An eccentric Florida real estate tycoon who lost millions investing in two West Coast festivals linked to Virgin Group co-founder Richard Branson scored a bittersweet legal victory on Friday (April 12) when a Delaware judge awarded him a $2 million breach of contract verdict for the KAABOO festival crash — but dismissed larger fraud claims that could have netted him millions.
Judge of Delaware Paul Wallace found that the previous owners of KAABOO had lied and misrepresented the festival's financial status to the investor Mark Haglewho bought KAABOO in 2019, but ruled that Hagle likely knew the screenings were fake because one of the festival's board members shared confidential data with Hagle during sales negotiations.
In all, Hagle, a 75-year-old commercial real estate developer from Orlando, is estimated to have lost about $23 million investing in the festival business, including spending $10 million to buy the ill-fated KAABOO festival in September 2019, before continuing to lose millions still unsuccessfully developing Virgin Fest in Los Angeles.
While the loss certainly stung, Heigl isn't hurting for cash since he made his fortune building malls for Walmart. In 2020, he donated $10 million to his alma mater, Purdue University, and two years later pledged $5 million to the University of Central Florida. In 2022, Hagle and his wife became the first married couple to travel into space on a flight from Amazon founder Jeff Bezos' Blue Origin and are currently building a massive $33 million, 45,000-square-foot home in Winter Park, Florida, which will include an underground gun and an indoor pool.
Friday's ruling, absent an appeal, likely represents the end of Heigl's attempt to recoup the $23 million loss through the court system. Earlier this year, a California appeals court refused to overturn a 2022 Los Angeles Superior Court ruling that allowed Lizzo, Ellie Goulding and Kali Uchis to keep millions in fees Hagle advanced to the artists in February 2020 to secure their appearances at Virgin Fest. Weeks after the artists were announced, much of the United States went into lockdown due to the COVID-19 pandemic, forcing the cancellation of the festival.
Former Bear Stearns investment banker Brian Gordon launched KAABOO in 2015, shaping the event's high-end dining and hospitality offerings around Napa's BottleRock festival with headliner talent that included Pink, Red Hot Chili Peppers and the Foo Fighters.
Launched to an older, wealthier audience, KAABOO quickly gained popularity, but behind the scenes, Gordon's brash style led to lawsuits from former investors, former employees and former partners Brett Mosiman, a Kansas promoter who won a $7 million judgment against Gordon in 2020;
While Gordon reportedly presented himself to Mosiman and others as a highly successful businessman who “had so many hotels,” he couldn't “count them” and regularly bought “$400 bottles of wine like they were Chiclets,” financial documents obtained by Advertising sign showed that Gordon had lost $30 million on KAABOO in less than five years.
Without an immediate infusion of capital, Gordon would have had to cancel the 2019 edition of the festival, bankrupting KAABOO and triggering dozens of class-action lawsuits from ticket holders that could have extended to Gordon's other festival investments, such as Virgin Fest, whose Gordon was a co-owner. Chief Marketing Officer of KAABOO Jason Felts.
At the time, Virgin Fest was a holding company that owned the licensing rights to the Virgin brand for music events and festivals from Branson. Exhausting options to save KAABOO, Gordon began negotiations with Hagle for a deal that would eventually see Gordon resign his position at Virgin Fest and sell his controlling shares in KAABOO to Virgin Fest in a deal of 10 million dollars funded by Hagle. As part of the deal, Gordon would continue to produce KAABOO on behalf of Virgin Fest.
While the last-minute acquisition prevented cancellation, it didn't take long for both sides to end up in court, starting a five-year legal battle to sell KAABOO, which has been defunct ever since.
Gordon fired the first shot in the legal battle, filing a lawsuit against Virgin Fest weeks after the sale closed, alleging that Hagle and Virgin Fest had not paid KAABOO's invoices in retaliation for Gordon's decision to lay off most of the KAABOO staff and place his daughter in charge of the company. Hagle and Virgin Fest countered, claiming Gordon had misled them about the festival's financial prospects and falsified KAABOO's financial records.
After a seven-day trial that took place in a Delaware courtroom in January, Judge Wallace issued his ruling Friday, finding that email evidence in the case pointed to Gordon and company officers Robert Walker and Seth Volkoff spent hours systematically writing off expenses and overstating revenue so that KAABOO's 2019 financial forecast showed a modest profit of $275,000 for the year instead of the more expensive $3 million in losses that company officials had previously predicted.
Wallace wrote that “KAABOO management knowingly made false statements” to Hagle and his attorneys and accused Gordon, Wolkov and Walker of “intentional acts of concealment” and having “a clear motive to commit fraud.”
That wasn't enough to win a fraud judgment, however, Wallace wrote in his 70-page ruling. That's because Haigle didn't sufficiently prove that he relied on the financial documents provided by Gordon's team and likely knew the claims were false, Wallace explained. Emails produced during the trial showed Felts — who was on KAABOO's board at the same time his company, Virgin Fest, was trying to buy KAABOO — was sending updates about the festival's deteriorating financial situation to Hagle, encouraging the real estate investor. to play hardball with KAABOO and win concessions to sweeten the deal.
However, Wallace found that Gordon's misrepresentations violated a transparency clause in the asset purchase agreement between KAABOO and Virgin Fest. Under the guidelines of the asset purchase agreement itself, damages arising from a breach of the document are limited to $2 million. Wallace thus ordered KAABOO to pay Virgin Fest $2 million in damages, plus attorney's fees.
For his part, Gordon received a $360,000 consulting fee that Virgin Fest never paid him after he resigned from the company.
It is unclear whether Haig plans to appeal the verdict. With no legal option to recoup his investment, Hagle's chances of recouping his investment depend on the success of a group of new investors who have reportedly begun trying to raise money to license the KAABOO brand from Hagle as part of a revival of the brand. The investment group has yet to announce whether it will revive the festival brand in 2024 or 2025.
from our partners at https://www.billboard.com/pro/kaaboo-festival-investor-breach-of-contract-verdict/
