EXACTLY HOW PHAT IS LYOR?
That’s the amount the newly anointed WMG N.A. chief supposedly earned from a 16% share in Russell Simmons’ Phat Fashions, which he valued at $5.5 million in a personal financial statement filed in his legal battle with Steve Gottlieb’s TVT.
The rap mogul is now in more hot water, as TVT lawyers have accused him of misrepresenting his net worth, which could lead to contempt of court or perjury charges and a criminal investigation.
Federal magistrate Debra Freeman ruled two weeks ago that TVT can take new testimony to determine whether Cohen intentionally understated the value of his Phat Fashions stake.
The financial statement is important because federal Judge Victor Marrero, who presided at the trial, used it as the basis to reduce the $56 million punitive damage award against Cohen to $3 million.
Cohen testified last April that his net worth was $29 million, with $5.5 million of that attributed to his Phat Fashions stake. Clothing manufacturer Kellwood Cothe purchased the company for a reported $140 million earlier this year from Simmons. Based on his stake, Cohen earned $22.4 million in the deal.
TVT is asking the court to levy "substantial sanctions" against Cohen for "repeated material misrepresentations" of his net worth.
In his court statement, Cohen claimed $1.1 million in cash and equivalents, $248k in collectible personal loans and $14 million in investments.
He also listed more than $10 million in real estate holdings, including "ownership interest" in a residence on 94th St. in Manhattan, which was valued at $7.5 million in January 2002.
Cohen also owned a residence on Park Avenue which he sold for $2.2 million last year.
In addition, he reported owning $1.9 million in personal property, including artwork, jewelry, furniture, automobiles and assorted bling-bling, with $770k in deferred cash and stock compensation accounts with UMG.
The legal battle goes back to 2002, when TVT first sued Cohen and Def Jam for blocking the release of an album featuring Ja Rule and Irv Gotti.
Last May, a federal jury in N.Y. ordered Cohen and Def Jam to pay TVT $24 million in compensatory damages after finding the defendants liable for fraud, interference with contractual relations and copyright infringement. Def Jam was ordered to pay an additional $52 million in punitive damages, while Cohen was personally ordered to pay $56 million in punitive damages.
Last September, the judge reduced the punitive damage award to $3 million against Cohen and $24 million against Def Jam, with compensatory damages upheld.
The latest move comes in the midst of an appeal of the jury verdict by Cohen and IDJ that jurors were prevented from considering all evidence in the case. TVT, which has yet to receive any payment, insists in their latest motion, filed Feb. 5, that Cohen’s valuation of his share in Phat Fashions was "grossly and materially understated."
Cohen’s lawyers argue that his investment was based on a valuation assigned during a "capital transaction" which occurred May 2002. The judge has since ruled that TVT could conduct discovery on what Cohen knew about his interests in Phat Fashions and the company’s value, prior to Sept. 2, 2003, when the damages were reduced.
If TVT can find evidence that Cohen had information about the company that differs from his statements regarding his net worth, the judge will hear further arguments about how to proceed. Questioning of Cohen is limited to what he knew about the value of the company before Sept. 2. 2003.
TVT must produce explicit documentation between Cohen and another party regarding Phat Fashion’s value. Insiders insist TVT’s complaint against Cohen is a reaction to the possibility the label’s appeals process will turn out poorly.
