The state of Florida is suing the principals in a movie graphics production company, claiming taxpayers were defrauded of $82 million.
The alleged “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 and bamboozled the Florida Legislature, former Gov. Charlie Crist and others into approving grants that were then illegally used to pay off debt.
The civil action was filed Tuesday in St. Lucie County. The county was hit hardest, having granted Digital Domain Florida $60 million, supposedly to help launch a job-producing start-up.
Fort Lauderdale attorney William Scherer of Conrad & Scherer is representing the plaintiff, Florida Department of Economic Opportunity.
According to the Economic Opportunity department, Digital Domain California owed millions of dollars to its principal lender, Falcon Mezzanine Partners. The California CGI company had plenty of movie credits and prestige, but its business model was unsustainable.
“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 complain states.
The California company then planned to merge with its Florida counterpart.
John Textor, a Florida native “turned wannabe Hollywood movie mogul” who had an interest in the company became the pitch man, the complaint explained. Enterprise Florida, the state agency qualified to vet these type of 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 then-Governor Crist and the Legislature, particularly Rep. Kevin Ambler, R-Tampa, who sponsored the bill and was named to Digital Domain Florida’s board as a “success bonus,” the complaint states.
The lobbying succeeded and Digital Domain obtained a $20 million special budget appropriation June 30, 2009.
“Textor and others on behalf of Digital Domain used the grant as political clout to obtain an additional $62 million from St. Lucie and Palm Beach counties,” the complaint alleges.
Digital Domain then tried to sell the company, but was not successful. Still in debt, the company borrowed millions more on predatory terms.
Digital Domain was supposed to have created 500 new jobs paying an average salary of $64,233, and to have invested $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.
Digital Domain Florida filed for bankruptcy Sept. 11, 2012.
The state alleges all defendants committed civil conspiracy to commit fraud, gross negligence against SingerLewak and other charges against Textor and other individual defendants.
Textor’s attorneys in the bankruptcy, John Monaghan and Richard Lear of Holland & Knight in Boston and Washington, respectively, did not comment by deadline. Bankruptcy attorneys for the Digital Domain Florida legal entity, 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.
Creditors in the bankruptcy include such movie industry giants as Lucasfilm Ltd., Universal Studies LLC, Marvel Entertainment LLC and Walt Disney Studios Motion Pictures.