Calumet Says It Is Bankrupt : Horse racing: Historic farm has had eight Kentucky Derby winners. It joins others as victims of a troubled business.

Last February, J.T. Lundy, the president of Calumet Farm, was in San Francisco, receiving 1990 Eclipse Awards for being the best breeder and for Criminal Type, the horse of the year.

Two months later, Lundy resigned as president, and Thursday, after a succession of stories in the racing trade press about clients suing Calumet, the historic farm filed two Chapter 11 bankruptcy petitions in Lexington, Ky., listing debts of about $135 million.

John Ward, who replaced Lundy as president of Calumet, said that the 869-acre farm is for sale and added: “We needed protection from the courts so that we could go on and do business.”

A Kentucky judge gave Calumet permission to borrow $350,000 in operating funds from a Texas bank, using four horses as collateral.

Calumet, with its devil’s-red-and-blue silks showing up in winner’s circles across the country, won the Kentucky Derby eight times, starting with Whirlaway in 1941. The farm dominated racing for about 20 years, also winning the Derby with Pensive, Citation, Ponder, Hill Gail, Iron Liege, Tim Tam and Forward Pass. Whirlaway and Citation added victories in the Preakness and Belmont Stakes, sweeping the Triple Crown.

Calumet also bred Strike The Gold, this year’s Derby winner, but he was a sign of the farm’s decline, having been sold to three New Yorkers the year before in a seven-horse package for $3 million.

In recent years, Calumet could no longer afford the luxury of just racing its horses.

Since 1986, Calumet took mortgages on the farm totaling $65 million, and in recent months creditors filed suit asking for payment of $27 million in debts.

“We had no cash to operate,” Ward said Thursday.

In effect, when Alydar died, Calumet started to go with him. Destroyed after suffering an inoperable stall injury in November, 15-year-old Alydar was Calumet’s premier stallion. He sired Alysheba, the 1987 Kentucky Derby winner, plus Criminal Type, Strike The Gold and at least 43 other stakes winners.

Lundy was able to hold off some of Calumet’s creditors by offering breeding considerations with Alydar, who was being mated to as many as 70 mares a year, far above a stallion’s average.

In 1968, Forward Pass gave Calumet its last Kentucky Derby victory, although the farm didn’t collect the purse until several years later, because Peter Fuller, owner of Dancer’s Image, the first-place finisher, appealed a positive drug test that disqualified his horse.

With its flagship trainer, Ben Jones, dead and his son, Jimmy, retired, Calumet Farms was unable to adjust to a changing game. The days were gone when a farm could survive by just breeding and racing its horses. Calumet made a small comeback 10 years ago when it hired John Veitch as trainer, but the farm was still not making money. Debt increased in the 1980s when Calumet paid boxcar prices to obtain premium stallions such as Epsom Derby winner Secreto.

The commercial bloodstock market bottomed out, with European and Arabian buyers backing off. Criminal Type was Calumet’s first champion in nine years.

There also was friction within the family about the way the farm was run. Bertha Wright, Calumet’s largest shareholder and Lundy’s mother-in-law, stood at her table toward the end of the Eclipse dinner in February and shouted at Lundy as he accepted Criminal Type’s trophies.

Lundy could not be reached for comment Thursday.

Warren Wright Sr., heir to the Calumet Baking Powder Co. fortune, inherited the farm in 1931. Wright’s widow, Lucille, inherited the farm and an estate that totaled $12 million. Lucille Wright later married Gene Markey, a Hollywood producer and screenwriter who had been married to Joan Bennett, Hedy Lamarr and Myrna Loy.

The Markeys did not pay that much attention to their horses, and when Lucille died in 1982, she left her entire estate--other than the farm--to medical research, an amount estimated at $460 million.

A minority interest in the farm was left to Warren Wright Sr.’s grandchildren, with a majority being placed in a trust that named Bertha Wright as the lifetime beneficiary.

Finding a buyer for Calumet could be difficult. It is being added to a long list of Kentucky farms on the market at a time when the thoroughbred breeding business is struggling.

Lewis Burrell Sr., who with his son, rap star M.C. Hammer, and other family members have spent millions of dollars this year on bloodstock, is interested in buying a farm, but he said this week that Calumet is too expensive and he would have concerns about its legal entanglements.

There was a report in Kentucky this week that William Allen, Terry Beall and Ron Volkman, who raced Wild Again, the 1984 Breeders’ Cup Classic winner who has been standing at Calumet, might be interested in buying the farm. Attempts to reach them Thursday were unsuccessful.

Meantime, a judge said Thursday that he will allow Calumet to go ahead with plans to sell nine yearlings at Keeneland’s major sale next week. It is too late for them to do Calumet any substantial good.