Family feud lawsuit depicts lavish spending by family that owns Baltimore's Pimlico

One recent Preakness a water problem rendered multiple bathrooms unusable. When it rains, the Pimlico infield turns into a bog and the grandstand roof sprouts leaks. Everything from falling ceiling tiles to the lack of luxury suites speaks to the 148-year-old horse track’s deterioration — and, state officials say, the need for a $300 million renovation.

But if The Stronach Group that owns Pimlico has been reluctant to drop that kind of money on the aging track, a lawsuit filed this month in Canada offers a look at how freely its principals allegedly spend elsewhere.

The suit, filed by Canadian billionaire Frank Stronach against his daughter, Belinda Stronach, revealed an explosive power struggle and spending dispute between the 86-year old patriarch and his 52-year-old heir apparent. Since the lawsuit was filed Oct. 1 in Ontario Superior Court of Justice, racing insiders have expressed concerns about its possible impact on the company, North America’s largest owner and operator of tracks — including Pimlico Race Course and Laurel Park in Maryland.

The family feud comes at a critical time for Maryland racing, with The Stronach Group investing heavily in Laurel and indicating it wants to move the Preakness there, and the Maryland Stadium Authority expected to release a report next month on what needs to be done to keep Pimlico viable. All of which, said longtime marketing consultant Bob Leffler, highlights the role horse racing — particularly Preakness — plays in the state’s professional sports portfolio.

“This is a treasured franchise,” Leffler said, “and it has to be taken care of.”

At the heart of the 73-page suit is Frank Stronach’s complaint that his daughter mismanaged the company and various family trusts and undermined his authority. He is seeking to remove her from positions of authority and hundreds of millions of dollars in damages from her and a former CEO, Alon Ossip.

Belinda Stronach and Ossip have both issued statements denying the allegations.

In the suit, Frank Stronach said his daughter “wrongly appropriated both personally and for her children well in excess of $70 million [in Canadian dollars] from The Stronach Group … for purposes of maintaining her extravagant lifestyle.

“Belinda routinely submitted hundreds of thousands of dollars in personal expenses to members of management of The Stronach Group for reimbursement as business expenses,” according to the lawsuit. “Such personal expenses included, for example, expenses associated with parties, vacations for Belinda and her children, limousine rides and expensive meals, none of which related to legitimate business expenses.”

The suit offers “one particularly egregious” example of her allegedly free-spending ways: the purchase and refurbishment of an office in an upscale Toronto neighborhood for “more than $10 million [in Canadian dollars] at a time when The Stronach Group is suffering from liquidity issues.”

Belinda Stronach also hired “her friends and acquaintances to occupy positions of authority in The Stronach Group that they are unqualified to fulfill. These employees have been paid grossly inflated salaries.”

The suit suggests the daughter had concerns of her own about her father’s spending.

She developed what the suit called “unfounded concerns” about the $300 million he spent to develop a farm of grass-fed, hormone-free, open-pasture animals, as well as a nearby golf course and country club. Despite the farm’s lucrative potential — Frank Stronach said the demand for grass-fed beef is expected to double in the next several years — the suit accused her of undermining the development.

“Regrettably, Belinda and Alon became unfairly and improvidently dismissive of Frank’s vision for Adena Farms and Adena Golf,” his lawsuit said.

Leases were canceled, employees laid off and funds cut off, the suit said, and then this summer, over her father’s objections, Belinda Stronach abruptly closed the golf club and it was listed for sale at “a steep discount.”

The suit also offers something of an origin story for Frank Stronach, whom the publication Canadian Business currently ranks as that nation’s 31st-richest person. It details how Stronach left Austria for Canada in 1954 as a 21-year-old “struggling tool and die maker,” and founded a shop in Toronto that eventually became Magna International, now the world’s third largest automotive parts supplier.

