LAS VEGAS (CN) – Professional tennis’ “It couple,” Andre Agassi and Stephanie Graf, say the managers of the popular Pure Nightclub, of which they are part-owners, mismanaged finances and used the nightclub’s money to fund competing venues.
The couple, along with Agassi’s former coach Darren Cahill and spokesman Todd Wilson, are part owners of Touch LLC, which has operated Pure nightclub in the Caesars Palace since 2004.
The club “ushered in a new era of nightclubs in Las Vegas that catered to VIP clientele and featured a level of luxury and service never before seen in Las Vegas nightclubs,” according to the lawsuit filed in Clark County Court.
“Spurred by the immediate and substantial success of Pure,” Touch Management execs Steven Davidovici and Robert Frey formed other companies, like Pure Management Group, “with the express purpose of opening other nightclubs and related properties, many of which would complete against Pure.”
Those clubs include LAX at the Luxor; the Christian Audigier nightclub in the Treasure Island, and Aura, located in the Bahamas. They also opened a number of bars and restaurants on the Las Vegas Strip, including Company Lounge, Dick’s Last Resort, Noir, Social House and the Venus Club.
“None of these other properties approached the success of profitability of Pure,” the lawsuit states. “In fact…the overwhelming majority of these properties have experienced extended periods of unprofitability.”
On Wednesday, Angel Management Group announced that it struck a deal to acquire Pure Management Group.
Plaintiffs say since 2007, Touch Management has been charging them for its non-Pure related expenses.
“The new regime caused Touch to bear [Pure Management’s] operating overhead and other commonly incurred expenses, which in turn caused Touch’s own expenses to increase sharply and remain at a high level for each succeeding year.”
“Overall … total corporate overhead expenses charged to Pure by [Pure Management’s] increased approximately between 2005 and 2006,” the lawsuit states. “The next year…costs covered by the corporate overhead allocation charged to Pure nearly tripled.”
The lawsuit says the allegedly improper allocations prompted the IRS to raid Pure in February 2008, “the result of significant improprieties involving … Touch Management employees’ failure to report income.”
The lawsuit says defendants then used Pure’s money to defend Davidovici to the tune of $1 million in legal fees.
Defendants were “subsidizing the expenses incurred by…competing properties, which were less profitable than Pure and often not profitable at all,” the lawsuit states. “In turn, this meant that defendants knowingly and consistently misappropriated Touch’s resources.”
Plaintiffs say they have requested to examine the books, but defendants have refused.
Plaintiffs seek unspecified damages for breach of contract, conversion and negligence.
The lawsuit was filed by John Bailey with Bailey Kennedy.