Fourth of five parts
Dana Giacchetto: The Scams Continue
One thing was for certain: Dana Giacchetto, who is due to be sentenced in a New York courtroom Wednesday, had found in Paradise Entertainment an easy way to manipulate funds.
In April 1999, he signed a deal as a consultant with the company and joined its board of directors. In exchange, he received a chunk of restricted stock.
Earlier in the year, Paradise stock had been so low it had almost been barred from trading. Then came Dana. Immediately he poured his client's money into Paradise. The stock price began to rise. No one questioned the impropriety of a money manager putting his clients into stock on whose company board he sat — or would pay him a bonus as the stock price rose to 8.
Giacchetto's clients, who thought they were rich, started asking for their profits. "And Dana was telling everyone he was a genius," says one insider.
But Giacchetto panicked. Needing cash as he pilfered from various accounts, he started selling off Paradise, and triggered an avalanche along the way. "He was selling it by the handfuls," says one investor.
Over a six-day period between Aug. 25-31, he made at least 90 transactions — all sales of Paradise stock. For the week of Aug. 23-30, the volume in trading of Paradise shares spiked from an average of about 20,000 to 1,841,600. In one week, the price of the stock opened at 4.625, peaked at 9.75, then fell back to 4.50. It closed at 5.3. In one week, Giacchetto had ravaged the company in a bid to save himself.
By Oct. 29, Paradise's stock price was at $3.25, and Giacchetto had cleaned out all his shares.
"Look at the volume," says one insider. "Dana caused the stock to spike and then took it down. Day traders looking at the stock jumped in and then followed suit."
The atmosphere in the Cassandra office became charged with tension. "People were calling and asking where the money was," says a back office staffer. "Dana would say don't talk to them. We would let the phone ring off the hook, literally. When they got us, they'd say, I thought I had this or that. And we'd say, this is what we see on your account. Otherwise, you'll have to speak to Dana, who wouldn't return their calls."
Having gotten past the Ovitz/Yorn dilemma, Giacchetto then faced a new problem. He had entered into a tentative deal to license Leo DiCaprio's name and likeness in Asia. The deal would have realized about $25 million and made him a hero for his friend. But the marketer, Lawrence Bathgate, a prominent New Jersey attorney and Republican party fund raiser, required Dana to put up $500,000 of his own money as security.
Giacchetto, of course, didn't have the money. And so the scramble began. What Bathgate never knew was the initial check Giacchetto wrote to their new joint escrow account on September 30, 1999 for $500,000 bounced. Giacchetto's bank balance on that day was only $139,000.
To make matters worse, Giacchetto also had some smaller checks to issue five days later — to director Ted Demme, to members of the Smashing Pumpkins, and to Springsteen E Street Band member Steve Van Zandt.
To make up for the missing money, according to Cassandra records, he looted again from Courtney Cox ($325,000), Lauren Holly ($200,000), and a clutch of less famous but nonetheless steadfast investors. The total he borrowed from those eight accounts, on just October 5, 1999, came to $1,375,000. (It would be the worst day of wholesale looting of accounts, with the runner-up being November 30, the day Giachetto helped himself to a million dollars from members of Phish, the rock group he ultimately stole $5 million from.)
But the end justified the means: Bathgate had his money. In order to get Bathgate's money, though, Giacchetto had to come up for a reason he was using clients' money. He seized on the idea that Digital Entertainment Network, a dicey venture that eventually closed amid fraud and sex harassment charges, was about to issue an initial public offering.
"Dana called maybe 10 of his best clients," says one, "and said he had the inside track on restricted stock for the IPO. As soon as it would be issued, the stock would peak, and we'd get our return."
DEN, however, was nowhere near the issuance of an IPO. Nevertheless, Giacchetto simply took the money from the accounts.
But in California, according to sources, Bathgate met with DiCaprio's lawyers, who told him there was trouble in paradise. The lawyers, according to sources, had heard from Yorn and Ovitz that something was wrong with their accounts. When Bathgate caught on that DiCaprio and other celebrity clients were bailing out of Giacchetto's business, the Republican fund raiser demanded and got most of the escrow money — including the monthly fee of $100,000 that Giacchetto was receiving as a stipend — returned to him to pay for expenses. "Dana was a good guy," says a source who worked on the deal. "But he only spoke in hyperbole."
According to one source, when Bathgate contacted the DiCaprios and the two sides compared notes, they realized Giacchetto had made different deals with the two sides. "Dana lied so much he probably couldn't remember what he'd said to either one," says a source.
On October 25, Giacchetto received his most crushing blow yet: two-sentence letters from DiCaprio, his father, and Tobey Maguire firing him as their money manager. (On November 2, according to Cassandra's ledgers, Giacchetto sent Maguire a check for $357,000. His balance on that day was negative $140,000. The check bounced.)
"Dana was very upset," says an intimate. "He said Leo didn't want to be his friend anymore. And you know, he worshipped Leo. They would walk around Little Italy together, Dana in his weird white outfit made out of sharkskin."
In his slander suit against former partners Jeffrey Sachs, Samuel Holdsworth and Robert Egan — a suit since dismissed — Giacchetto blamed Sachs for bad-mouthing him to DiCaprio. Sachs denies this.
But one wonders how Giacchetto was keeping all his stories and scams straight. On October 30, to make matters worse, one of the October 5 DEN "IPO" clients caught on that something was wrong. The client, one of Giacchetto's early supporters, demanded restitution. Instead, a Cassandra employee repaid the client with Giacchetto's personal funds — and promptly left the office, never to be seen again.
Not one to take a lower profile, Giacchetto continued to live flamboyantly. On November 11 he donated $90,000 to the New York Academy of Art for an event chaired by his client, Mammoth Records founder Jay Faires. It was a huge donation, and made with money stolen from more Brown accounts — those of a private family trust fund, Good Machine Films, and artists Ross Bleckner and David Salle.
"Goodness," said one Academy member, "we had no idea of course." And they didn't.
Giacchetto had promised Faires that he would raise money for the event. But when Faires called him on it, Dana had been unsuccessful. "So he just wrote the check himself," says an Academy source. "His back was against the wall."
Two weeks later, on November 16th, as a morbid punctuation to the Paradise debacle, former CAA agent and Ovitz protege Jay Moloney — whom Dana had installed on the Paradise board after years of struggle with drug abuse — committed suicide. A stream of celebrity clients, urged on by Ovitz and Yorn, exited en masse. Devastatingly negative articles began to appear.
If bad karma did exist, Giacchetto was certainly attracting it. On November 24th, the art gallery where Dana had bought his Bruce Naumann neon sign burned down mysteriously, taking with it Madonna's brother's new bistro, called Oriont. The gallery owner, Patrick Callery, was the former partner of Marianne Boesky, another client Giacchetto had stolen from, and was known for being Leonardo DiCaprio's art dealer.
For anyone else, the party would have been over. But there was life left in Dana Giacchetto.