LOS ANGELES (CN) — Relativity Media’s CEO Ryan Kavanaugh lied about the company’s financial condition to fraudulently induce a hedge fund manager to invest $2 million, using an earlier $10 million investment as leverage, the investor claims in Superior Court.
Carey Metz sued Kavanaugh on Thursday, that the executive, known in Hollywood circles as the “Billion Dollar Producer,” asked him in June 2015 to provide a $2 million bridge loan to help his beleaguered media company. Relativity is known as a “mini-major” producer of independent films, music and television.
“Kavanaugh lied about Relativity’s financial condition, he lied about the existence of other investors, and he lied about the size of other investments to induce Metz to make a bridge loan to Relativity,” the complaint states.
Under terms of the deal, Metz was to receive 8 percent annual returns and repayment within one year. Metz says they consummated the deal with a handshake.
He says that Kavanaugh told him wealthy investor Ron Burkle already had invested $10 million, that an initial public offering was imminent, and that his $10 million would rescue the ailing company until he could secure funds from other investors.
None of these representations were true, the hedge fund manager says.
Kavanaugh told Metz that he expected an influx of cash from ongoing projects, but instead of repaying investors, Kavanaugh “purchased real estate valued at several million dollars for his personal use,” the filing states.
Relativity filed for Chapter 11 bankruptcy on July 30, 2015, and according to Metz, Kavanaugh has “left countless creditors, including Metz, unpaid.”
He says his demand for repayment of the loan has gone unanswered.
He seeks damages for fraudulent inducement, breach of contract, breach of faith, false promise, unjust enrichment, negligent misrepresentation, and costs of suit. He is represented by David Bovino of the Aspen, Colorado firm Bovino Carminati.
Courthouse News has contacted Relativity and Bovino for comment.