One group of BottleRock investors is suing another BottleRock investor for fraud and demanding the return of $3 million the group says it lent to BottleRock 11 days before the start of the festival.
In a lawsuit filed this week in Napa County Superior Court, plaintiff Saratoga Festival Investments, a California LLC, claims that BottleRock investor Jason W. Johnson was fraudulently paid $3 million for his investment in last May’s five-day Napa music event, reaping a quick profit of at least $1 million before the first acts took the stage.
According to the lawsuit, the $3 million Saratoga investment was used to pay off Johnson at a time when festival organizers were running out of cash to mount the music extravaganza, set to start a week later, the suit contends.
According to court documents, Johnson invested $1 million in BottleRock at the end of 2012. He also supposedly lent BottleRock another $1 million, although no note exists reflecting that agreement, according to the lawsuit.
In April, Bob Vogt and Gabe Meyers, the public face of BottleRock, decided to buy out Johnson but “did not have cash available” to do so, according to the suit.
The two men subsequently sought additional investors to make the payment, according to the court documents. Saratoga Festival Investments say they were then approached by Vogt and Meyers as an investor.
“Due to omissions regarding the financial health” of BottleRock, Saratoga Festival Investments — managed by Brad Buss and John Keller, both of California — invested $3 million in BottleRock, the suit asserts. That agreement was finalized on April 26.
BottleRock organizers then used that money to buy out Johnson on April 30, according to the court filing. BottleRock paid Johnson $3,026,849.32 “representing a $1 million profit on his original contribution less than six months earlier,” plus interest.
Johnson, who has Solano County business ties, accepted the payment, even though he knew that money represented the majority of BottleRock’s assets, said the suit. By doing so, Johnson’s conduct was “willful, wanton, malicious and oppressive and undertaken with the intent to defraud,” the lawsuit reads.
The lawsuit acknowledges that BottleRock, referred to in the suit as BR Festivals, had the right to buy out Johnson at any time prior to April 30 for $2 million above his initial contribution of $1 million. However, those provisions “were extremely favorable” to Johnson. Those provisions “unfairly discriminate” against BR Festivals, its other members and creditors, the statement said.
Johnson should have known that BottleRock could not afford to buy him out, as the festival did not have “monetary reserves or an expectation of income” sufficient to make that payment and keep the festival going, the suit alleges.
The filing asserts he knew that such a buyout would result in BottleRock becoming insolvent, and therefore, the payment to Johnson was fraudulent.
“Saratoga would not have agreed to the Johnson buyout if Johnson did not withhold material information from Saratoga,” the lawsuit states.
Indeed, within days of the buyout and “on the eve” of BottleRock, Keller was “forced to make an emergency loan” of $100,000 to BottleRock so that the festival could pay the vendor who was supplying the electrical generators for the five-day show.
“Without the emergency loan, BottleRock may have been forced to shut down,” said the lawsuit. “Vogt and Meyers also scrambled to pay other creditors immediately prior to or during BottleRock to avoid any substantial disruption.”
As a result of the Johnson buyout, BottleRock had “unreasonably small assets remaining” and was unable to repay Saratoga, the suit alleges.
The court filing provides new details into the inner workings of the financially troubled festival held May 8-12 at the Napa County Expo. According to a December 2012 operating agreement, BottleRock partners included Willpower Entertainment, Johnson, Amos Flint and Micah Malan.
Willpower Entertainment was founded by Vogt, a Napa native. Johnson is the son of the founder and CEO of Copart Inc., an auto auction company formerly based in Fairfield. He is also the CFO of Deville Enterprises and co-owns the Deville Theatre in downtown Vacaville.
Flint and Malan are both listed as a “sales associate” on a 2013 BottleRock contact list provided to the Napa Expo.
The agreement said that Willpower made an initial “contribution” of $250,000, Johnson paid $1 million, Flint paid $100,000 and Malan $10,000. It’s unclear how the ownership was calculated but the agreement states that Willpower owns 59.5 percent of BottleRock, Johnson 35 percent, Flint 5 percent and Malan .5 percent.
No mention is made of Meyers, another BottleRock organizer who has been named in lawsuits against the festival.
Vogt and Meyers have been named in numerous other BottleRock lawsuits for non-payment, but this is the first such document to name Johnson as a key investor.
In recent months, as many as three different potential investors have been touted as the savior of the festival, including Live Nation and Musiek Media Group Inc. However, no purchase or new investor has been announced.
While a hit with concertgoers, BottleRock “ultimately proved to be a financial and public relations disaster,” the lawsuit said. Including the $3 million owed to Saratoga, BottleRock’s unpaid debt tops $5.5 million, including $630,000 owed to the 142 union employees who worked at the festival.
As much as $1 million in promised donations to a group of nonprofits remains undistributed. Vogt and Meyers are also engaged in a financial dispute with CP Cooks, the organization that managed the food and beverage operation at the festival.
In other BottleRock news, neither union or BottleRock representatives attended a court hearing on Thursday morning to ask BottleRock to begin arbitration over the $630,000 owed to union workers.
An attorney for Buss and Keller declined to comment on this story. Buss or Keller could not be reached for comment. Attorneys for Johnson and Vogt and Meyers could not be reached for comment on this story. Cell phone mailboxes for both Vogt and Meyers were not accepting new messages. Neither Johnson, Flint or Malan could be reached for this story.
Advance tickets for an announced 2014 BottleRock festival remain on sale on the festival’s website.