Treasury nominee sued in fraud case
The complaint by financier RKA is related to the collapse of Relativity Media.
Steve Mnuchin is accused of a scheme related to a media company’s collapse.
President Trump’s Treasury secretary nominee, Steve Mnuchin, has been sued again by a film financier that accuses Mnuchin and others of fraud related to the collapse of movie and TV company Relativity Media.
RKA Film Financing, in an amended complaint filed Thursday in New York County Supreme Court, renewed its claim that Mnuchin and multiple others, including Relativity founder Ryan Kavanaugh, made “repeated misrepresentations” as part of a scheme designed to “prop up a failing media company.”
A spokesman for Mnuchin called the case “preposterous.”
The new court filing comes as the Senate is in the process of confirming Trump’s Cabinet picks. The Senate Finance Committee this week advanced Mnuchin’s nomination after Republicans changed rules to stymie a Democratic boycott. The panel approved the former Goldman Sachs banker 14-0 despite objections concerning his history in the finance industry from Democrats who refused to show up for the vote.
In its complaint, RKA says it lent Relativity $81 million to fund prints-and-advertising costs for films including “The Disappointments Room” and “Before I Wake,” believing it to be a low-risk investment. But Relativity used the money for other purposes such as salaries and bonuses, the suit alleges. Relativity filed for Chapter 11 bankruptcy protection in July 2015.
Mnuchin was nonexecutive chairman of Relativity from October 2014 to May 2015 — leaving just before the studio went under — and ran OneWest Bank Group, a Relativity lender that had put $160 million into the company.
Lawyers for RKA say Mnuchin’s position at Relativity made him “intimately familiar” with its financial situation. They claim that some of RKA’s money was used, in part, to repay a $50million loan that OneWest had made to the Beverly Hills studio before it sought bankruptcy protection.
“Mnuchin was afforded complete and unfettered access to the inner workings of Relativity’s finances, including how Relativity used or misused” prints and advertising funds, RKA said in its complaint.
Mnuchin spokesman Barney Keller on Friday called the claims “frivolous” and “preposterous,” and said Mnuchin intends to seek sanctions from the court, which previously dismissed a similar complaint RKA brought against the Wall Street executive and film industry investor.
RKA first accused Mnuchin and Kavanaugh of fraud in 2015, well before the former entered the spotlight as Trump’s Treasury pick. That suit, which sought $110 million or more in damages, was dismissed last year by Judge Charles Ramos, who gave RKA’s lawyers a chance to re-plead their case. The new complaint seeks to clarify the basis for the fraud allegations.
“The claims against Steven Mnuchin are the same frivolous claims that were previously rejected by the court,” Keller said in a statement. “RKA never once spoke with, corresponded with or otherwise dealt with Mr. Mnuchin .... Mr. Mnuchin’s inclusion in this complaint is gratuitous and insulting.”
Mnuchin’s attorney Robert Sacks told the Los Angeles Times in November that the contract between RKA and Relativity was entered into before Mnuchin invested in the studio. He also dismissed the notion that Mnuchin was uniquely positioned to ensure that One West was repaid ahead of other creditors.
Besides Relativity, Mnuchin’s Hollywood investments have included backing for “Suicide Squad,” last year’s DC Entertainment blockbuster. With New York hedge fund Dune Capital Management, he cut deals to finance the movie slates of 20th Century Fox and Warner Bros., serving as executive producer for such movies as “American Sniper” and “Mad Max: Fury Road.”
Relativity has floundered since it emerged from bankruptcy protection last spring. The company has released a pair of flops — “The Disappointments Room” and “Masterminds” — and laid off employees. Last month, the company’s film-distribution joint venture with EuropaCorp, known as RED, cut most of its 40-person staff.