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A Shot of Trouble, Served Straight Up

Skybar's Ian Schrager and Rande Gerber trade bitter lawsuits in a business spat on the Sunset Strip


Ian Schrager and Rande Gerber together brought red hot and cool bars to Schrager's boutique hotels on both coasts. Now the relationship is on the rocks.

Earlier this month, Schrager sent bar czar Gerber a letter of intended termination from the Skybar on the Sunset Strip, which, since its opening in late 1996, has been a watering hole for the ultra-hip, stick-thin people in black with real or tenuous ties to show biz. "He's out," says Schrager attorney Stanley Arkin. "Out."

Not so fast, counters Gerber who last week filed suit in Superior Court charging Schrager's companies with financial hanky-panky--in legalese, "malicious, oppressive, and/or fraudulent" misappropriation of funds, including wrongly charging more than $1 million in hotel operating expenses to the Skybar, which sits poolside at the Mondrian Hotel, overlooking the city.

As for Schrager's attempt to oust him from the club for breach of contract for his alleged plans to open a competing bar, Gerber claims it is Schrager's move to terminate him that is unlawful and the action of a man angry with him for rejecting his demands to be exclusive to Schrager hotels.

And so, beneath the cloak of the glitz and glamour of the Strip, the increasingly uneasy alliance between Schrager, 54, and Gerber, the 38-year-old husband of supermodel Cindy Crawford, has escalated into full-scale Bar Wars.

"Pure rubbish," Schrager said of Gerber's accusations. "The Gerber boys got caught with their fingers in the cookie jar."

In his suit, Schrager charges that Gerber did an end run around him and made plans with a rival hotelier to open a bar in the Grafton on Sunset (formerly the Park Sunset), just an olive's throw from Skybar. In fact, Schrager won a permanent injunction last month in New York Supreme Court barring Gerber from involvement in operation of a planned Cuban-themed bar-restaurant at the Grafton.

"I would never go to court over money," says Schrager. "I went to court over honor." He adds: "A bar here and a bar there is not very important to me," and points out that his 14-hotel international empire is valued in excess of $2 billion. He accuses Gerber of treachery, disloyalty, dishonesty, and "filching" trade secrets--in short, making underhanded deals with Schrager's rivals.

Gerber says only his brother and business partner, Scott Gerber, was involved in the Grafton deal, a claim that Schrager dismisses as "a transparent scheme."

Schrager lawyers say Rande Gerber was indeed involved in the Grafton deal, citing magazine articles and publicity releases that have "trumpeted Rande Gerber's involvement to create the proper 'buzz' " around the proposed club. And, Schrager charges, a paper trail shows the deal was negotiated with Rande Gerber under the umbrella of his Midnight Oil company.

The permanent injunction also forced the Gerbers out of operation of the Wet Bar in Manhattan's New W Hotel-The Court, which is owned by Starwood Hotels and Resorts Worldwide, a mammoth company that has gobbled up Westin and ITT/Sheraton. The New W is only blocks from Schrager's Morgans hotel on Madison Avenue, where Rande Gerber still operates Morgans bar.

A supplemental complaint filed by Schrager attorneys accuses Gerber of being in cahoots with Starwood to undermine Schrager bar operations for their profit.

Gerber had some choice words about that. "Ian Schrager lied to the government about his taxes when he ran Studio 54 and was sent to prison for it. Then he lied to the government about hiring minorities at the Mondrian Hotel and had to pay $1.08 million in damages. Now he's lying again," says Gerber.

That's "the statement of a desperate person," responds Schrager. "It doesn't deal with the issue--the violation of our agreement. I got in trouble almost 25 years ago and made a very, very bad mistake. I'm really proof that the system works."

Once co-owners of New York's fabled Studio 54 disco in the '70s, Schrager and his partner, the late Steve Rubell, served 13-month prison terms for income tax evasion.

Gerber's Mondrian reference is to the recent settlement of a racial discrimination complaint filed by nine bellmen--all minorities but one--who were fired after the hotel's renovation in 1996 and replaced by 15 white bellmen.

"The color of their skin had nothing to do with it," says Schrager. "I am married to a Latin woman. Most of my in-laws don't even speak English." (That may soon be ex-in-laws. It was announced last week that the hotelier and his wife of six years, Rita, have split.) L.A. is about show business, Schrager says, and at the Mondrian, "I'm looking for people who have a presence and a vivaciousness and an enthusiasm."

Schrager says he never tried to rein in Gerber and had no problem with his "leveraging the success he had with us. That's the American way. [But] I can't be in business with somebody I don't trust."

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