Stronach bought his first thoroughbred in 1962 and eventually began buying racetracks and developed a breeding operation. The Stronach Group was created as “a complex network” of family corporations, trusts and holding entities, with horse racing and wagering generating nearly all of its revenues and profits, the suit said. The group’s website lists Frank Stronach as founder and honorary chairman and Belinda Stronach as chairman and president.

In addition to their shared business interests, the father and daughter shared political ambitions.

In 2004, the suit notes, Belinda Stronach left Magna, where she had been president and CEO, and launched an unsuccessful bid to lead the federal Conservative Party of Canada. Although she lost, she was elected as a Conservative member of the Parliament of Canada later that year. She switched to the Liberal side a year later before returning to the family business in 2007.

Frank Stronach realized his political aspirations in his native Austria, where he founded the populist party Team Stronach in late 2012. The following year, the party won 11 seats in the Austrian National Parliament, one of which he held.

But he, too, had an abbreviated political career: In January 2014, the suit said, he gave up the seat “to devote his time, efforts and attention to the business and affairs of The Stronach Group, including its burgeoning agricultural business.”

Soon after his return to Canada, trouble ensued. He learned The Stronach Group “was facing serious liquidity issues,” according to the suit, which accuses Belinda Stronach and Ossip of neglecting the business, self-dealing and concealing cash flow problems.

“Belinda and Alon were confrontational, disrespectful and insubordinate,” the suit said. “Alon threatened to fire employees of The Stronach Group who took instructions from or even spoke to Frank. Alon belittled and embarrassed Frank, and did so with the blessing and encouragement of Belinda.”

They made clear “that they intended to exert complete control over the organization, and to eliminate Frank’s role in the family enterprise that he had created and funded,” the suit said.

As a result, the suit said, there is “a complete breakdown” between Belinda Stronach and her parents, Frank and Elfriede Stronach.

The suit’s depictions of the father and daughter might seem familiar to some in Maryland.

Increasingly Belinda Stronach has become the company’s face at high-profile racing events in Maryland; she is expected to attend the Jim McKay Maryland Million at Laurel Park on Saturday. At the Preakness, a former interior designer for Ralph Lauren helped give her party tent an expensive, private clublike feel — something one observer said has been extended to spaces at Laurel Park as well.

Meanwhile, her father’s interest in agriculture apparently extends even to Pimlico despite its urban Northwest Baltimore location. He told The Baltimore Sun in June that he would like to see part of Pimlico redeveloped into an urban farm, creating jobs for residents and growing organic produce for the city. On the question of whether the Preakness would stay at Pimlico, he said it could, but only if redevelopment of the aging racecourse — the nation’s second oldest track, after Saratoga — was part of a broader attempt to reduce poverty in Baltimore.

The Maryland Stadium Authority is expected to release the second phase of its Pimilco study next month, and reportedly will examine nonracing uses of the facility, the benefits of renovation versus a complete rebuild and the surrounding neighborhood.

Last year, the authority said it would cost $250 million to $320 million to rehabilitate Pimlico so it remains a suitable home for the Triple Crown race.

Who will pay for that, however, remains a question.

The answer generally has been a public-private partnership of some sort, although there are complications on both sides of that.

Cash-strapped Baltimore has multiple needs from education to infrastructure that might seem to take priority over keeping the Preakness in Baltimore.

The state, meanwhile, channels millions of dollars to horse racing every year from slots revenues — in fiscal 2017, $54.6 million for increased purses and $8.4 million for track renewal.

“That is a significant public investment in the racing industry,” said Maryland Del. Sandy Rosenberg, whose district includes the Pimlico neighborhood. “We need to also have the private investment in the facility.”

But The Stronach Group clearly sees Laurel Park rather than Pimlico as its future in Maryland, given its proximity to Washington, and it has invested tens of millions of dollars in barns, luxury seating and landscaping there.

“Right now, the momentum is with Laurel,” Leffler said. “It makes sense because of where it is.” ​​​​​

jean.marbella@baltsun.com

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