A Shot of Trouble, Served Straight Up

Ian Schrager and Rande Gerber together brought red hot and cool bars to Schrager’s boutique hotels on both coasts. Now the relationship is on the rocks.

Earlier this month, Schrager sent bar czar Gerber a letter of intended termination from the Skybar on the Sunset Strip, which, since its opening in late 1996, has been a watering hole for the ultra-hip, stick-thin people in black with real or tenuous ties to show biz. “He’s out,” says Schrager attorney Stanley Arkin. “Out.”

Not so fast, counters Gerber who last week filed suit in Superior Court charging Schrager’s companies with financial hanky-panky--in legalese, “malicious, oppressive, and/or fraudulent” misappropriation of funds, including wrongly charging more than $1 million in hotel operating expenses to the Skybar, which sits poolside at the Mondrian Hotel, overlooking the city.

As for Schrager’s attempt to oust him from the club for breach of contract for his alleged plans to open a competing bar, Gerber claims it is Schrager’s move to terminate him that is unlawful and the action of a man angry with him for rejecting his demands to be exclusive to Schrager hotels.

And so, beneath the cloak of the glitz and glamour of the Strip, the increasingly uneasy alliance between Schrager, 54, and Gerber, the 38-year-old husband of supermodel Cindy Crawford, has escalated into full-scale Bar Wars.

“Pure rubbish,” Schrager said of Gerber’s accusations. “The Gerber boys got caught with their fingers in the cookie jar.”

In his suit, Schrager charges that Gerber did an end run around him and made plans with a rival hotelier to open a bar in the Grafton on Sunset (formerly the Park Sunset), just an olive’s throw from Skybar. In fact, Schrager won a permanent injunction last month in New York Supreme Court barring Gerber from involvement in operation of a planned Cuban-themed bar-restaurant at the Grafton.

“I would never go to court over money,” says Schrager. “I went to court over honor.” He adds: “A bar here and a bar there is not very important to me,” and points out that his 14-hotel international empire is valued in excess of $2 billion. He accuses Gerber of treachery, disloyalty, dishonesty, and “filching” trade secrets--in short, making underhanded deals with Schrager’s rivals.

Gerber says only his brother and business partner, Scott Gerber, was involved in the Grafton deal, a claim that Schrager dismisses as “a transparent scheme.”

Schrager lawyers say Rande Gerber was indeed involved in the Grafton deal, citing magazine articles and publicity releases that have “trumpeted Rande Gerber’s involvement to create the proper ‘buzz’ ” around the proposed club. And, Schrager charges, a paper trail shows the deal was negotiated with Rande Gerber under the umbrella of his Midnight Oil company.

The permanent injunction also forced the Gerbers out of operation of the Wet Bar in Manhattan’s New W Hotel-The Court, which is owned by Starwood Hotels and Resorts Worldwide, a mammoth company that has gobbled up Westin and ITT/Sheraton. The New W is only blocks from Schrager’s Morgans hotel on Madison Avenue, where Rande Gerber still operates Morgans bar.

A supplemental complaint filed by Schrager attorneys accuses Gerber of being in cahoots with Starwood to undermine Schrager bar operations for their profit.

Gerber had some choice words about that. “Ian Schrager lied to the government about his taxes when he ran Studio 54 and was sent to prison for it. Then he lied to the government about hiring minorities at the Mondrian Hotel and had to pay $1.08 million in damages. Now he’s lying again,” says Gerber.

That’s “the statement of a desperate person,” responds Schrager. “It doesn’t deal with the issue--the violation of our agreement. I got in trouble almost 25 years ago and made a very, very bad mistake. I’m really proof that the system works.”

Once co-owners of New York’s fabled Studio 54 disco in the ‘70s, Schrager and his partner, the late Steve Rubell, served 13-month prison terms for income tax evasion.

Gerber’s Mondrian reference is to the recent settlement of a racial discrimination complaint filed by nine bellmen--all minorities but one--who were fired after the hotel’s renovation in 1996 and replaced by 15 white bellmen.

