Stallone Sues Over Planet Hollywood Stock Losses
Fri Feb 15, 5:52 AM ET
HOLLYWOOD (Variety) – Actor Sylvester Stallone has filed a $17.3 million lawsuit against a business manager who urged him to hold onto Planet Hollywood stock as the share price spiraled downward and the theme-restaurant company plunged into bankruptcy.
Stallone, in a complaint filed in Los Angeles Superior Court, claimed that Kenneth Starr, a business manager with many celebrity clients, cost him more than $10 million by repeatedly advising Stallone to hang on to more than 3.9 million shares of Planet Hollywood International stock.
Stallone received the shares in exchange for promotional work for the movie-themed restaurant chain, which went public in 1996 with help from Stallone, Arnold Schwarzenegger and Bruce Willis. The shares peaked in September 1996 at $28.50, making Stallone’s stake worth more than $111 million.
Starr allegedly “had actual or constructive knowledge of the poor financial condition of Planet Hollywood” because he also represented Keith Barish, a member of the company’s board of directors and a large shareholder. Financial information about the company normally sent to Barish also went to Starr, the suit said.
When Stallone became a Starr client in 1997 at the suggestion of Barish, Planet Hollywood stock was trading at between $16 and $20, making Stallone’s investment worth $60 million to $80 million.
Starr, when asked by Stallone or his assistant about selling the stock, said he shouldn’t, that a sale would hurt the company by sending the wrong message to the stock market, and that the price of the stock could be expected to go much higher, the suit said.
Starr allegedly made similar statements over several years as the stock price continued to go down. The company filed for bankruptcy in October, 1999. Stallone eventually sold his shares in March, 2000 for less than ten cents apiece and netted $295,256.74, the suit said.
Starr allegedly told others that Planet Hollywood was heading for bankruptcy at a time when the stock was still trading at more than $5, the suit said.
Stallone also complained in the lawsuit that despite instructions to invest only in conservative, liquid investments, Starr lost some $7.3 million by putting the actor’s money in three high risk, illiquid mutual funds.
– Craig Zablo (February 17, 2002)