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The back story behind reality star and ousted Elite World Group chief executive officer Julia Haart’s losing court battle with estranged husband Silvio Scaglia has been revealed in a 52-page opinion by a judge from Delaware’s Chancery Court.
The decision, written by vice chancellor Morgan T. Zurn and filed Aug. 4, exposes Scaglia’s efforts to maintain control of Elite World Group despite his public proclamations that he and Haart were equal partners. But the judgment concludes that neither party had clean hands.
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Haart, the former creative director of La Perla, was fired from her position as CEO of Elite last February, amid the couple’s deteriorating relationship. Hours after she was ousted, she filed for divorce from her Italian business mogul husband and in a separate Manhattan Supreme Court sued Scaglia, characterizing him as a “liar and a fraud” who owes her millions from her share of Elite parent Freedom Holding Inc, according to court documents.
According to the Chancery Court motion, Freedom “began reporting in financial statements that Scaglia and Haart owned Freedom equally.” In reality, and apparently unbeknownst to Haart, Scaglia maintained one share more of Freedom stock than his wife. A razor thin margin of control that was apparently unbeknownst to Haart at the time.
As Zurn wrote: “Despite the appearance of an equal partnership, the evidence reveals that Haart never owned an equal stake of Freedom’s preferred stock.”
But, according to court filings, Haart first became aware that her husband was deceiving her back in 2020. That’s when Freedom entered into a negotiation with Gabelli Group Capital Partners over a possible SPAC transaction for Elite. At the time, Haart was CEO of Elite, but Scaglia excluded her from the negotiations with Gabelli.
“During these negotiations, Haart learned for the first time that Freedom preferred shares existed, and that Scaglia owned all of them,” writes Zurn. “Haart testified she was ‘devastated’ to learn that Scaglia had ‘misled and lied to [her]’ and that he could make decisions for the business, including selling it to Gabelli, without her.”
Having been caught in this deceit, Scaglia showed contrition by appearing to transfer to Haart 50 percent of Freedom Holding.
Zurn writes: “The record contains a June 12 stock power purporting to transfer from Scaglia to Haart 61,832 of Freedom’s 123,665 preferred shares (the “Stock Power”).”
The stock power was drafted by Scaglia’s corporate accountant Jeffrey Fineman of accounting firm DDK & Company; Fienman is named in Haart’s lawsuit.
But, as Zurn writes, “the Stock Power, by its own terms, does not transfer half of Scaglia’s 123,665 preferred shares. Rather, it transfers one half share less than half, or 49.9995957%, of those preferred shares. Assuming the Stock Power was effective, Scaglia continued to hold the bare majority—50.0004043%—of Freedom’s preferred shares. Both Scaglia and Feinman testified this structure was intentional. Scaglia credibly testified he was willing to share Freedom’s economic gains with Haart through common shares, but he insisted on keeping control for himself.”
Christopher Milito, Haart’s attorney said in a statement to WWD: “The court’s decision is a tour de force examination of the many years of Scaglia’s statements and documents confirming to Ms. Haart and to the world at large that she was a full 50-percent owner. Ms. Haart disagrees with the ultimate decision and will appeal it. But in the event it stands, it will be the final piece of evidence proving Scaglia’s fraud against his wife, fraud for which Ms. Haart is already seeking redress in New York State Supreme Court.”
Marty Singer, who is not involved in the case but is representing Haart in other matters concerning Scaglia, weighed in as well: “Court papers filed [Aug. 4] further confirm the falsity of Mr. Scaglia’s statements about Ms. Haart’s ownership of Freedom. Lanny Davis, a publicist for Mr. Scaglia, stated in a headline in a March 9, 2022, press release, ‘The numbers don’t lie. Mr. Scaglia owns more than 99% of the voting stock – Ms. Haart owns less than .01%. That’s a fact.’ Documents don’t lie either. Mr. Davis’ statement is belied by the judge’s statement in the ruling acknowledging the existence of a document signed by Mr. Scaglia confirming his agreement to transfer 49.9995957% of the preferred or voting shares to Ms. Haart.”
But there’s more. According to the filing, Haart was aware that Scaglia had maintained a one-share advantage by early 2021. By May 2021, Scaglia was in contact with investment bank Jeffries Group about a potential SPAC deal or initial public offering. At the time, Zurn writes, Scaglia “was also hopeful that an upcoming Netflix series focusing on Haart would bring value to EWG and accelerate a potential deal.”
And while she discovered the stock “discrepancy” after the fact, she was aware of it when she filed her lawsuit. Zurn also highlights Haart’s efforts to pressure Fineman, whom Zurn characterizes as an “on-call personal assistant to Scaglia and Haart,” to “parrot that she owned half of Freedom.”
“Haart continued leaning on Feinman after this litigation began,” adds Zurn, “When Feinman complained about unpaid bills Haart owed, Haart responded: ‘You want to get paid? Plz help me help you! I cannot pay you without the truth first coming out and being acknowledged as a 50% owner which you know better than anyone that I am.’”
In the end, the court rejected Haart’s claims that the judgment in Scaglia’s favor should be overturned because of Scaglia’s documented duplicity.
Zurn writes in a final, if syntactically challenged, conclusion: “The exercise of looking at the litigants’ hands reveals dirt on Haart’s.”
Peter A. Bicks, a partner at Orrick Herrington & Sutcliffe and lead counsel for Scaglia, added: “We are pleased that the judge, after seeing Mr. Scaglia testify live, found him credible and that, in sharp contrast, Ms. Haart was determined to have ‘dirt on her hands’ because she fabricated the truth in open court about her stock ownership in Freedom. We are grateful that the court has made clear that Mr. Scaglia controls Freedom, the owner of EWG, and that the termination of Ms. Haart was entirely lawful.”