The bankruptcy trustee for investors in Dana Giacchetto’s Cassandra Group is alleging that Artists Management Group partner Rick Yorn benefited from the sale of an investment that Yorn knew was never made, and that Yorn knew the company was insolvent when he received money for that investment.
Yorn’s bankruptcy counsel, David Stern, calls that allegation ridiculous and denies any wrongdoing by Yorn.
“Our understanding is that Rick owned that stock,” Stern said, adding that as such, Yorn was perfectly within his rights to sell it.
The purchase in question involved Paradise Entertainment, an investment that netted Yorn some three quarters of a million dollars when he had it sold in September 1999.
Contrary to published reports elsewhere, Yorn has not been accused of multiple counts of fraud stemming form his dealings with the disgraced money manager.
“They (the reports) have that wrong,” said Robert Geltzer, the bankruptcy trustee appointed by the court to recoup funds for investors bilked in Giachetto’s Cassandra Group. Geltzer added: “The 10 counts are not for fraud.”
The filing calls Yorn’s profits from the Paradise stock improper because Yorn allegedly made “no legitimate purchase” of that stock.
Geltzer said Yorn may be liable for “fraudulent conveyance,” a highly specific legal term that bankruptcy lawyers when referring to “somebody (who) gets something from a debtor without providing adequate consideration for what they get,” as Geltzer put it.
Jerry Chapnick, Yorn’s business manager, rejects that allegation, saying most of the financial documentation will prove that Yorn’s lawful purchase and sale of Paradise stock has been supplied to counsel (David Stern).
“We would not have gone through with the sale had Rick not owned the stock,” Chapnick said. “The charges are unfounded.”
Bankruptcy lawyer Alan Kornfeld, of Pachulski, Stang Ziehl & Young, said fraudulent conveyance lawsuits are an everyday occurrence in bankruptcy cases. Under bankruptcy law, a trustee can seek the return of payments up to four years before the bankruptcy filing if those payments were deemed fraudulent conveyances.
Just doing his job
“The job of the trustee is to try to marshal assets,” Kornfeld said. “One means is to bring a fraudulent-transfer complaint against someone who is alleged to have received money or other assets without provident reasonable consideration in return.”
If the trustee can prove that the person got something without adequate payment, he can recover the money without having to prove fraud as the layperson understands it.
Giacchetto was sentenced Feb. 7 in U.S. District Court in Manhattan to 57 months in prison after pleading guilty to fraud. He admitted stealing some $10 million of his clients’ money. His Cassandra Group filed Chapter 7 bankruptcy in July. At the time of the filing, the fund had assets of less than $25,000.
Those were the days
Giacchetto and AMG had enjoyed a close connection during Giacchetto’s glory days: Yorn introduced AMG clients Cameron Diaz and Leonardo DiCaprio to Giacchetto, and Giacchetto would claim he brokered the deal between Yorn and Ovitz leading to the creation of AMG.
But in December 1999, Giacchetto abruptly lost many of his clients. On April 3, 2000, he was charged by criminal complaint of looting accounts belonging to clients of his Cassandra Fund. The same day, the SEC filed a related action, and a court froze Giacchetto’s assets.