Fallout from Giacchetto case continues
AMG partner Rick Yorn filed his answer Monday in the Cassandra Group bankruptcy proceeding, denying virtually all of the allegations made by the bankruptcy trustee.
Last month, trustee Robert Geltzer brought suit in New York bankruptcy court seeking the return of more than $700,000 paid out by Cassandra’s Dana Giacchetto, plus unpaid interest on a loan to Yorn by Cassandra. Geltzer claimed that while the $700,000 check supposedly represented Yorn’s profits on the sale of Paradise Music & Entertainment Inc. stock, Yorn had never purchased the stock but had pressured Giacchetto to give him the benefit of the subsequent and brief increase in the Paradise stock price.
Geltzer also alleged Yorn insisted on a loan of more than $600,000 to purchase a new home in 1998, and although he ultimately repaid the loan in 1999, he did not pay interest.
Agrees with basic facts
In Monday’s answer, Yorn agrees with many of the basic facts alleged in the complaint, but denies any of his actions was taken with the intention of defrauding Cassandra’s creditors or with the knowledge that other Cassandra investors might have gotten less favorable treatment. He concludes by denying the trustee is entitled to the return of any of the money.
Yorn’s attorney, David Stern, said, “Rick, like many other people, dealt with Cassandra, which managed his investments. The answer makes clear he received money in good faith and without any knowledge or belief that Cassandra was engaged in any improper activities.”
For example, Yorn agrees he received a check with the legend “Paradise sale,” but denies the trustee’s claim that he should have known he was required to sign a written agreement to purchase securities. His answer asserts Cassandra had an obligation to deliver him Paradise stock and pay him the profit from the sale. Without naming Giacchetto directly, Yorn also states he has no knowledge of whether someone else had the intent to defraud Cassandra’s creditors.
At the time the suit was filed, Yorn’s attorney and business manager said the financial documentation would prove Yorn had purchased 100,000 shares of Paradise stock. It is unclear from Monday’s answer whether the stock actually was purchased, but Yorn takes the position that he believed he had purchased it and received the proceeds from the sale in good faith.
Yorn also agrees Cassandra loaned him money to buy a home and that he never repaid the interest. But he denies that the loans were made in bad faith or that there was anything wrongful about the timing of his repayment. According to Yorn’s attorney, Yorn’s accountant handled the loan, and no interest was ever asked for.
Seeks jury trial
Along with the answer, Yorn also filed a demand for a jury trial.
Cassandra principal 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 $10 million of his clients’ money. The Cassandra Group filed Chapter 7 bankruptcy in July. At the time of the filing, the fund had assets of less than $25,000.
Giacchetto and AMG enjoyed a close connection during Giacchetto’s glory days: Yorn introduced AMG clients Cameron Diaz and Leonardo DiCaprio to Giacchetto, and Giacchetto claimed he brokered the deal between Yorn and Mike Ovitz that led 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 Securities & Exchange Commission filed a related action, which is still pending, and a court froze Giacchetto’s assets.