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Lawsuits, failed ventures mark developer's past

Hal Katersky, whose company specializes in soundstage projects in other states, wants to erect an office building in Hollywood. A city agency is offering him a big discount on the lot.

August 17, 2010|By Richard Verrier, Los Angeles Times

Santa Monica developer Hal Katersky is an unlikely candidate to play the role of Hollywood booster. His company, Pacifica Ventures, specializes in developing soundstages in other states and is best known for its sprawling studio in Albuquerque, N.M., which has lured business away from Southern California.

Yet Katersky is now proposing to develop an eight-story, $57-million office building at the corner of Vine Street and Selma Avenue that would cater to the entertainment industry. City officials have offered to sell the mostly vacant lot —where a hamburger stand now sits — back to the developer for $4.5 million less than the Los Angeles Community Redevelopment Agency paid for it just four years ago, contending it will "retain and attract entertainment companies and create new jobs."

But Katersky's business career has been entangled in lawsuits over failed ventures and clashes with former partners.

He was sued for alleged fraud by former business partners in Culver Studios, which he once managed, and by a company that says it helped him expand into New Mexico. Katersky denied wrongdoing in the cases.

Last month, Pacifica Mesa, the owner of Albuquerque Studios, filed for Chapter 11 bankruptcy protection, claiming debts of nearly $105 million. The 168,000-square-foot studio was once a hotbed of production, hosting such movies as "Terminator Salvation" and "The Book of Eli" and the AMC TV series "Breaking Bad."

"I'm proud of my track record," Katersky said in an interview, adding that his past business ventures had been influenced "by events far outside their control."

Katersky blamed the bankruptcy filing on the recession and a decline in the number of movies that studios are making. His company has sued former managers, alleging that they took kickbacks from vendors and diverted business to rival studios. The managers have denied the claims, and former acting chief operating officer Nick Smerigan has sued Pacifica Mesa for alleged slander.

"We believe the whole motivation behind the lawsuit was to divert attention from the financial condition of the studio," said Joseph Golden, an attorney representing Smerigan.

Katersky said the bankruptcy filing would not affect the viability of his other projects, even though Workers Realty Trust, the financial backer of the Vine Street project, is seeking to foreclose on the Albuquerque property.

Katersky said he and his partners already had invested $3.5 million in the Vine Street project, which he predicted would create hundreds of construction and entertainment-related jobs. Katersky said no tenants had been secured but predicted strong demand for the space, possibly from a division of a major studio or video game company.

The L.A. Community Redevelopment Agency bought the Vine Street site from a company managed by Katersky in 2006 for $5.4 million and has proposed selling it back to the firm for $825,000. An agency official previously told The Times that the price was a "reasonable return to the developer" given the restrictive requirement that the company rent space only to entertainment-related entities for five years. The City Council is scheduled to vote on the project next month.

But critics have questioned the steep discount. "The City Council should be asking a lot of questions, not only about this deal of selling back to the same person for such a low price, but demand some hard facts about how this project would be viable," said longtime Hollywood resident and redevelopment agency critic Richard MacNaughton.

An agency spokeswoman declined to comment.

Katersky's previous foray into L.A.'s entertainment business culminated in a legal fight. In 2007, the owners of historic Culver Studios in Culver City sued Katersky and his partner Dana Arnold, alleging that "various acts of fraud and embezzlement" occurred when Katersky and Arnold managed the studio from 2004 to 2006. The lawsuit alleged that the men improperly charged more than $1 million in expenses to the studio and falsely claimed to be the owners.

The case was settled confidentially in 2008. "They made a large financial settlement to us and gave up all their financial interests here," said James Cella, chief executive of Culver Studios.

Katersky called the accusations "unsubstantiated and unfounded" and said the lawsuit was a ploy to thwart the growth of Pacifica, which had just broken ground on the Albuquerque Studios.

Pacifica was targeted in another lawsuit last year. New Mexico-based Digital Media Group, which claims to have pitched Katersky and Arnold on the idea of building a studio in New Mexico and to have helped line up financing for it, sued the men in January 2009. It accuses Katersky and Arnold of fraudulently misrepresenting that they owned Culver Studios and of pushing Digital Media out of the Albuquerque project. Katersky said the claims were "totally without merit" and that his company never had an agreement to include Digital Media. The case is pending.

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