Burkle-Riordan accord reported
A legal battle between former Los Angeles Mayor Richard Riordan and billionaire businessman Ron Burkle over an investment has ended before Burkle was even served with court papers, according to Burkle’s spokesman.
In a lawsuit filed Thursday in Los Angeles Superior Court, Riordan alleged that Burkle not only refused to let the former mayor -- and once close friend -- out of the deal, but changed investment strategy without letting the investors know.
The lawsuit, which sought unspecified damages, stems from a 1999 investment of $5 million that Riordan made with Burkle, who acquired his fortune mostly by buying and selling supermarket chains and who founded a powerful private equity firm with stakes in various industries
When Burkle, 54, found out about the Riordan suit, he dispatched a letter to the former mayor saying he was “shocked and surprised” and offering a buyout.
“It’s been resolved,” said Burkle spokesman Frank Quintero. “They had a very cordial, pleasant conversation last night.”
In that phone call, according to Quintero, the two men agreed that Riordan, 77, would donate the money to the Puente Learning Center and LA’s Best, an after-school program.
It’s unclear exactly how much will be recouped from Riordan’s $5-million investment. “It’s not a material amount of money, but I would be remiss if I did not advise you that this is a bad time to sell,” Burkle said in the letter.
Phone calls to Riordan’s office Friday were not returned.
According to the lawsuit, Riordan was eager to get into high-tech ventures when he invested with one of Burkle’s “partnership-style investment vehicles” -- the various entities that comprise Burkle’s Yucaipa Cos. -- which in turn invested in Alliance Entertainment Co., a provider of CDs, DVDs and videos.
Riordan said in his suit that he was told he would have an opportunity to cash out within a few years. In 2005, Alliance became part of the publicly traded Source Interlink and since then, the suit stated, “Source Interlink’s stock has steadily declined from nearly $14/share to about $4/share, today.”
Yucaipa Cos. owns about a third of Source Interlink, making it the largest shareholder. Source Interlink paid $1.2 billion in May for a specialty magazine unit, causing some analysts to publicly question whether Source Interlink had paid too much.
Riordan said in his suit “that Mr. Burkle has forestalled realizing losses in these companies whenever possible, in order to continue to falsely perpetuate the myth of his being a billionaire, ‘legendary investor’ with superior rates of return.”
Riordan’s investment is part of the partnership’s investment.
In Burkle’s letter to Riordan, he wrote, “It has always been my principle that partners go into an investment together and get out together. Having said that, and because I know you’ve had a rough year with many challenges, I am willing to take you up on the offer you made . . . that we buy your partnership interest.”