Ari Emanuel Says Clothiers Defrauded Him

LOS ANGELES (CN) - Hollywood talent agent Ari Emanuel claims in court that his partners in a clothing business fleeced him out of $600,000 and used the firm as their "cash cow" to fund competing ventures.

Emanuel, brother of Chicago Mayor Rahm Emanuel and the inspiration for the Ari Gold character in HBO's "Entourage," sued couple Mark and Jill Freeman, owners of the Jill Roberts designer boutiques in Los Angeles, in Superior Court.

Emanuel and his wife, Sarah, claim the Freemans approached Ari in early 2010 to invest in another apparel company called Seaton LLC.

After investing $200,000 for a 50 percent stake and loaning them $400,000, Emanuel says the Freemans told him this year that Seaton was not making enough money, and that they were going to close shop without paying back his capital contribution or loans.

That prompted Emanuel to take a closer look at Seaton's books, when he "uncovered numerous acts of fraud, embezzlement, misappropriation, deceit, fiduciary breach and unlawful competition by the Freemans."

He says he discovered, for example, that the couple had loaned themselves $450,000 in Seaton funds, used Seaton to charge $700,000 in unjustified expenses, made several disbursements to a trust they controlled, and "sold large volumes of Seaton merchandise to Jill Roberts at prices that were far below market."

They sold the Seaton merchandise to Jill Roberts at 40 percent off the wholesale price, "severely impairing Seaton's financial position while simultaneously guaranteeing windfall profits to Jill Roberts on resales," according to the lawsuit.

Emanuel also accuses the couple of siphoning off Seaton's merchandise, designs and revenues for Jill Roberts and a start-up company called Freeman.

The Freemans "secretly treated Seaton as their own 'cash cow,' using the monies invested in and loaned to Seaton not to expand Seaton's business, but rather to make large payments to themselves, and to finance their other businesses," the 22-page lawsuit states (emphasis in original).

"They operated Seaton as if it were their own personal piggy bank, misappropriating plaintiffs' investment and using Seaton funds to finance their lifestyle and the activities of their other competing apparel businesses."

Emanuel, 51, is also co-CEO of talent agency William Morris Endeavor. His older brother Rahm was White House Chief of Staff to President Barack Obama from 2009 to 2010.

The Emanuels seek at least $2 million plus punitive damages for alleged fraud, breach of fiduciary duty, breach of contract, conversion, accounting and unlawful competition.

They are represented by Paul Salvaty of Glaser Weil Fink Jacobs Howard Avchen & Shapiro.

The Freemans could not immediately be reached for comment.

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