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"Sillerman took The Firm's business concept and misused his position as a director (on The Firm's board) to effectively force The Firm to abandon its own plans and either proceed with the proposed merger with FXM or face having FXM as a formidable competitor."
——the lawsuit against Sillerman
THE FIRM-SILLERMAN DEAL
HEADS TO COURT
Top Management Company Sues Former SFX Chief For $1 Billion-Plus—Whoa
Just weeks after the collapse of Robert Sillerman's ambitious plan to create a super management entity by purchasing existing talent companies (hitsdailydouble.com, 12/12), managerial powerhouse The Firm filed suit late Thursday (1/4) against the former SFX chief, citing breach of contract and fraud, according to a court filing.

The Firm, the first of several management companies to join Sillerman's planned venture FXM, also names former SFX executive and Sillerman loyalist Mike Ferrel in its suit. The court action asks for a declaration of rights and unspecified damages allegedly caused by Sillerman and Co.'s inability to close the reported $200 million purchase of The Firm, Hitsdailydouble.com has learned.

Sources indicate that The Firm's claim for damages could total in excess of $1 billion.

FXM and The Firm principals could not be reach for comment, while representatives for both companies were also unavailable at press time.

According to The Firm's complaint, Sillerman allegedly used The Firm's planned business model to create a new major management company, and then threatened to become its competitor (through other acquisitions) if they did not agree to merge with FXM, the suit alleges.

"Sillerman took The Firm's business concept and misused his position as a director (on The Firm's board) to effectively force The Firm to abandon its own plans and either proceed with the proposed merger with FXM or face having FXM as a formidable competitor," the suit reads.

At issue is Sillerman's highly publicized big-bucks plan to reinvent the management business by creating a colossal company through the rapid purchase of existing management companies, much like he did with the live entertainment industry through SFX, which brought him over $4 billion when it was sold last year.

The entrepreneur began his big management move in November (hitsdailydouble.com, 11/14) by agreeing to purchase The Firm for a reported $200 million. The Firm's clients include Backstreet Boys, Korn, Limp Bizkit, Martin Lawrence, Ice Cube and Michael Jackson. While securing that deal, Sillerman, through FXM, was reportedly in talks with such other top management companies run by Howard Kaufman, Cliff Burnstein and Peter Mensch and Jim Guerinot, among others.

However, the completion of the funding for Sillerman's acquisition of The Firm and others never happened as he apparently ran afoul of a non-compete clause in the SFX-Clear Channel deal, sources said. [Clear Channel reportedly obtained a 4% stake in the new company.] The Firm suit alleges the executive did not disclose, at that time, that he was already in negotiations to sell SFX to Clear Channel.

The suit also says that Sillerman, while at the helm of SFX, invested $25 million in The Firm for a 16% stake in the company, which he was allowed to retain after the Clear Channel purchase was finalized. The non-compete clause apparently legally prevented Sillerman from increasing his stake in The Firm or purchasing other management companies, the suit alleges. The Firm says in its filing that Sillerman did not disclose the non-compete issue during its merger negotiations.

On Nov. 13, Sillerman went public with his managerial move, stating: "The Firm, whose name will not change, will continue to provide the vision and service that its clients and their fans have come to expect. However, they will benefit greatly from the expanded resources FXM will afford them. Over the next few weeks, we look forward to several more major announcements," referring to the other management companies that Sillerman had set his sights on.

BLACKOUT TUESDAY: HOW THE MAJORS RESPONDED
(6/5a)
HARLESTON, HABTEMARIAM LAUNCH UMG TASK FORCE
(6/5a)
SONY MUSIC SETS UP $100M FUND
(6/5a)
10K OPENS FUND TO AID BLACK YOUTH
(6/5a)
BLACK MUSIC MONTH: THE REVOLUTION WILL NOT BE TELEVISED
(6/5a)
WHAT NEXT?
The biz ponders action after some reflection.
GRAMMY SPECULATION
100% guaranteed to be somewhat accurate, probably.
BLACK MUSIC MONTH
...continues.
TRUMP'S IN THE BUNKER
Just to inspect it, though.
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