Hollywood Advisor’s Shadow Falling Across Former Clients

Money manager Dana Giacchetto’s arrest this week on charges that he pilfered $6 million from the accounts of his celebrity clients is a reminder of Hollywood’s weakness for fast-talking, good-looking con artists. And, when exposed as unsophisticates, how quickly they close ranks against the intruder.

Being mentioned with Giacchetto now has the cachet of finding your name in confessed Hollywood madam Heidi Fleiss’ address book. It requires a lot of explaining.

As the collateral damage in Hollywood piles up in the Giacchetto affair, those who lauded the Gen-X money manager just four months ago, from high-profile Hollywood players to heads of companies, suddenly are lying low. “Any time there’s a scandal, it isn’t beneficial to anyone near it,” says the attorney of a former Giacchetto client.

Back in December just as Giacchetto’s alleged scheme was unraveling, one Hollywood friend, an agent, said, “I adore Dana.” Said a female producer: “He has a really good heart. He may have just been distracted and made some mistakes. His biggest problem is how incredibly naive he is.”

A laughable defense now that Giacchetto faces as many as 20 years in federal prison on three criminal counts, if found guilty.

So who’s likely to suffer their association with the alleged yuppie scam artist?

Power broker Michael Ovitz and his young partner Rick Yorn both once considered Giacchetto a personal friend as well as financial guru. Yorn steered such high-profile clients as Leonardo DiCaprio and Cameron Diaz to the hip and cool money manager. Giacchetto claims to have been the matchmaker in the marriage between Ovitz and Yorn that spawned Artists Management Group. Ovitz last year was quoted saying, Giacchetto “is my life advisor.”

It’s a quote that looks especially silly when rehashed about a guy who was photographed earlier this week wearing a stocking cap pulled down over his eyes, looking like a new arrival in the federal witness protection program, escorted by FBI agents. It also hurts Ovitz’s image as a savvy businessman, especially on the heels of his debacle investing with another alleged shyster, Garth Drabinsky, in Livent Inc.

Ovitz and Yorn now deny Giacchetto was instrumental in their partnership. But they risk losing credibility with clients over the Giacchetto affair anyway.

“Completely endorsing someone who is a liar hurts your credibility,” says an Ovitz rival, ready to capitalize on the moment.

AMG sources claim it’s “a nonevent.” They say none of their clients lost money.

Ovitz let Giacchetto invest $300,000 of his money in options, and he says he lost no money. But allegedly, like many other Giacchetto clients, Ovitz’s money was being unknowingly tapped by Giacchetto to pay his bills and to cover his tracks by paying back others whose money he had lifted from their accounts. Giacchetto allegedly made powerful clients such as Ovitz whole with funds from lesser-known clients.

The biggest problem for Ovitz and Yorn is that it looks like they failed to protect their prize client, DiCaprio, from Giacchetto.

DiCaprio stayed in Giacchetto’s loft and went clubbing with him until dawn while Giacchetto basked in his friend’s “Titanic” success. The two buddies even had matching cockatoos, Giacchetto’s “Angel” and DiCaprio’s “Tiberius.”

DiCaprio once told the Wall Street Journal that although movie stars have “traditionally been exploited” by their money managers, Giacchetto has “educated me financially.”

Just as Giacchetto was star-struck by DiCaprio, so was the star awed by the world of finance the money manager helped expose him to. In fact, DiCaprio was escorted to the New York Stock Exchange by one of Giacchetto’s associates, who recalls, “For 75 seconds, he stopped the floor.”

Now, DiCaprio representative Ken Sunshine says, the star doesn’t want to talk about Giacchetto. DiCaprio’s lawyer sent Giacchetto a letter late last year cutting all ties.

Granted, Ovitz and Yorn aren’t the only ones whose reputations could suffer. Several agents from Creative Artists Agency, including President Richard Lovett, invested with Giacchetto.

One of the outside business managers that CAA worked with, Jerry Chapnick, linked their mutual clients up with Giacchetto. Chapnick was fired by clients Matt Damon and Ben Affleck over it. The two were livid that Giacchetto had traded on their names in the press.

Some say Chapnick, who himself was a Giacchetto client, failed his clients and suggest his reputation and business could suffer by association.

“Where was his fiduciary responsibility to his clients to be vigilant in making sure everything was on the up and up?” questioned one source.

An entertainment attorney observed, “I don’t think he did anything bad; he just turned it over [to Giacchetto]. . . . But clearly there are consequences here.”

Chapnick took a $100,000 cash loan from Giacchetto--which Chapnick has said he paid back in full--borrowing against the investments he placed with the money manager. “Why was he indebted to a guy like him?” asks one agent, who like many others are questioning the nature of that loan.

Chapnick’s attorney, Gordon Greenberg, would say only, “We are cooperating in the ongoing investigation [of Giacchetto] and don’t feel it’s appropriate to be quoted in the press.”

Chase Manhattan Bank also failed to catch Giacchetto’s alleged frauds. A 1998 Wall Street Journal story announcing the creation of an investment advisory fund with Chase Capital Partners quotes officials from the bank saying they “scrutinized” Giacchetto’s investment advisory business.

Even though Chase split from Giacchetto last year, its association with him risks staining its reputation as the premier entertainment lender. It also doesn’t help that Chase’s Brown & Co. brokerage allowed Giacchetto to keep clients’ money. Court papers show he routinely ordered up checks from Brown for clients without their knowledge, had them sent to him by Federal Express and then endorsed them for deposit in his accounts.

One has to wonder what Chase’s Brown & Co. was thinking, routinely issuing checks to Giacchetto such as the $100,000 one written to Matt Damon. Even more puzzling is why Giacchetto’s bank, U.S. Trust/Citizens, cashed them with only Giacchetto’s signature on them. At the very least, internal controls failed.

Still suffering from its ties to Giacchetto is Paradise Music & Entertainment, a small entertainment firm headed by Jesse Dylan, son of music legend Bob Dylan. Giacchetto was a consultant to the company, promising to raise money for it. In December, the firm cut its ties to Giacchetto and took a $330,000 charge related to the termination of that consulting agreement, according to documents filed with the Securities and Exchange Commission.

Paradise sources believe that Giacchetto sold all his stock as his financial woes worsened last year, depressing the price. Sources said the company is cooperating with the SEC’s investigation of Giacchetto and is considering suing him for such things as failing to deliver on promises to raise funds for the company.

“It’s like we were hit by a drunk driver and got thrown into jail for it,” one top company official said.

When asked why so many people in Hollywood and New York were drawn to Giacchetto, one top agent suggested, “At the bottom of this is greed.”

Someone who used to work closely with Giacchetto and his Cassandra Group, said he was amazed to find that “agents were blindly sending us checks for $300,000 and $400,000 and saying, ‘Please invest it for me.’ ”

The source, who claims he was never a fan of Giacchetto’s and is among those who predicted his inevitable downfall, added, “People don’t want to admit what they don’t know about their money.”