Attorney sued over
movie financing deals

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By Tim Ryan
tryan@starbulletin.com

In a lawsuit revolving around financial incentives for film and television productions to work in Hawaii, April Masini is suing a local tax attorney and his law firm for malpractice and fraud.

Masini, owner of Hawaii-based Masini Television and Film Enterprises and Masini Enterprises in Los Angeles, filed a lawsuit in Circuit Court charging attorney Vito Galati and Honolulu firm Cades Schutte Fleming & Wright with breach of fiduciary duty, gross negligence, intentional interference of contractual relations, misrepresentation, fraud and unjust enrichment. Masini's attorney is Philip R. Brown.

The suit alleges Masini had retained Galati for assistance in creating a business to secure film and television production work in Hawaii, with the lure being Act 221, a state law that provides tax incentives for certain high-tech investment, including film and TV production.

According to the suit, Galati would use his tax expertise to explain to Hollywood productions how Act 221 is structured and how to qualify while Masini would market the statute's benefits to networks, distributors, studios, and producers in Hollywood.

Galati began representing Masini in Hawaii as her attorney beginning in fall 2001, the suit says.

The suit says one of the main reasons Masini retained Galati was to obtain "a comfort letter" from state Tax Director Marie Okamura assuring investors that participating studios or production companies were qualified for the incentives.

The suit alleges that once Galati received the letter he never forwarded it to Masini, not only thwarting her marketing efforts in Los Angeles but using it for his firm's gain. Masini allowed Galati to approach several potential investors, including Bank of Hawaii and several local insurance companies, on her behalf because even as late as February this year she believed that the attorney was working for her, the suit says.

Galati in numerous e-mails to Masini acknowledges their partnership though apparently no written agreement exists, the suit says.

Masini and Los Angeles attorneys Adam Fields and John La Violette convinced Universal Pictures to use Act 221 for its "Blue Crush" film production, which Galati was expected to structure, the suit says.

When a deal with Bank of Hawaii to invest in the film fell through, Masini and Fields turned their attention to Damon Estate participation, but that also failed.

Masini acknowledges in the suit she knew Galati was trying to get other investors for "Blue Crush" but she believed the attorney would ensure her role in the ultimate transaction as well as secure compensation similar to the transactions for the Damon Estate and Bankoh.

When Galati created the final "Blue Crush" transaction, Masini was no longer a party but an "agent" -- though Galati's role had "greatly increased," the suit claims.

"Cades moved Masini out of the 'Blue Crush' deal to gain an increased role and compensation for itself and its other clients," the suit says.

In January, Galati allegedly sent Masini a new agreement that drastically altered her and Fields' fee for the "Blue Crush" efforts and effectively put her in competition with Galati's other clients for selling the tax credit structure and receiving the benefit of the sale.

"Galati had completely abandoned Masini (but) continued to use (her) contacts ... to establish his position in the industry at Masini's expense," the suit says. Since partnering with Masini, Galati has been retained by other productions seeking Act 221 incentives.

Galati was not available for comment. In a written statement, the law firm said the lawsuit is "completely without merit" and they "intend to vigorously defend ourselves."

"We are confident that when all the facts are known, Ms. Masini's claims will be totally discredited," the statement says. "We are proud of the role we have played in the generation of interest in movie production in Hawaii and in the stimulation of investments that have benefited the State's economy.

"We hope this unfortunate lawsuit does not damage the state's efforts to attract investors to projects in Hawaii."