The largest creditor of Axium International Inc. sued the company’s former principal owners on Tuesday, alleging massive fraud and theft a week after the Hollywood payroll service provider filed for liquidation bankruptcy.
In a lawsuit filed in federal court in Los Angeles, investment firm GoldenTree Asset Management said Axium’s former principals, John Visconti and Ron Garber, treated the company “as their own personal piggy bank to finance their extravagant lifestyles.”
Visconti and Garber, according to the suit, used Axium funds to lease private jets and ultra-luxury cars, including Rolls-Royces and Aston Martins, for personal use; paid for personal gifts and vacations using corporate credit cards; made personal political contributions with Axium money; maintained secret bank accounts; and spent the money “without any apparent business purpose.”
GoldenTree said it extended $130 million in financing from 2004 to 2007. Last week, GoldenTree swept $22 million from company accounts that had secured the loan on which Axium defaulted, said Howard Ehrenberg, the court-appointed bankruptcy trustee who oversees Axium’s finances.
New York-based GoldenTree said it was unable to determine the precise amount of monetary damages but believed them to top $87.5 million.
The suit also names Visconti’s and Garber’s ex-wives, Maha Visconti and Susan Cruz, alleging that they benefited “directly and indirectly,” including access to luxury cars paid for by Axium funds.
GoldenTree declined to comment Tuesday.
Visconti and Garber, through a spokesman, also declined to comment. On Monday, before the suit was filed, they issued a joint statement denouncing “false claims” made about them and pledging to “take steps to make sure that the facts regarding this situation will come out.”
“First of all, we are not responsible for ‘pulling the plug’ on the company,” they said. “We have always had our employees’ best interests at heart and we know they are hurting. However, this situation was totally beyond our control.”
Axium closed its offices in Los Angeles, Burbank, New York, London, Toronto and Vancouver, Canada, on Jan. 7. An e-mail from an Axium executive in New York that day told stunned employees to leave and not come back.
Fallout from the company’s abrupt closing stung entertainment industry workers suddenly holding worthless paychecks, production companies with thousands of dollars frozen in payroll accounts, and about 400 Axium employees who were fired.
On Monday, about 25 former Axium workers gathered outside the company’s Burbank office to air their frustrations. They said they had not received their last paychecks, severance pay or vacation cash-outs. Many said they lived paycheck to paycheck, so losing their jobs left them scraping to pay mortgages and make car payments.
“I took out a chunk of money yesterday because I have overdraft protection, and that’s what I’m living off,” said Miescha Montoya, a former payroll coordinator from Lancaster, as colleagues consoled each other nearby. “Once that’s gone, there’s nothing else.”
Also on Tuesday, Ehrenberg, the bankruptcy trustee, said he had identified potential buyers for the assets of Axium and one of its subsidiary companies: Ensemble Chimes Global, or ECG, a provider of contract workers and other personnel services.
ECG’s assets will be auctioned in U.S. Bankruptcy Court in Los Angeles on Jan. 23, Ehrenberg said. The opening bid for the company is $7.5 million. Last year, Axium paid $80 million in cash to acquire Chimes Inc., which was combined with another Axium subsidiary to form ECG.
Axium’s assets are expected to be auctioned the next week but no sale date has been set, Ehrenberg said. The opening bid for the company is likely to be about $2.5 million, he said.
The opening bidder for ECG’s assets is Barry Olson, former president of Chimes, Ehrenberg said. He declined to disclose the potential opening bidder for Axium’s assets.
After the assets are sold, it’s likely that most of the companies’ former employees will be rehired, Ehrenberg said.
“Hopefully the buyers will be able to stop the bleeding of customers and be able to maintain and recapture business that may have been lost,” he said. “It’s only been one week since the company shut down, so hopefully it hasn’t been irreparable.”