Saturday, August 13, 2005

Copperfield a Tricky Deal-Maker

In one of his stage tricks, magician David Copperfield makes audience members disappear. In a 2003 real estate deal, he made himself disappear.

It all happened when Copperfield tried to buy an island from multimillionaire John Melk -- who made his fortune in Chicago -- for about $46 million. But the magician's methods prompted Melk to sue. David Rammelt, Susan Greenspon and Kenn Brotman of Kelley Drye & Warren's Chicago office are representing Melk.

"Our client is confident in his lawsuit, and is looking forward to his day in court," Rammelt said.

Melk, 69, made his fortune from holdings in Waste Management Inc. and Blockbuster Video. He has also invested in Chicago real estate. He lives most of the year in Florida.

In 1995, Melk and his then-wife decided to buy Musha Cay, in the Bahamas, for $2.25 million. They spent $55 million turning the island into a luxury resort. They built guest houses, homes for the island's staff, a "state-of-the-art" industrial kitchen and a water desalinization system that purifies 30,000 gallons a day, according to Melk's lawsuit. They laid three miles of concrete path, and installed tennis courts and a landing pad for helicopters.

The resort opened for business in 2001. Its Web site, www.musha, bills it as "the ultimate private island experience." Musha quickly became a favorite spot for celebrities, including Oprah Winfrey, Robin Williams and Steve Martin. The guest rate: $25,000 per day.

The following year, the Melks decided to sell Musha Cay. Copperfield approached them about buying in October 2002. But Copperfield had no experience running a resort, and the Melks were willing to sell only to a buyer who knew the business. Instead, Melk offered to sell Copperfield a 50 percent stake for $25 million, with Melk continuing to run it.

Meanwhile, two other bidders surfaced. Christian Jagodzinski and Michael Gleisner told Melk they had extensive experience running luxury resorts and had operated one in Fiji. After six months of negotiation, the Melks agreed to sell Musha to them for $45.5 million.

A week after the deal closed, Copperfield called Melk and told him that he, Copperfield, was the new owner of Musha Cay. As it turned out, Jagodzinski and Gleisner were fronts for Copperfield in what is known as a "strawman" purchase, according to the lawsuit. The new corporation formed to run the island -- Imagine Nation -- was owned by Copperfield.

Stunned, Melk sued Copperfield to rescind the deal and obtain damages. Melk owns other islands near Musha and wants to see the resort kept up in a professional manner, according to his lawsuit.

"John will not stand for anything less than [Musha Cay's] tradition of unequaled, ultra-exclusive service," Rammelt said.

Copperfield has long focused on running his career, not other businesses. Born David Seth Kotkin, he grew up in New Jersey and first drew notice in "The Magic Man," a musical that ran in Chicago. He went on to become one of the world's top-grossing entertainers, according to Forbes magazine.

Melk argues that "rumors" about Copperfield, including "alleged ties with the Russian Mafia," would hurt business at Musha Cay. Copperfield, for his part, seems obsessed with rumors about himself. His Web site features an entire "rumors" section, in which, for example, he denies speculation he is gay. Copperfield also says he "can't deny" stories the Russian mob held his equipment "hostage" when he visited that country to perform there.

According to court documents filed by Melk's lawyers, Copperfield knew the deal would crater if his involvement were discovered. At one point during negotiations, Copperfield wrote to rock musician Lenny Kravitz asking for his help. Copperfield needed approval from the Bahamian government to put a deposit on the property, and Kravitz, according to a court document, is a cousin of the Bahamian prime minister. Copperfield asked Kravitz to "speak to the prime minister." He also implored the rocker to keep his involvement under wraps. "It is imperative that it remains secret until the deal is signed," the magician wrote.

Copperfield's lawyer, Bruce Laxalt of Laxalt & Nomura in Reno, Nev., did not return a call seeking comment. In court papers, the magician claims Melk "repeatedly asked Mr. Copperfield to be his partner in owning Musha Cay" because he was "desperate to raise cash." A lawyer on the deal "advised John Melk that there was an anonymous partner involved." When Melk learned Copperfield was the true buyer, he "stated that he was happy," according to court filings.

The Melks' lawsuits are pending in federal court in Nevada, and in the Bahamas.



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