October 01, 2012 6:45pm PT by Alex Ben Block
Ryan Kavanaugh Lawyer Threatens New Yorker Over 'Egregious' Ron Burkle Profile (Exclusive)
Relativity Media CEO Ryan Kavanaugh is striking back at an article published Monday by The New Yorker about his partner Ron Burkle that paints Kavanaugh as a poor business leader who doesn't have control over his company and soon could be replaced by Harvey Weinstein.
The Hollywood Reporter has obtained a letter from Relativity and Kavanaugh lawyer Carol Genis to New Yorker editor David Remnick and writer Connie Bruck that calls the article, headlined "Cashier du Cinema," a "false and malicious" attack "loaded with numerous statements of fact which are false and defamatory." The article "was obviously designed to inflict serious harm upon Relativity and Mr. Kavanaugh," the letter states, before demanding that the piece be removed from the magazine's website and retracted in print.
The New Yorker responds in a statement: "We stand by our story, which is the result of months of reporting by the award-winning journalist Connie Bruck, including interviews with numerous sources close to the deals described."
In addition, Kavanaugh tells THR in an interview that his staff attempted to correct several inaccuracies in the article when the magazine called to fact-check prior to publication. Specifically, he takes issue with the magazine's characterization of who is in control of Relativity. The article states that Kavanaugh was forced to put up essentially 100 percent of the company as collateral to protect Burkle's most recent investment.
“It was made very clear prior to this article publishing by myself, Mr. Burkle and numerous parties involved in the transaction that they reference that the facts they claim as facts are wholly egregious,” Kavanaugh says.
Burkle, according to the New Yorker piece, was given "free equity" in Relativity, which Kavanaugh emphatically denies.
"Mr. Burkle did not, nor did any of his entities, receive free equity," Kavanaugh says. "Mr. Burkle has never, nor have any of his entities, had the entire company or close to the entire company as collateral. Mr. Burkle does not have board control nor company control. In fact, I, Ryan, have the majority of board seats as well as majority control of the company. [New York-based hedge fund] Elliott has not fully cashed out. In fact, they are still an active participant in future deals and are funding a deal as we speak."
Kavanaugh launched Relativity in 2004 in partnership with Elliott as a finance vehicle investing in film slates at Universal, Sony and other studios. In 2010, Kavanaugh took Relativity into distribution, becoming a full-fledged studio and entering other businesses such as games, digital, music and merchandising. Burkle's Yucaipa came on board with a series of investments in 2011, leading to widespread speculation in Hollywood as to Relativity's financial health and future. Through it all, Kavanaugh has maintained that the company is profitable.
The New Yorker piece cites "one popular Hollywood theory" that Burkle will fire Kavanaugh and put Weinstein in charge of the company (possibly through a merger of Relativity and The Weinstein Co.). But Kavanaugh says such a scenario is not even possible.
"I consider Harvey Weinstein a close friend, but we have very different businesses,” he says, “What The New Yorker says about me and Harvey is almost laughable. Not only does Ron support us and support our business plan, this type of change wouldn't be possible without the entire board -- me included -- supporting it. I'm too difficult to work with, anyway; Harvey wouldn't want to be my partner.”
In fact, says Kavanaugh, his relationship with Burkle is ongoing, "Ron is an incredible partner, and we look forward to continuing to do more business together."
Kavanaugh also takes issue with the portrayal of how his company and his business ventures have performed.
“They state that most of my deals lost money for investors,” notes Kavanaugh. “Actually, almost every one of my deals has had a moderate to good return. As expected, a few did lose money.”
He says the magazine's reporting on the Gun Hill film slate deals -- which provided money for movie production in partnerships with Universal, Sony and others -- was inaccurate.
“Specifically on Gun Hill, they called for information,” says Kavanaugh. “We gave them the contacts for numerous investors. They elected to completely ignore all such information and write what they chose rather than do any sort of due diligence.“
Kavanaugh also is adamant that his studio has performed well, contrary to the picture painted by the article.
“Relativity also has set the record as the first studio to have three No. 1 openings in its first year as a distributor, and 85 percent of its films have earned a profit,” Kavanaugh says. “I’m not quite sure what box-office failures they are referring to when we’ve had in the last 12 months films like Limitless, Act of Valor, Immortals, which did $228 million [worldwide], and just [tied for] our fourth No. 1 opening with House at the End of the Street. “
He also says the article distorts a computer program his company uses to evaluate movies for possible production. “As to the movie-picking system they reference,” says Kavanaugh, “if anybody ever asks me, I always say the same thing: It is a simple movie-rejection system.”
Kavanaugh also says he is also offended by the way he is described, particularly his educational background. “They state that I did not graduate college and imply somehow I am uneducated,” says Kavanaugh. “I am an official graduate of UCLA and currently enrolled in a Ph.D. program at USC."
Kavanaugh says he's threatening legal action because he hopes to stop future attacks.
“It’s sad in this business when people have an agenda,” he says. “I’m very proud of our company having set a record with four No. 1 openings, 23 on-air series -- one of the largest television companies -- the third-largest sports agency and 11 movies set for release next year competitive with the major studios. I can’t understand how The New Yorker could ignore all these facts and just focus on gossip and hearsay.”