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Italian Billionaire Had Share Edge Over Reality TV Star Wife (1)

Aug. 5, 2022, 3:36 PMUpdated: Aug. 5, 2022, 8:01 PM

Italian billionaire Silvio Scaglia told the whole world his fashion businesses were half-owned by his wife, reality TV star Julia Haart, but he secretly kept at least a one-share advantage at all times, a Delaware judge said, explaining her recent ruling resolving a bitter dispute between the divorcing couple.

Vice Chancellor Morgan T. Zurn elaborated on a decision she issued in late May as part of “a two-step intended to expedite finality.” The judge rejected Haart’s claims of 50% co-ownership at the time without offering an explanation or saying what share of the businesses Haart actually does own.

Zurn acknowledged that Scaglia let Haart, investors, tax authorities, and everyone else believe the 50-50 ownership narrative about modeling agency Elite World Group LLC and its parent company, Freedom Holding Inc. The business is featured on Haart’s Netflix series “My Unorthodox Life.”

“But behind the scenes, Freedom’s internal documents told a different story,” the judge wrote in a 52-page opinion for Delaware’s Chancery Court. “Despite the appearance of an equal partnership, the evidence reveals that Haart never owned an equal stake of Freedom’s preferred stock.”

The decision closes one chapter on the acrimonious dispute that began with the public breakdown of the couple’s relationship in early February, around the same time Scaglia ousted Haart from her leadership positions at the modeling agency. Other court cases in Delaware and New York are ongoing.

Zurn’s opinion Thursday came 10 weeks after her brief ruling in Scaglia’s favor, which prompted a victory lap from Scaglia’s representatives—who say the co-ownership claims were a lie—and frustration from Haart, whose spokesperson stated that “Scaglia’s empty words continue to bend reality.”

Elite, under Scaglia’s control, sued Haart for unjust enrichment and fiduciary breaches in early June. That lawsuit accuses her of stealing millions from the business to prop up the lavish personal lifestyle shown on her TV series.

Unclean Hands

Zurn found that Haart “continued to insist she was an equal owner” after learning Scaglia had held back the single share when allegedly purporting to transfer 49.999% of the modeling agency’s preferred shares to her. The two each own half of its common stock.

Although Haart didn’t discover the “discrepancy” until the marriage began breaking down, she knew about it no later than January 2021, a year before the court case began, the judge noted. Haart also tried to pressure the company accountant into taking her side, Zurn said.

She declined to rule on Scaglia’s argument that he never effectively transferred any stock to Haart, saying it wasn’t necessary to the outcome of the case.

“At most, she owns half the common and less than half of the preferred” shares, the judge wrote.

Zurn also rejected the argument that Scaglia’s win should be barred due to the surreptitious circumstances surrounding the alleged share transfer and his assurances that Haart owned half the business.

The judge cited Haart’s own knowledge of the stock discrepancy, her efforts to pressure the accountant, and omissions in her court filings.

“The exercise of looking at the litigants’ hands reveals dirt on Haart’s,” Zurn wrote.

Scaglia is represented by Richards, Layton & Finger PA and Orrick Herrington & Sutcliffe LLP. Haart is represented by Connolly Gallagher LLP and Ajamie LLP.

The case is Haart v. Scaglia, Del. Ch., No. 2022-0145, 8/4/22.

(Updates with additional reporting in paragraphs eight, 10, and 11, as well as additional small changes throughout.)

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com