“The color of their skin had nothing to do with it,” says Schrager. “I am married to a Latin woman. Most of my in-laws don’t even speak English.” (That may soon be ex-in-laws. It was announced last week that the hotelier and his wife of six years, Rita, have split.) L.A. is about show business, Schrager says, and at the Mondrian, “I’m looking for people who have a presence and a vivaciousness and an enthusiasm.”

Schrager says he never tried to rein in Gerber and had no problem with his “leveraging the success he had with us. That’s the American way. [But] I can’t be in business with somebody I don’t trust.”

He gave Gerber his first opportunity, Schrager says, but then “he began to believe the headlines. He began to think he was bigger than his word. That’s where he made his fundamental mistake.” Arkin says, somewhat more inelegantly, “Ian made Rande. Now he’s a little too big for his pants.”

The Skybar, of which Schrager companies directly or indirectly own 99% and Gerber 1%, has been a lucrative venture for both. Their contract called for Gerber to manage the bar and for revenue (excluding that from private parties) to be split evenly between Schrager and Gerber companies.

Schrager is fuming too over what he calls “theft” of the Skybar trademark, charging that Gerber interests registered the name with the U.S. Patent and Trademark Office in California and have refused repeated requests to give it back to him, the rightful owner. Further, he charges, Gerber planned to use it to open Skybar 2 in Los Angeles. Gerber’s spokesman says there were no such plans.

In a separate suit filed in Superior Court, Gerber claims that he created the Skybar name and “created the cachet” associated with it, while Schrager is “seeking to capitalize on the success of the name” and take it as his own through intimidation and without compensation.

Annual revenue from private functions alone at the Skybar exceeds $750,000. Schrager gets 12.5% off the top, which, he says, so irks Gerber that he struck the Grafton deal “with the purpose of diverting party business away from Skybar.” Gerber, meanwhile, claims in his suit that Schrager diverted Skybar moneys to his Mondrian Hotel profits in numerous ways.

Schrager and Gerber are even squabbling over who was the creative genius behind their bars. Schrager says he “conceived, planned and built the bars.” Gerber asks, “If his concept is so special, why did he have to ask me to create, promote and run the Skybar? People come to the Mondrian Hotel because of the Skybar and not the other way around.”

With Gerber interests out at the Grafton, the bar-restaurant space likely will be taken over by owners of the Sushi Roku restaurants in Hollywood and Santa Monica. “We’re in final talks,” confirms Sushi Roku partner Lee Maen. Plans call for a bar lounge with “a very New York feel” and a “high-end restaurant with Americana cuisine.” The projected opening date is December.

The Schrager-Gerber saga began in 1990 when Schrager, whose chain of boutique hotels also includes the Miramar in Santa Barbara, the Delano in Miami, and Morgans, the Royalton and the Paramount in New York, took the former Ford agency model, then a real estate agent, under his wing to operate the Whiskey Bar at the Paramount.

Gerber proved to be a quick study. Today he is chief executive and a majority stockholder in Midnight Oil, a multimillion-dollar company that owns or operates a nationwide chain of Whiskey Bars, including one at the Sunset Marquis hotel in West Hollywood. He also operates cafes in five Giorgio Armani stores.

Although the Gerber-Schrager contract has eight years to run, both say they want out. And now. Gerber says he has offered to buy Schrager out of their two remaining collaborations, the Skybar and Morgans bar--or to have Schrager buy him out. “But Ian does not want to end our partnership. He wants me working exclusively for him.” In his lawsuit filed last week, Gerber says Schrager wants it both ways--to terminate him and bar him from going into another bar operation in California for two years.

He says, “Our dispute with Ian Schrager will be decided in court. To paraphrase Harry Truman, ‘If he’ll stop lying about me and my family, I’ll stop telling the truth about him.’ ”

For his part, Schrager says he feels “betrayed” and is anxious to end a relationship that “has outlived its usefulness. . . . My business will go on without skipping a heartbeat.”

Seems unlikely the two will work things out over a drink any time soon.

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Beverly Beyette can be reached at beverly.beyette@latimes.com.