Relativity Media CEO's Father Ordered to Pay Damages in Art Fraud Case
A Los Angeles jury on Friday found that Jack Kavanaugh, father of Relativity Media CEO Ryan Kavanaugh, defrauded his former friend Victor Sands in the sale of a phony Picasso. It awarded Sands close to $3.5 million in damages.
Jack Kavanaugh was ordered to pay Sands $250,000 in punitive damages, and the jury awarded Sands an additional $3.2 million in compensatory damages.
Sands filed suit against the elder Kavanaugh in December of 2010, claiming that Kavanaugh had persuaded Sands to invest more than $6 million "in a series of dubious ventures from which Kavanaugh stood to personally benefit."
The most significant of these cases – and the sexiest – involved an work of art purported to be by Pablo Picasso. Sands, who paid $2 million for the forged piece, accused Kavanaugh of receiving $800,000 from Los Angeles gallery owner Tatiana Khan for arranging the deal. Sands also accused Kavanaugh's wife, Leslie, another defendant in the case, with being complicit in the deception.
In 2010, Khan agreed to plead guilty to federal fraud charges. As part of her plea deal, she agreed to pay restitution for the cost of the fake Picasso.
Kavanaugh's lawyer Eric George believes that $2.2 million of that $3.2 million has already been accounted for through the payments made by Khan.
"We've always maintained -- as the FBI concluded -- that no one bears responsibility other than the woman who was convicted by the U.S. Attorney for commissioning the forgery," George said in a statement. "In any event, the jury's special verdict confirms the plaintiff suffered no damages, other than legal fees and costs he neither pleaded nor is legally entitled to recover."
Sands' lawyer Matthew Taylor objected to that characterization, believing that his client was entitled to the full amount.
"We're very grateful that the jury saw the actions of Jack and Leslie Kavanaugh for what they were, which was a successful attempt to defraud my client," Taylor told TheWrap.
When the verdict was delivered, the jury was asked, "Do you find by clear and convincing evidence that Jack Kavanaugh engaged in conduct that is malicious, oppressive or fraudulent?"
The jury replied yes, also finding Kavanaugh guilty of "breach of fiduciary duty," "intentional misrepresentation," "negligent misrepresentation" and "concealment," among other charges.
Still, George argued that because other claims had been dismissed, his client would be entitled to recoup attorney fees.
"We're gratified we prevailed on the majority of the claims and they were dismissed. As we are entitled to do, we will proceed in the next phase of trial to recover all our attorney's fees related to those dismissed claims."
Taylor rejected that as well, saying there was "no reasonable basis" for such a conclusion.
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