Ousted by Reagan's Son, Entrepreneur Says
LOS ANGELES (CN) - President Ronald Reagan's adopted son shut out the person who made it possible for people to have email addresses named for the Gipper, a California businessman claims in court.
Elias Chavando says he conceived the idea for an @Reagan.com email service in October 2006, pitching it to Michael Reagan and Reagan's longtime business partner and friend Tim Kelly.
Reagan and Kelly allegedly balked at Chavando's estimate that the venture would require $35,000 to $50,000 in capital, but Chavando says they came around when he reduced that figure to $6,000.
Chavando, Reagan and Kelly entered a three-way equal partnership for the service in early 2010, each putting up $2,000 each in capital, according to Chavando's complaint in Superior Court.
With the email service attracting subscribers and turning profits, Chavando says he requested funds for a software upgrade in August 2011. But Kelly allegedly told Chavando that the business had no money, and then "became very upset" when Chavando asked to look at the books.
Kelly later refused another request for partnership funds for a system upgrade so subscribers could use their Android devices, according to the complaint.
Chavando says the service generated $150,000 in revenue, but Kelly showed him a breakdown that left nearly $46,000 in net income after expenses. A third of that amount went to Chavando, according to the complaint.
"In October 2011, without Chavando's authorization or agreement, Reagan and Kelly breached their partnership agreement and violated their fiduciary duties to Chavando when they unilaterally gave, transferred, or sold a 25 percent ownership interest in the @Reagan.com partnership asset to [nonparty] Jay Hoffman," the 21-page complaint states. "Reagan and Kelly took the position that Chavando's ownership interest in @Reagan.com was reduced to 25 percent from 33.33 percent. If Reagan and Kelly received or obtained consideration from Hoffman for this transfer, neither Reagan nor Kelly disclosed that material fact to Chavando, nor did Reagan or Kelly distribute any of this consideration to Chavando representing his ownership and equity share of the partnership asset."
Chavando says that Kelly and Reagan then formed a new business in Illinois with another Chicago-based businessman, nonparty Tony Saliba, naming it Reagan.com LLC, and transferring the @Reagan.com business over to the new entity.
"This transfer completely divested Chavando of his entire ownership interest in @Reagan.com," the complaint states.
Chavando says Reagan and Kelly's lawyers tried to pressure him into a settlement, but that he refused.
Michael Reagan, 67, is the only adopted child of the 40th president and the actress Jane Wyman. There were also two biological children in that marriage, and another two during marriage to actress Nancy Davis.
Michael Reagan previously hosted the radio show "The Michael Reagan Talk Show," and also worked as a Republican strategist.
Chavando alleges fraud, conspiracy to commit fraud, conversion, breach of partnership agreement, breach of fiduciary duty, promissory estoppel and unjust enrichment.
He seeks an accounting, punitive damages and the return of his stake in the Reagan.com email service.
Chavando is represented by Mark Chassman with Chassman & Seelig of Santa Monica, Calif.
Neither Reagan nor Kelly immediately responded to emailed requests for comment through Reagan.com.