Florida is suing the principals in a movie graphics production company, claiming taxpayers were defrauded of $82 million.
The complaint alleges a “de facto Ponzi scheme” involved a computer graphics imagery company that worked on many Hollywood blockbusters—”Titanic,” “Apollo 13″ and “Transformers” among them—but fell on hard times.
Digital Domain Florida is accused in the St. Lucie Circuit Court suit of bamboozling the Florida Legislature, former Gov. Charlie Crist and others into approving grants that were illegally used to pay off debt.
The civil action was filed in the county that was hardest hit by the company’s collapse after granting the company $60 million to help launch a job-producing startup.
Fort Lauderdale attorney William Scherer of Conrad & Scherer was hired as outside counsel by the Florida Department of Economic Opportunity to bring the lawsuit.
The department alleges Digital Domain California owed millions of dollars to its principal lender, Falcon Mezzanine Partners. The California computer graphics company had plenty of movie credits and prestige, but its business model was unsustainable, the lawsuit claims.
“Digital Domain California hatched a new plan to rid itself of debt: 1) start a brand new company with no debt on its books; 2) use Digital Domain California’s credentials, together with promises of new high-paying jobs for Floridians, as security to obtain grant money for Digital Domain Florida; and 3) use the grant to partially bail out Digital Domain California,” the complaint states.
The California company then planned to merge with its Florida counterpart.
John Textor, a Florida native “turned wannabe Hollywood movie mogul,” became the pitch man, the complaint explained. Enterprise Florida, the state agency that vetted job-creation grant applications, rejected Textor after finding the California company’s financials weak. From 2005-2008, the company had losses exceeding $35 million.
Textor made an end-run around Enterprise Florida by wooing Crist and the Legislature, notably state Rep. Kevin Ambler, R-Tampa, who sponsored the bill and was named to the company’s Florida board as a “success bonus,” the complaint states.
The lobbying succeeded, and Digital Domain obtained a $20 million special appropriation June 30, 2009.
Textor and others on behalf of Digital Domain used the grant as “political clout” to obtain another $62 million from St. Lucie and Palm Beach counties, the complaint alleges.
Digital Domain unsuccessfully tried to sell the company. Still in debt, the company borrowed millions more on predatory terms, the complaint said.
Digital Domain promised to create 500 jobs paying an average salary of $64,233 and invest $50 million in real estate improvements in St. Lucie County. Both targets were not met, the lawsuit states.
SingerLewak, an accounting firm that is among the 22 co-defendants, acted with “reckless disregard” by rendering unqualified audit opinions for financial statements in 2009, 2010 and 2011, the complaint said.
Digital Domain Florida filed for bankruptcy protection Sept. 11, 2012.
The state alleges all defendants committed civil conspiracy to commit fraud. Monterey Park, Calif.-based SingerLewak also is accused of gross negligence. Other counts were filed against Textor and other individual defendants.
Textor’s bankruptcy attorneys at Holland & Knight, John Monaghan in Boston and Richard Lear in Washington, had no comment by deadline.
Bankruptcy attorneys for the Digital Domain Florida company, PBC Digital Holdings LLC, include Paul Keenan of Greenberg Traurig in Miami and Adam Cole of Cousins Chipman & Brown in New York. They also did not comment by deadline.
Bankruptcy creditors include such movie industry giants as Lucasfilm Ltd., Universal Studies LLC, Marvel Entertainment LLC and Walt Disney Studios Motion Pictures.