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EXCLUSIVE: Hollywood investment company asks to reopen fraud lawsuit against Treasury Secretary Steven Mnuchin, claiming he helped swindle $81m out of investors in Ponzi-like scheme

  • RKA Film Financing has asked an appeals court to reopen a fraud lawsuit against U.S. Treasury Secretary Steven Mnuchin 
  • The Hollywood company claims the former Wall Street executive helped the failing Relativity Media swindle $81m in investments
  • The case against Mnuchin was first tossed in June but RKA appealed in August
  • RKA claims Mnuchin – who invested $50m into Relativity – knew the company was failing and using investments to pay salaries and debts 
  • The financial state was said to be so dire that Relativity used its office space to film porn movies
  • Mnuchin resigned from the company in 2015 and withdrew his investment the next day; Two months later Relativity declared bankruptcy

A Hollywood investment company is asking an appeals court to reopen a fraud lawsuit against U.S. Treasury Secretary Steven Mnuchin, claiming he helped swindle the investors out of millions of dollars as part of a Ponzi-like scheme 2015.

RKA Film Financing claims Mnuchin and other senior leaders at Relativity Media misled it into investing $81million into Relativity's financially troubled movie funding division. 

Relativity then allegedly used the money to pay off salaries and other personal expenses rather than investing in films before declaring bankruptcy in 2015.

A New York judge previously tossed the case against Mnuchin – the former co-chairman of Relativity's board – in June, saying there was no evidence he was aware of the alleged fraud. 

But RKA is appealing that decision and is asking the court to restore Mnuchin as a defendant.

RKA Film Financing has asked an appeals court to reopen a fraud lawsuit against Treasury Secretary Steven Mnuchin (pictured), claiming he helped swindle $81million out of investors when he was co-chairman at Relativity Media

RKA Film Financing has asked an appeals court to reopen a fraud lawsuit against Treasury Secretary Steven Mnuchin (pictured), claiming he helped swindle $81million out of investors when he was co-chairman at Relativity Media

The appeal threatens to revive scrutiny over the Treasury Secretary's business practices during his time in the private sector. 

Mnuchin was criticized by Democrats for controversial investments, including his involvement with Relativity, during his confirmation hearing last February. 

RKA argues in court documents that Mnuchin 'knew that Relativity was a failing enterprise' but allowed the company to misrepresent its finances to RKA while he was serving on Relativity's board. It said he also engaged in 'repeated misrepresentations' in order 'to misappropriate millions of dollars from unwitting investors.'

RKA claims Mnuchin – who invested $50million in Relativity and was friends with the company's owner – was aware the film studio was using its film funding division to pay off general operating expenses such as salaries and bonuses.

But the company claims he kept his mouth shut so that Relativity could continue operating and pay back Mnuchin's $50million investment before it declared bankruptcy.

'Mnuchin knew this to be false and misleading, yet never disclosed same to RKA,' said RKA in documents filed with the New York appeals court on Aug. 11. 

'Worse, as Co-Chairman of Relativity's Board of Directors and playing a key role in attracting and obtaining further funding for Relativity, Mnuchin knowingly and willingly allowed Relativity to continue making material misrepresentations to RKA.'

RKA claims Mnuchin ¿ who invested $50m in Relativity ¿'knew it was a failing enterprise' and was aware it was using its film funding division to pay off salaries and debts. The former Wall Street executive was hand-picked by Trump (pictured together) and sworn in in February

RKA claims Mnuchin – who invested $50m in Relativity –'knew it was a failing enterprise' and was aware it was using its film funding division to pay off salaries and debts. The former Wall Street executive was hand-picked by Trump (pictured together) and sworn in in February

RKA said it initially invested in Relativity's film financing division after being told by the company that this was a 'low-risk' investment that would solely fund advertising expenses for major upcoming films.

Instead, RKA claims its money was used to 'pay salaries and bonuses of Relativity personnel, its contractual debts, and its other general corporate expenses,' and to 'allow other investors to decrease their financial exposure in the event of Relativity's financial demise.'

The investment also 'provide[d] Relativity a lifeline to continue operations and attract more unwitting investors,' said RKA.

The company said Mnuchin was aware of Relativity's financial problems through his own due diligence as an investor and his position as board co-chairman. RKA said the law firm Jones Day gave Mnuchin an assessment of the company's financial situation in 2014.

