When investment adviser Kenneth Ira Starr was accused of running a $30 million fraud scheme, the charges didn’t shock lawyers for the late Joan Stanton, an actress who was the voice of Lois Lane on “The Adventures of Superman” radio program in the 1940s.
They sued Starr two years ago in New York state court on her behalf, alleging he mishandled her $60 million fortune and misappropriated “tens of millions of dollars” in what they described as a “‘Producers’ type scheme,” referring to the film and Broadway musical, “The Producers,” in which two theater producers hustle investors.
Lawyers for Stanton, a widow who died last year at 94, alleged in court papers that Starr “inveigled” her to entrust her financial affairs to him and then put a “substantial” portion of her money into “illiquid, speculative and inappropriate investments” that treated her money “much like his own unrestricted endowment.”
The lawsuit was settled in January for an undisclosed sum, court records show. Lawyers declined to comment on the amount, saying the matter was confidential.
“It’s not a surprise, as it seems the allegations made by the government in their case are very similar to those we made against Starr on behalf of Joan Stanton,” David Mills, a lawyer for Stanton’s estate, said in a phone interview yesterday.
Bragged About Clients
Stanton’s civil suit against Starr reads like a road map to the criminal case and states that he bragged about clients including heiress Rachel “Bunny” Mellon, director Hal Prince, playwright Neil Simon and actor Wesley Snipes.
“Mr. Starr is an accountant and financial adviser to the rich and famous,” Stanton’s lawyers said in the complaint. “His current and former clients include numerous Hollywood and other high profile figures, as well as numerous wealthy individuals of advanced age.”
Among the alleged victims in Starr’s criminal case is Mellon, the 99-year-old of widow of philanthropist Paul Mellon. Mellon’s family-owned company, Oak Spring Farms LLC, lost more than $5 million, prosecutors said.
Alex Forger, manager of Oak Spring Farms and attorney for Mellon, said she is “shocked” by the “allegations of criminality” by Starr, whom she has known for many years. Actress Uma Thurman was another victim, said a person familiar with the case.
Incentive to Flee
While Starr was charged May 27 with operating a $30 million fraud scheme, it’s likely that the size of the fraud scheme will be greater as other victims come forward, the U.S. said. Joshua Klein, a lawyer for Starr, declined to comment.
“He’s been in the business of managing people’s money for decades,” Assistant U .S. Attorney William Harrington in Manhattan said last night at a court hearing, arguing Starr posed a flight risk because he had “the incentive to flee and the means to flee.”
“People believed that he could work magic for them and he disseminated and stole those clients’ money,” Harrington told U.S. District Judge John Koeltl. “He controlled more than hundreds, if not thousands of those accounts. We have attempted to freeze all of those accounts but we cannot be confident that we’ve frozen every one of them.”
Starr is being held without bail.
Asked if he had been contacted by federal investigators about the allegations made against Starr in the Stanton lawsuit, Mills declined to comment.
Stanton, who also played the role of secretary Della Street in the “Perry Mason” radio program, inherited an estate of $60 million from her husband Arthur, who owned Volkswagen and Audi auto dealerships, according to her lawsuit.
Starr began to cultivate her as a client at the time of her husband’s death in 1987 and by the early 1990s, Starr had taken over her finances, investing for her and paying her bills, according to the suit.
Stanton claimed in the suit that Starr persuaded her to make loans or investments to “high-profile Broadway and Hollywood figures or related entities” and placed “tens of millions” of dollars into “high-risk investments.”
While he invested $90 million of clients’ assets into “layered partnerships” or financial entities he controlled, cutting off his clients from any access to information about them and charging them excessive fees, Stanton’s lawyers said.
Stanton alleged that from 1998 to 1999, Starr invested and lost $4.5 million of her money in businesses and investment vehicles controlled by Keith Barish, a Planet Hollywood board member, at a time when he knew the theme-park restaurant chain was failing.
Barish, who was described by Stanton as “a personal friend and client” of Starr’s, wasn’t charged with any criminal wrongdoing by the U.S. Peter Vigeland, a lawyer for Barish, declined comment.
After losing millions in the Planet Hollywood deal, Starr later committed an additional $3 million of Stanton’s funds to two entities, identified as NIS-II and KB-II, which Stanton said were managed by Barish and his wife, according to the suit.
The $20 million which Starr made on Stanton’s behalf through NIS-II and KB-II included Bregman Productions, which the U.S. cited in the criminal complaint against Starr, and Planet Hollywood International Inc.
Sylvester Stallone sued Starr in federal court in Los Angeles in 2002, claiming the financial advice Starr gave led him to lose as much as $10 million on Planet Hollywood.
Stallone, who along with Arnold Schwarzenegger and Bruce Willis helped launch Planet Hollywood in 1996, claimed in the suit that Starr dissuaded him from selling his 3.9 million shares when the stock traded as high as $20 a share in 1997.
The actor claims Starr was biased because he also advised Barish. Stallone said he wasn’t aware that Starr advised Barish until 2001.
Stallone said Starr disobeyed his instructions to invest his money in “conservative investments that were liquid” and instead put the actor’s money in technology hedge funds. Stallone claims he lost $7.3 million on those bad investments.
As Planet Hollywood stock plummeted, Starr advised Stallone to hold on because his sale would look bad for the company and the stock was poised to rise, according to the suit. Stallone sold his shares for 10 cents each, for a total of $295,256, in 2000 after the chain sought Chapter 11 protection. Stallone received the shares from the restaurant in exchange for helping promote the company.
The Stallone suit was settled in February 2003 for an undisclosed sum. Lawrence Nagler, a lawyer for Stallone, didn’t return a voicemail message left at his office seeking comment yesterday. Bert Fields, a lawyer who represented Starr in that case, didn’t return a voice-mail message left at his office yesterday.
The cases are Joan Stanton v. Kenneth Starr, 601122/2008, New York State Supreme Court (Manhattan), and Sylvester Stallone v. Kenneth Starr, U.S. District Court, Central District of California (Los Angeles) 02-CV-2151.