Dinesh D'Souza's Laundry Aired in Lawsuit
SAN DIEGO (CN) - Right-wing pundit Dinesh D'Souza is trying to wrest control of the company that produced the film "2016: Obama's America," and drained money from it to fight allegations that he had an affair with a college student, a producer claims in court.
Sain Communications sued D'Souza and Obama's America Foundation, which produced D'Souza's film about Obama, in Superior Court.
On Oct. 17, D'Souza resigned from his post as president of The Kings College, in New York City, after allegations of his affair surfaced.
Sain claims it co-founded the Obama's America Foundation with D'Souza to make the surprise hit, "2016: Obama's America," which trails only Michael Moore's "Fahrenheit 911" as the highest-grossing U.S. political documentary.
Ownership and voting rights in Obama's America Foundation were divided equally when it was formed, with D'Souza getting 50 percent interest, and Sain and a company called VGI sharing 50 percent, the complaint states.
But after the movie's success at the box office, D'Souza tried to acquire a portion of VGI's interest in Obama's America Foundation to get a controlling stake, according to the complaint.
Because Sain did not consent to transfer of membership interests between VGI and D'Souza, it says, the transaction was "null and void."
Sain says that D'Souza retaliated against it by firing the production company's counsel, and hiring a new attorney, who disregarded the terms of the production company's operating agreement.
D'Souza also sought unnecessary debt financing of $1 million, on top of the $2 million Obama's America Foundation needed for expenses, so he could claim a $50,000 finders fee, Sain says in the complaint.
D'Souza then blocked payment of $1.5 million in theatrical revenue to the production company, from the movie's distributor Rocky Mountain Pictures, to trigger "the need to use $1 million of borrowed funds to pay vendors," and earn D'Souza his fee, the complaint states.
Sain claims that D'Souza had $90,000 paid into an account in India "in order to hide the funds from the IRS, his current wife, or others."
It claims that D'Souza has used the resources of Obama's America Foundation's promote one of his books, The Kings College, a movie he is developing about Ronald Reagan, and for "crisis management dealing with his personal extramarital affair."
D'Souza made headlines when he was alleged to have showed up for public functions with a fiancée, nonparty Denise Joseph, though he was still married.
"Sain alleges that D'Souza's current wife was involved in various aspects of the production of the movie at the same time as he was involved with Joseph and introduced her as his 'assistant.' On information and belief, D'Souza continued the ruse that Joseph was his 'assistant' in order to justify spending OAF [Obama's America Foundation] funds on Joseph that were intended for the movie production and exploitation," the complaint states.
Besides using Obama's America Foundation money to pay for Joseph's travel, D'Souza used company resources "to defend his reputation publicly," and "clear his name," according to the complaint.
"Many of these resources are being wasted at a critical time when they are needed, instead, for the movie's exploitation," Sain claims.
It adds: "Sain has previously frustrated D'Souza attempts to misuse his management authority to benefit his own interests and to the detriment of OAF: including delaying the finder's fee for unnecessary debt financing; disputing travel for his current wife to Kenya; disputing travel for Ms. Joseph to the Republican National Convention in Tampa and the Democratic National Convention in Charlotte; disputing personal legal fees by the former company counsel; and, disputing D'Souza's excessive use of OAF website and email list for advertising D'Souza's book and his previous employer The King's College."
Sain claims that D'Souza's attorney sued managing principals of Obama's America Foundation this month "over a contrived advertising disagreement," using it as a "ruse to seek sole management control of OAF and use its resources for his own benefit."
D'Souza sent Sain Communications owner Douglas Sain a letter "purporting to remove him as a managing member," and "is entering into loans with OAF, which are not being entered into at arm's length, and which have undefined payment terms, potentially to the financial detriment of OAF's other members," according to the complaint.
"Through D'Souza's bullying management style, including numerous threats to terminate his relationship with the picture which he conceived, D'Souza has already derived a disproportionate share of the film production budget for his own limited services: $827,500 of the $2.5 million budget (which excludes his future earnings under his services agreement and as an owner of OAF)," the complaint states. (Parentheses in complaint.)
Sain seeks declaratory judgment that the executive producers' agreement is a binding agreement, and wants D'Souza enjoined from taking any actions that violate the agreement.
Sain is represented by David King with The King Law Group, of San Diego.
In a statement on his website, D'Souza says that Douglas Sain was trying to "deprive another member [of Obama's America Foundation], Christopher Williams, of his share."
Sain filed suit because D'Souza refused to pay its owner a monthly salary of $30,000, in addition to $5,000 a month for the next 15 years, D'Souza says.
"From the beginning, Sain has attempted to push Williams out of the company and take Williams' share for himself," his website states. "Eventually Williams decided to sell half of his share to me. Sain has disputed this transaction, and our executive producers agreement provides that this dispute be resolved through arbitration. I have initiated that process in keeping with the agreement."
"I have never used a single penny of the film's money for my own benefit," D'Souza added. "On the contrary, on more than one occasion, I have made interest-free loans to the film. Currently I have $146,000 in outstanding loans that I made available for the company to purchase and sell DVDs on the film's website. Sure, the website has promoted my book 'Obama's America' but that is hardly inappropriate since the film itself is based on that book and my earlier book 'The Roots of Obama's Rage.'"
D' Souza also says that Sain controls the company's bank accounts, and he claims that Williams blocked Sain from making an unauthorized withdrawal from the company account.
"Ultimately all of this will be settled in arbitration," D'Souza wrote. "But in the meantime Sain is trying to use the public media to make false allegations that seem to be aimed at forcing me to approve a big payout to him. This is completely undeserved, and inconsistent with the interests of the investors. That's why I won't yield, and we'll let the legal process take care of this rogue operator."