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Cher claims SAIL Venture Partners and several of its principals defrauded investors to rake in millions in management fees, according to a lawsuit filed Wednesday in Los Angeles County Superior Court.
The singer, suing as Veritas Trust, claims between 2006-2007, Veritas’ business manager Warren Grant convinced her to invest about $1.3 million as a limited partner in SAIL Venture Partners and SAIL Safe Water Partners.
Cher is suing for breach of contract, breach of fiduciary duty, professional negligence and fraud, and is seeking compensatory and punitive damages and restitution.
“Defendants routinely leveraged their insider positions with the portfolio companies to placate limited partners with news of supposed ‘exit strategies,’ impending ‘initial public offerings,’ and the potential for ‘enormous’ profits,” states the complaint. “Unbeknownst to Veritas, Defendants secured its capital and that of several other limited partners under duress at the eleventh hour … these bizarre and improper management tactics were a harbinger of worse to come.”
In reality, and unbeknownst to Cher, the investments were tanking. Of the 10 initial portfolio companies, at least three have filed for bankruptcy and most of the others will never generate a return, states the complaint, yet “defendants continued to collect management fees and lull the limited partners with false, rosy representations in violation of the Partnership Agreements.”
“All that remains of Defendants’ $200 million empire is a P.O. Box in Irvine,” states the complaint, which calls SAIL’s continued efforts to convince Cher her investment will generate strong returns “hogwash.”
The suit claims defendants served as directors on boards of portfolio companies and used their insider positions to mislead investors with “rosy projections” and false assessments of projections in order to keep collecting their 2.5 percent annual management fee.
“Today SAIL LLC’s status is a mystery,” states the complaint. “Defendants are no longer communicating with the limited partners, and it is unclear what (if anything) is left of the Partnerships’ holdings.”
In addition to the SAIL companies, managing partners F. Henry Habicht and Walter Schindler and chief scientist Chris Brown are listed as defendants.
Cher claims defendants have admitted to “improperly allocating the Partnerships’ management fees to invest in portfolio companies and to cover personal expenses, including lavish personal vacations; giving secret finder’s fees to intermediaries in exchange for quick cash; and improper relationships between members of SAIL LLC’s management and staff.”
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