'Years of involvement in Relativity and multiple rounds of due diligence provided Mnuchin a clear window into how Defendants [operated the film advertising division],' said RKA. 'Relativity's Board, including Mnuchin, was intimately involved in the Company's financial decisions.'

'[T]he court below erred because it failed to consider that Mnuchin's knowledge of and participation in the fraud can be inferred through Mnuchin's position as Co-Chairman of Relativity's Board while the fraud was ongoing,' the company added.

RKA argued that Mnuchin's insight into the company went beyond business. He reportedly had a close relationship with CEO Ryan Kavanaugh, who is being sued by RKA as well
Ryan Kavanaugh, CEO, Relativity Media

RKA argued that Mnuchin's insight into the company went beyond business. He reportedly had a close relationship with CEO Ryan Kavanaugh (right), who is being sued by RKA as well

Mnuchin was on Relativity's board and has been credited as an executive producer in blockbusters such as Suicide Squad and American Sniper. Pictured: Mnuchin with his former wife Heather and actor George Clooney

Mnuchin was on Relativity's board and has been credited as an executive producer in blockbusters such as Suicide Squad and American Sniper. Pictured: Mnuchin with his former wife Heather and actor George Clooney

RKA argued that Mnuchin's insight into the company went beyond business. He reportedly had a close relationship with Relativity CEO Ryan Kavanaugh, who is being sued by RKA as well.

'Mnuchin's unique vantage was also made possible by his longstanding personal and professional ties to Relativity's CEO (Defendant Ryan Kavanaugh), who considered Mnuchin a trusted advisor and friend,' said RKA.

Kavanaugh was also sued in January for fraud by Relativity's former president, Adam Fields, who claimed the money problems at Relativity were so dire that the company's office was used to film porn movies.

Mnuchin has previously denied RKA's allegations, calling the claims 'frivolous' and claimed he had no involvement with RKA's investment.

'RKA never once spoke with, corresponded with or otherwise dealt with Mr. Mnuchin,' said Mnuchin's then-spokesman Barney Keller in February. 'RKA's allegations are preposterous, don't deserve coverage…and Mr. Mnuchin's inclusion in this complaint is gratuitous and insulting.'

Mnuchin asked to be dismissed from the lawsuit in March, and a New York Supreme Court judge granted his request in June.

'RKA does not sufficiently establish that Mnuchin was aware of the alleged misrepresentations and their implications. Mnuchin's personal friendship with Kavanaugh is insufficient to establish awareness or liability,' said the judge.

Vice President Mike Pence officiated the wedding of Mnuchin and his third wife Louise Linton on June 24, in Washington DC (pictured). The 36-year-old actress wore a custom Ines Di Santo gown and her wedding ring and earrings were by Martin Katz

Vice President Mike Pence officiated the wedding of Mnuchin and his third wife Louise Linton on June 24, in Washington DC (pictured). The 36-year-old actress wore a custom Ines Di Santo gown and her wedding ring and earrings were by Martin Katz

The newly married woman came under fire last month for posting a photo on Instagram, tagging her luxury clothing, worth more than $4,000
She fired back at a woman who made a scathing comment about the trip

The newly married woman came under fire last month for posting a photo on Instagram, tagging her luxury clothing, worth more than $4,000 (left). She fired back at a woman who made a scathing comment about the trip (right)

Mnuchin resigned from Relativity's board on May 29, 2015 and pulled out his $50million investment the next day. 

Two months later Relativity declared bankruptcy, defaulting on other investments. During his confirmation hearing, Democrats suggested that Mnuchin was given an inside deal.

'[Mnuchin's company] OneWest pulled out $50million, emptying several Relativity accounts, including one earmarked for guild expenses that included wages for contractors and tradesmen,' said Sen. Ron Wyden at the hearing. 'Mr. Mnuchin bailed out just before the studio declared bankruptcy.'

Other remaining defendants in the RKA lawsuit include Colbeck Capital Management LLC, Colbeck Capital, LLC, Colbeck Partners IV, Jason Colodne, Jason Beckman, David Aho, Ramon Wilson, Andrew Matthews, Greg Shamo and Tucker Tooley, according to the August court filing.

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ABOUT THE AUTHOR celebrityrave

Journalist, writer and broadcaster, based in London and Paris, her latest book is Touché: A French Woman's Take on the English. Read more articles from Agnes.

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