The Los Angeles Superior Court lawsuit accuses an Irvine company called SAIL Venture Partners and its three top officials of mismanaging the singer’s money by putting it into “risky and unsound ventures,” hiding their failures and then engaging in “oppressive, malicious, and fraudulent actions” to run up millions in management fees for themselves.
Over a decade, SAIL and its related companies launched 13 limited-partnership investment funds worth more than $200 million. Yet now, “all that remains of defendants’ $200 million empire is a P.O. Box in Irvine,” Cher’s lawsuit claims.
“And yet, even now, defendants continue to misrepresent and pretend that SAIL LLC is a going concern and, more remarkably, that [Cher’s] $1.3 million investment stands to generate strong returns,” the lawsuit states. “Hogwash.”
The complaint was filed in the name of The Veritas Trust. Cher is the trust’s sole trustee, and its “business manager” is Warren Grant; the lawsuit puts Grant’s title inside quotation marks.
SAIL managing partner Walter Schindler, one of the three individuals named as a defendant, called the lawsuit “a bullshit case.”
Schindler said company records do not list the Veritas Trust as an investor, although a different Cher trust is listed. He contended the suit is the product of a feud between Cher’s former business manager and Adam Waldman, an attorney with Washington-based Endeavor Law, listed as co-counsel on the June 8 complaint.
“I wonder whether Cher’s even aware of it,” he said.
Schindler said the defendants have hired Newport Beach lawyer Bobby Samini to represent them. Samini, who has represented Donald Sterling in litigation with the National Basketball Association, could not be reached late Thursday.
According to the lawsuit, however, Grant encouraged Cher to put about $1.3 million into two investment partnerships promoted by the SAIL group in 2006 and 2007.
One invested in a company that would provide “scalable, safe and affordable water solutions to underserved communities throughout the world,” and the other would invest in “early-stage companies” developing clean-energy technologies.
For a time, all seemed well.
“For many years, in violation of the partnership agreements, defendants leveraged their insider positions to mislead the limited partners with rosy projections and false assessments of the portfolio companies’ performance,” the complaint states.
But the companies began to fail.
“Defendants’ misdirection could distract only for so long,” according to the lawsuit.
In the end, three of the 10 companies that SAIL had invested in for Cher and others had filed for bankruptcy. “Most of the others will never generate even $1 of returns,” Cher’s lawsuit alleges.
The defendants coped with the failures by concocting a scheme to protect themselves and their $4 million per year in management fees. They created a new fund called SAIL Exit Partners that guaranteed itself a 200 percent return, secured by the money invested by Cher and the other limited-partner investors.
The scheme “made it even more unlikely … that the limited partners would ever see a dime of the funds they entrusted to defendants,” Wednesday’s lawsuit states.
These days, according to the complaint, “SAIL LLC’s status is a mystery. Defendants are no longer communicating with the limited partners, and it is unclear what (if anything) is left of the partnerships’ holdings.”
The lawsuit accuses the defendants of fraud, breach of contract, breach of fiduciary duty, professional negligence, interference with a contract and other wrongs. It seeks compensatory and punitive damages, restitution, attorneys’ fees and other relief.
Cher’s lead attorney, Mark Holscher of Kirkland & Ellis LLP, was not available Thursday to discuss the case.
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