Robert F.X. Sillerman, chief executive officer of CKX Inc. and owner of the “American Idol” brand, was sued by an investor in a failed development on the Las Vegas Strip who accused him of “self dealing.” William Huff’s Huff Alternative Fund LP, the second-largest investor in Sillerman’s FX Real Estate and Entertainment Inc., filed the lawsuit yesterday in New York State Supreme Court in Manhattan against both Sillerman and FX Real Estate.
The so-called derivative suit, brought on behalf of FX Real Estate shareholders, alleges that Sillerman and other company insiders engaged in a scheme to retain rights to 17.7 acres of Las Vegas property in January 2009. The defendants defaulted on $475 million in mortgage loans secured by the land, the plaintiffs said.
“The insiders alone will retain rights to the property, consisting of all of FXRE’s historic businesses and the focal point of investors while other shareholders will be denied their right to participate on a pro rata basis” the Huff fund alleged in the suit.
According to the complaint, Sillerman and other insiders entered into a “lock-up plan” in October that ultimately wiped out the interests of second-lien holders through a series of complex transactions.
Under the Chapter 11 petition filed in Las Vegas on April 21, the title to the property would be given to the first-lien creditors while second-lien noteholders would receive nothing.
Sillerman, who owns the commercial rights to the names and images of Elvis Presley and Muhammad Ali through New York-based CKX, sought to develop a resort with an Elvis theme in 2007 until the financial markets collapsed and the Las Vegas gaming market declined. After defaulting on the first mortgage, a receiver was appointed in June.
The property is currently occupied by a motel and several commercial and retail tenants at the intersection of Las Vegas Boulevard and Harmon Avenue, the Huff fund said.
“Defendant’s self-dealing and corresponding breaches of the fiduciary duties and duty of loyalty have caused significant damage and injury to FXRE,” according to the complaint, which seeks $100 million and unspecified punitive damages.
Ed Tagliaferri, an outside spokesman for Sillerman, said he didn’t have an immediate comment on the lawsuit.
The case is Huff Alternative Fund LP v. Robert F.X. Sillerman, 650338/2010, New York State Supreme Court (Manhattan).
To contact the reporter on this story: Patricia Hurtado in New York Supreme Court at firstname.lastname@example.org.