The two had known each other socially for a number of years, but by the summer of 1997, tired of consulting, Sachs says, he decided "to get into more transactional activities." He had heard a lot about Giacchetto's deal-making skills during the sale of Sub Pop to Warner Music and was impressed by his manic energy.
For his part, Giacchetto thought that if he fused his personal contacts with Sachs's institutional ones, they could build a powerhouse. To sweeten the arrangement, Giacchetto says, Sachs promised to deliver him a money manager's pot of gold, a lucrative pension fund from the state's health-and-hospital-workers' union, which was being run by Sachs's friend Dennis Rivera. (Sachs denies this.) Though the fund never materialized, in the summer of 1997, Giacchetto invited Sachs to move his operation into Cassandra's offices, where he joined former Billboard publisher Sam Holdsworth -- who would use his connections to look for promising entertainment start-ups -- and his old boss's son, Chris Cuomo, who would "lawyer" the deals.
In the beginning, at least, the partnership went as planned. Several months after arriving at Cassandra, Sachs introduced Giacchetto to his friend Mitchell Blutt, a high-powered executive partner at Chase Manhattan Corporation's $2 billion venture-capital unit. Sachs knew that Blutt's division, Chase Capital Partners, was hungrily looking for alliances to help identify potentially explosive start-up companies in the entertainment field. Enter Dana.
In March, Giacchetto began squiring Chase's buttoned-up investment bankers around the tables of Moomba, where between Cosmos he and Blutt talked about putting together a partnership. Their first joint venture was a deal to underwrite the Standard Hotel in Los Angeles, a project of Giacchetto's friend André Balazs, who also owned the Chateau Marmont and New York's Mercer. Then, on October 9, 1998, Giacchetto, Blutt, Holdsworth, and Sachs formed Cassandra-Chase Entertainment Partners, a venture-capital firm backed by $100 million from Chase. The fund's main objective was to ferret out entertainment start-ups and get a first look at the projects conceived by Giacchetto's famous clients. The partners stood to earn 15 to 20 percent of each venture.
Despite the Chase funding, not all was well between the partners. From the start, Giacchetto says, Sachs had trouble adjusting to Cassandra's hypercasual atmosphere. And to Cassandra's employees, who had prided themselves on their outlaw attitude toward corporate America, Sachs and his buttoned-up team seemed suspiciously old guard. Sachs told Giacchetto he needed to hire people who were more professional. In November 1997, on his recommendation, Giacchetto hired as Cassandra's vice-president Soledad Bastiancich, a Yale-educated lawyer who had worked at the conservative Allen & Company. She is the girlfriend of John Howard, a multimillionaire Bear Stearns venture capitalist and a close friend of Jeff Sachs.
Though she was charmed by her madcap boss, Bastiancich was alarmed at the lax operation he ran. Backed by Sachs, she persuaded Giacchetto to authorize a $250,000 audit of Cassandra. Bastiancich later outlined her concerns in a confidential four-page letter obtained by New York, which included a list of demands that Giacchetto had to meet if he wanted to keep her on. It's a strange document, which veers from fawning regard for Giacchetto's "vision" to anger over his shortcomings. "For all I know," she writes, "you may spit on this letter and tell me you never want to see me again (though I pray you don't ever feel that way)." She signed it with a smiley face.
The letter, which Giacchetto twice denied to me even existed, provides a glimpse inside Cassandra's chaotic offices and reveals an internal struggle over its future. In it, Bastiancich asks Giacchetto to "promise me that you will check with one of us about a client's account value and holdings prior to telling the client. TCG has had several hundred thousand dollars worth of trade errors during the past couple of years. We simply cannot afford anymore sic. It is okay not to always have awesome news."
She also complained that the company was paying Giacchetto's personal travel and entertainment expenses and had been making personal loans to clients that were not "professionally papered and at market rates."
Giacchetto denies that he lied about client accounts, and he says that his expenses were normal for someone who traveled frequently with clients. How about the trade errors? I ask. "Yeah, we had trade errors," he sighs. "There are always errors in trading, but I don't think I had any major problems. You call and say, 'Buy me 500 shares of Merck,' and somehow they'd buy 400 instead. That's a trade error. That's what she's addressing. But I don't think that's bad or negative or shocking. Soledad wanted power. All of them wanted power. They got in and they thought, I can do this better than you, because Dana's so flighty and creative and we're these top management people."
In fact, Bastiancich was seeking an equity stake in the company and asking to be named president, with the power to run daily operations and draw up a "conservative" budget to make the company profitable. Giacchetto angrily refused. She left Cassandra a few months later to write a novel.
Bastiancich and Giacchetto's partners in Cassandra-Chase were especially troubled by Giacchetto's involvement in a struggling firm called Paradise Music & Entertainment. In 1998, the company, which produced music videos, commercials, and albums, was about to be de-listed from the nasdaq because its assets were so dismally depleted. To Giacchetto, the company, little more than a shell operation at the time, presented a tempting opportunity. He agreed to pump $6 million of client funds into Paradise to rebuild it into a powerful indie force that would serve as a vehicle for his clients' projects. "It was a shell where I thought I could bring together the kinds of things I always wanted to bring together," Giacchetto says. To run the company, he tapped Jesse Dylan (son of music legend Bob Dylan), a respected commercial producer and a Cassandra client. As president he chose his old friend Jay Moloney, who had, after several attempts at sobriety, been clean for months.
Skittish because of Moloney's drug relapses and rumors of earlier suicide attempts, some clients hesitated to bankroll Paradise, and even Moloney's friends worried that the pressure would send the fragile agent over the edge again. "He could barely hold a job," one friend notes, "much less run a public company." Equally troubling was Giacchetto's stake in the venture. The money manager was given a consultant's title and paid in stock options worth $1.2 million. What made the arrangement problematic was that Cassandra traders were advising clients to trade shares in a company about which their boss possessed inside information.
Large financial firms install barriers between investment bankers and traders to prevent insider trading, but in Giacchetto's seven-member office the potential for abuse is enormous. "There was a potential conflict," Giacchetto says. "Absolutely. We were very careful. It's completely disclosed in the SEC filings that I owned stock. Everyone knew I owned it." John Heine, a spokesman for the Securities and Exchange Commission, says he can't comment on this case, but insists the issue is not clear-cut. "There's a possibility that his being a consultant and selling shares is a conflict of interest. Simple disclosure may not be enough." Giacchetto denies ever breaking any SEC rules. "If there was someone who has proof that I had, my former so-called partners would have picked it up during the first six months of this torture and put me in my grave."
By now the partners were also clashing over the operation of the Cassandra-Chase fund. Time and again, Giacchetto complains, Sachs and Holdsworth shot down deals he brought them involving major stars -- all of whom were Cassandra clients. There was Danny DeVito, looking for funding for an Internet start-up. There was Ovitz, wanting to put together a film-distribution company. There was DiCaprio, Martin Scorsese, and Q-Tip, who jointly planned to set up a film company. Finally, there was Larry Bathgate, the powerful former finance chair of the Republican National Committee, who had agreed to back a $20 million merchandising firm called Artists Marketing Corp., which would market the names and likenesses of such stars as DiCaprio in the lucrative overseas markets. (The AMC deal, which was killed when Bathgate was informed that Giacchetto had used his clients' funds as collateral, a charge Giacchetto denies. It also antagonized Ovitz, whose management company handles DiCaprio.) "Why didn't they do those deals?" says Giacchetto. "I don't know. It was ridiculous. They wanted the glamour of having me tromp all those celebrities through the door of Chase, but they didn't want to work with my clients."