Ovitz Woes a Sobering Blow to Partners

It would be the perfect union in Hollywood.

At least that was the pitch Michael Ovitz used to seduce a pair of ambitious, young talent managers to become his partners in one of the most promising new multifaceted entertainment ventures.

Rick Yorn and his sister-in-law, Julie Silverman Yorn, were lured away from Industry Entertainment in late 1998 to help Ovitz launch Artists Management Group, bringing with them such star clients as Leonardo DiCaprio, Cameron Diaz and Benecio Del Toro.

Now, all eyes in the industry are on Ovitz and what his financial woes will mean for the future of AMG, the nucleus of an enterprise that promised to offer clients opportunities in movies, television, music and sports programming. On Wednesday, Ovitz was forced to acknowledge that one of his key operations--the production unit Artists Television Group--was faltering. Ovitz laid off nearly half of ATG’s 38-person staff, including the senior vice president of production.

What this ultimately means for the Yorns and their partnership with Ovitz in AMG is unclear.

Yorn insisted Friday that, contrary to suggestions that he and his sister-in-law are reconsidering their options, the two are committed to standing by Ovitz and AMG.

“ATG did not work. It’s unfortunate. But a lot of things don’t work . . . ,” Yorn said. “Our management company is in great shape. This doesn’t affect the management side at all. . . . We are not leaving, nor do we want to leave.”

Yorn asserted that AMG has “the best clients by far” in Hollywood. The company’s rosters also includes actors Lara Flynn Boyle, Heather Graham, Marissa Tomei, Robin Williams, Dylan McDermott and Dustin Hoffman; directors Martin Scorsese, Barry Levinson, Oliver Stone and John McTiernan; best-selling authors Michael Crichton and Tom Clancy; and tennis superstar Pete Sampras.

Asked whether he felt let down by Ovitz, Yorn said, “I’m not disappointed in Ovitz. I feel bad for my partner. Everybody hates this guy.”

Both Yorn and Ovitz said the financial problems besetting the TV operation would have no impact on their management company.

Although AMG expects a positive cash flow by year’s end, many industry experts believe the demise of Ovitz’s television arm could threaten the management company.

“It can’t be good for AMG,” said one entertainment deal-maker who does business with the firm and declined to be identified.

Before news of ATG’s financial struggles became public, the Yorns restructured their original deal with Ovitz late last year to bail out of the troubled television group.

“We hired a lawyer who was sophisticated in television because the business plan of ATG evolved and changed from when we started and we needed his help and advice,” Yorn said. He declined to articulate precisely why he and his sister-in-law ended their financial involvement with Ovitz in the television group.

The Yorns, who are near-equal partners with Ovitz in the management company, owned a smaller share of the television group.

In the original five-year deal, Ovitz gave the Yorns an inducement they had long sought: a guaranteed ownership interest in an innovative entertainment company. This was something that had proved elusive at their previous management and production company, Industry Entertainment, where the Yorns had spent most of their successful early years.

Their relationship with bosses Keith Addis and Nick Wechsler turned sour when the two Industry partners sold 51% of their company to Interpublic Group in August 1997 without offering the Yorns an ownership position.

One year later, when Ovitz pursued the Yorns, they asked Addis and Wechsler for early releases from their contracts. Months of negotiations followed until the parties agreed on a settlement. Under terms of the agreement, the Yorns agreed to pay Industry a certain portion of future commissions from clients they took to AMG.

But those payments stopped in January, said lawyer Patty Glaser, who represents Industry.

“We have an arbitration pending because we are owed in our view a significant amount of money that has not been paid by the Yorns,” Glaser said. “There was a set amount due in January that hasn’t been paid. Thereafter, there were commissions that we get a piece of that weren’t paid.”

While Glaser declined to specify how much Industry is claiming to be owed, the amount is believed to be more than $ 1 million, according to two industry sources who insisted on anonymity.

Asked about the matter, Yorn said, “There were some discrepancies, and it’s going into arbitration.”

Glaser said the arbitration is set for January.

Yorn also has battled over his legal entanglements with now jailed money manager-to-the-stars Dana Giacchetto. On Thursday, Yorn agreed to pay $610,000 to settle a dispute with the bankruptcy trustee for Giacchetto’s New York investment company.

The trustee alleged that Yorn had received more than $1.3 million in loans while the firm was known to be broke. Yorn denies any wrongdoing.