Aggregated From: Forbes – Lifestyle
'Bull Durham' Ensnared in Alleged Fraud
Investors in Bull Durham were allegedly caught stealing as the show bolted for Broadway.
Planning to mount a musical adaptation of the acclaimed sports film on the Great White Way last spring, the producers of Bull Durham signed a funding agreement with two small production companies, Weathervane Productions and Forrest Capital Partners. Both businesses had helped fund several films, and co-financed the successful Penn & Teller on Broadway magic show in 2015.
Under the agreement, Weathervane and Forrest Capital promised to help the producers raise part of the show’s $ 14 million initial investment. Forrest Capital would set up an account through UBS, and the producers would make two deposits totaling $ 5.375 million. Weathervane and Forrest Capital Partners would then need to match them.
But, right after the Bull Durham producers made the first deposit of $ 2.5 million into the UBS account, something strange started to happen.
“[F]our payments went out of the account the same day, including a payment to [the founder of Forrest Capital Partners]’s brother and another to a Washington, D.C. consulting firm,” said lawyers for the Bull Durham producers. More unapproved payments were made from the account days later, and, the lawyers claim that, less than three months after the initial deposit, “the entire $ 2.5 million had been stolen.”
According to its lawyers, as the funds flowed out of the account, the Bull Durham team “worked to determine what was happening with its funds, putting Weathervane and Forrest Capital on notice of its breaches, and reaching out to UBS to learn what was going on.” The funding agreement required the producers to approve all payments from the UBS account, and they did not approve any of the payments.
One year later, the Bull Durham producers decided to go after UBS in a regulatory arbitration proceeding for letting the alleged fraud to happen. The producers claimed that they suffered losses due to “UBS’s negligence, negligent supervision, breach of fiduciary duty and violations of FINRA Rules 2090 and 2010, which required the firm to exercise ‘reasonable diligence’ in opening and maintaining its customer accounts, and to ‘conduct business with high standards of commercial honor’ and ‘maintain just and equitable principles of trade,’ respectively.”
The producers argued that, “to comply with its ‘Know Your Customer’ obligations, UBS was obligated to exercise ‘reasonable diligence’ to learn the ‘essential facts’ concerning Forrest Capital, Weathervane,” and their respective leaders when the opening the account. “Had it done so,” they continued, “it would have learned that [the leaders] had been ‘fired’ by their prior brokerage firm and had been repeatedly sued in multiple forums by other victims of their fraudulent financing schemes.” There were at least nine different lawsuits filed against the leaders or their firms, and the complaints all contained similar allegations.
Apparently, no one did their research.
UBS asked a federal court to block the regulatory arbitration proceeding, arguing that the regulator did not have the power to decide the dispute. It insisted that, since the allegedly looted UBS account belonged to Forrest Capital, the producers were not its customers, and the case actually involved an violation of the parties’ funding agreement, and not UBS’ business activities. Allowing the arbitration would be improper.
It believed that the producers subsequently withdrew their arbitration demand, and Bull Durham is now scheduled to throw out its first pitch on Broadway sometime in spring 2019.
Marc Hershberg, Contributor