Financial whiz kid’s stock falls

H'wood stars straying from Giacchetto

NEW YORK — Dana Giacchetto, the 37-year old Gotham-based money manager who quickly gained the loyalty of the Gen-X Hollywood set along with a high press profile, is now the subject of widespread scrutiny in Hollywood after losing as many as 17 prominent movie-industry clients in a very short period.

Helped by a fawning press that labeled him one of the architects of the business plan of Artists Management Group (which founder Michael Ovitz denies), Giacchetto once controlled an investment portfolio estimated at $400 million through his Cassandra Group, an asset management firm. Until recently his client list included Matt Damon, Ben Affleck, Leonardo DiCaprio, Tobey Maguire, Edward Burns, Cameron Diaz, Heather Graham, directors like Brian Gibson and dealmakers like Ovitz, CAA president Richard Lovett and a host of other top Hollywood managers, agents and producers.

Most of those movie industry clients have now parted company with Giacchetto, and a well-publicized affiliation with Chase Capital Entertainment Partners has also fallen by the wayside. Nonetheless, Giacchetto’s associates under the Cassandra-Chase partnership, Jeffrey Sachs and Sam Holdsworth, continue to oversee the Chase Capital Entertainment Group, but are understood to no longer be involved with Giacchetto or Cassandra.

Giacchetto named his Cassandra Group after the mythological Greek character given the power of prophecy but cursed by not being believed. Ironically, for several years Giacchetto was believed and accepted as a prophet of profit by his affluent yet fiscally naive young clients.

But skepticism is running high now, for it seems that Giacchetto strayed from his successful conservative strategy with several bad investments, including a failed satellite telephone venture and investments in private equity endeavors.

Giacchetto was unreachable Friday, but his attorney Martin Garbus downplayed the recent defections, saying in press reports Saturday that exits were a natural occurrence for a money management firm with more than 600 clients and that outgoing clients had been replaced. Giacchetto clearly has his detractors, whether they be clients who feel burned, rival money managers envious of his profile and trying to gain his business or even business associates trying to knock him from his perch. And it doesn’t take much to drive investors away from a money manager.

Though it remains unclear what started the rash of client withdrawals, sources said that Giacchetto’s disorganized back-office operation was one symptom of dissatisfaction. Former clients are understood to have complained repeatedly about not receiving up-to-date statements regarding their accounts.

Giacchetto, a former musician widely described as charming and charismatic, quickly rose to prominence by bonding with artists, entertainers and dealmakers. They liked Giacchetto’s sermon that he’d use conservative strategies, building their portfolios by putting money in blue-chip stocks. The strategy proved very lucrative, said several past and present clients who made money with him.

One of Giacchetto’s high-risk investments was Iridium, a telecommunications satellite venture, but the value of the stock dropped as the company went bankrupt. Cassandra, however, and was one of dozens of asset managers that lost money on Iridium.

Another source of skittishness is Giacchetto’s aggressive backing of Paradise Music & Entertainment Inc., the troubled entertainment company that Giacchetto has tried to help turn around.

As compensation for his financial consulting services with Paradise, Giacchetto was initially issued 200,000 shares of restricted common stock, as well as three-year warrants to purchase 800,000 shares of Paradise common stock at prices ranging from $5 per share to $10 per share.

Giacchetto helped install Jesse Dylan, son of Bob Dylan, to runs the publicly traded company as chairman and CEO.

And earlier this year, Giacchetto spearheaded a move to bring in Jay Moloney, the talented but troubled former CAA agent, as president. Moloney recently committed suicide.

Well before drug demons led to his CAA exit, Moloney invested his money with Giacchetto and helped the young money manager infiltrate the ranks of CAA agents and their clients. Showbiz investors asked by Giacchetto to help bank the Paradise venture were wary, given Moloney’s repeated drug relapses and rumors that his despair led to an earlier suicide attempt.

But many clients followed Giacchetto’s advice and put money in Paradise shares, which are practically flatlining now, down to around $3 a share from a 52-week high of $9.75 in August. While the stock has not recovered, the company recently posted some encouraging news, reporting that for the three months ending in September, revenues rose 97% to $3.6 million and net loss fell 75% to $196,000.

Giacchetto’s high press profile and some awkward and ill-timed quotes haven’t helped his situation. Journos embraced the seductive angle of a young tycoon who not only invested the money of top stars, but ran with the pack. Giacchetto has become a gossip column staple, written up for hosting lavish parties and carousing with the likes of Damon, Affleck and DiCaprio.

Giacchetto’s closeness to Ovitz and barnstorming for AMG have put him at odds with the powerbrokers of CAA, though sources at the percentery argued that most there who invested money with Giacchetto, such as Lovett, cut their ties some time ago, well before this recent turmoil.

Giacchetto was depicted in the press as a central figure in the formation of AMG, and one who tried to foster peace in the open feud between AMG and CAA. Giacchetto, who is no longer involved with Ovitz, was an early proponent of AMG’s plans to start a distribution company.

Giacchetto came off awkwardly in a recent New York Times Magazine profile about Ovitz, his tone full of mogul-like cockiness. “The whole world is interested in this moronic little management company,” he told journo Lynn Hirshberg as she inquired about AMG’s funding. And Giacchetto twice interrupted his interview to shout to an assistant in another room “Get me Leo” and “Get me Mike” in the presence of the reporter. Several sources labeled his quotes “embarrassing” and said the outspokenness was a reason some clients grew uncomfortable with him.