Planet Hollywood wrote off $5 mil that could've been recovered
Another file for the dog-bites-man drawer: A bankruptcy court report found last week that celeb investors in Planet Hollywood benefited from insider deals during the restaurant company’s better days.
The Orlando, Fla.-based chain of Hollywood-themed restaurants — whose backers have included Arnold Schwarzenegger, Bruce Willis, Demi Moore and Sylvester Stallone — is attempting a second bankruptcy reorg of its beleaguered operations. And an independent audit review that’s part of those Orlando court proceedings criticizes chain founders Robert Earl and Keith Barrish for being too chummy with the celebrities — though no celeb names are specified in the report.
“It would appear that both Earl and Barrish were more concerned with preserving their personal relationships with the celebrities at the expense of the business, creditors and shareholders,” the audit finds.
As a result of such twisted priorities, Planet Hollywood wrote off some $5 million in loans that might otherwise have been recoverable to the benefit of others, the report adds. A legal analysis is needed to see whether the loans constitute fraud or whether there was management misconduct on other matters, auditors suggest.
Earl accepts none of the criticism, which he traces ultimately to a “scorched Earth” legal strategy by unsecured creditors trying to bolster their position in reorg proceedings.
He further contends the “non-recourse” loan was secured only by stock — effectively making recoupment impossible — because it was intended as a remuneration for the celebs’ help to the company.
“Nobody would have complained if we would have just paid them for their promotional services,” Earl fumes.