Treasury Nominee Steve Mnuchin Blasts Relativity Fraud Claims: ‘Gratuitous and Insulting’

Former movie producer named in $110 million lawsuit against embattled studio

Last Updated: February 4, 2017 @ 4:15 PM

Treasury Secretary nominee Steve Mnuchin is hitting back against fraud allegations from his Hollywood days.

The former show business player and Trump administration hopeful responded to a lawsuit from RKA Film Financing, a lender to the barely-breathing movie company Relativity Studios, which claims the former board member and others misappropriated funds meant for promoting films.

“The claims against Steven Mnuchin are the same frivolous claims that were previously rejected by the court. RKA never once spoke with, corresponded with or otherwise dealt with Mr. Mnuchin. RKA’s allegations are preposterous,” Mnuchin spokesperson Barney Keller told TheWrap.

“Mr. Mnuchin’s inclusion in this complaint is gratuitous and insulting. On November 12th Mr. Mnuchin’s counsel wrote to RKA and warned them that if they re-asserted these baseless claims against Mr. Mnuchin, he would seek sanctions from the court. Mr. Mnuchin intends to follow through on that warning,” Keller added.

RKA claims that Relativity borrowed money for P&A — prints, advertising and other costs related to promoting the release of its movies — and then used those funds instead to finance operations and pay executive bonuses. It is seeking $110 million in damages.

“In reality, all of the Defendants knew that Relativity was a failing enterprise, and that, rather than financing P&A expenses, the P&A Facility was always intended to, among other things: pay salaries and bonuses of Relativity personnel, its contractual debts, and its other general corporate expenses,” the papers said.

RKA’s three rounds of investment in Relativity came over the course of a harrowing bankruptcy saga, in which the studio attempted to release films such as Kate Beckinsale’s “The Disappointments Room,” Halle Berry’s “Kidnap,” Kate Bosworth’s “Before I Wake” and “Masterminds.”

“Kidnap” and “Before I Wake” are still unreleased, which is the basis for RKA’s claims that their funds have not been applied to release campaigns.

The suit also alleges the Relativity financier Colbeck Capital was given priority to “decrease their financial exposure in the event of Relativity’s financial demise.”

The amended suit claims fraud, fraudulent inducement and negligent misrepresentation, and seeks roughly $110 million in damages.

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