whole new criminal case being introduced at a sentencing hearing, and in his final ruling he said, “Although there is evidence Mr. Lundy had the motive and opportunity to injure Alydar, and although there is some physical evidence, I am not able to conclude by the preponderance of the evidence that Mr. Lundy is responsible for the death of Alydar.” The judge sentenced Lundy to four years in prison for the bribery; Matthews received 21 months.
For more than an hour after the hearing, Tomala and Foster hung around the courtroom, packing up their exhibits and their files filled with a decade’s worth of notes about Alydar’s death. Although they hadn’t won, they said they felt some satisfaction in getting their allegations into open court so that everyone would know that Alydar’s death was no accident. I asked Tomala if she felt a sense of sadness that her long obsession with Alydar had come to an end. The statute of limitations on an insurance fraud case is ten years, which would make it unlikely that she’d ever be able to bring charges again regarding the horse’s demise.
Tomala gave me a confident smile. “Actually, there are ways to expand that statute and keep the case going for a little longer,” she said. “Somehow, someday, the whole truth is going to come out.”
Meanwhile, Lundy, who had been given a few months to get his affairs in order before reporting to prison, headed out of the federal courthouse, saying he needed to get back to Florida to take care of horses and visit his sick mother. I saw him standing at the curb, his hands in his pockets, his shoulders hunched. For a moment I thought about the young Lundy from the sixties, the rambunctious, hot rod-driving son of a tenant farmer, dreaming of the day he would run Calumet. Nearly forty years later, the dream had turned his life into a shambles. “That Tomala knows she’s full of bull—,” he said. “All she wants to do is get her name in the paper.”
“You didn’t have anything to do with that horse’s death?” I asked him.
Lundy looked at me, his face turning red. I realized it was the first time he publicly was going to answer a question about his alleged involvement. “Hell, no,” he said. “I loved that horse. Loved him.” He paused and shook his head, as if he couldn’t believe he would be living for the rest of his life with the reputation as Alydar’s killer. “I tell you, I’d give anything if Alydar was still at Calumet, heading off to his breeding shed,” Lundy said. And then he jumped into a cab, and he was gone.