Predatory Lending 

Feds are investigating a key Preds investor

A San Jose-based investment firm has accused California golden boy William Del Biaggio of being “a complete fraud."

William “Boots” Del Biaggio seemed like a godsend for a local investment group when he contributed nearly 30 percent of the funds needed to buy the Nashville Predators. When the successful San Jose venture capitalist from a monied family with a love of the good life strutted into town, he was hailed as a hero.

But now, a San Jose-based investment firm has accused the California golden boy of being “a complete fraud,” putting the second-most powerful owner of the Predators at the center of an ugly dispute that raises serious questions about the stability of the ownership group. And now a few of Del Biaggio’s faithful Nashville followers can’t help but ask a key question: Is the money he pumped into the Preds any good? And more importantly, has Metro been duped?

According to a lawsuit filed in a Santa Clara County Superior Court last week by DGB Investments, Del Biaggio obtained a $3 million loan from the investment firm by making bogus claims and drumming up some phony documents—and now he can’t repay it. DGB claims that in November 2007, Del Biaggio borrowed—or as the court filing states, used “complete deceit” to steal—$3 million for an unspecified “commercial venture.” Yet when the loan was due in April, Del Biaggio didn’t pay.

The suit strikes at the heart of Del Biaggio’s character. DGB claims that when he secured the loan, Del Biaggio and his broker at Merriman, Curhan, Ford & Co., also named in the suit, claimed to have millions in a Merriman account. “The truth was otherwise,” the lawsuit states.

The account never belonged to Del Biaggio in the first place, DGB claims. And according to the suit, Del Biaggio and his broker Scott Cacchione “used the account of another—doctored to make believe that the account statement belonged to Del Biaggio—to induce DGB Investments into extending the...loan.” The lawsuit says Merriman and Cacchione falsified paperwork to help Del Biaggio procure the loan.

Now DGB is seeking “exemplary damages to ensure that these same wrongs will not be perpetrated upon others.”

If that weren’t enough of a blow to Del Biaggio and the Preds, he is also the target of a second lawsuit filed by a San Jose bank founded by his father. It claims similar shenanigans as the DGB suit, this time over a $4 million loan.

Given that Metro has already agreed to a generous taxpayer-subsidized lease that will pump millions of dollars into the organization each year, the city needs the ownership group to be financially stable. The way the deal is structured, Metro is on the hook for more money if the team struggles in any way. Having the minority owner in the middle of a toxic lawsuit makes the city’s investment with the group even riskier than it was before.

What’s worse, Del Biaggio’s boots are made for running. Last week, he resigned from Sand Hill Capital, the investment company he co-founded, citing personal reasons. The lawsuit says Del Biaggio claimed he had “significant issues” precluding him from repaying his debts.

But the Preds say there’s no need to fret. In a press statement issued last week, the organization says that Del Biaggio’s “departure from Sand Hill Capital has no impact on the Predators organizational operations as we are focused on ticket sales, building long-term business partnerships in Middle Tennessee and improving our team for the 2008-09 season.”

But Steve North, the only member of the Metro Sports Authority to cast a dissenting vote against the agreement in March, has been dubious about the deal from the start—mostly because he fears the sweetheart deal will have the city paying more than it bargained for.

Given Del Biaggio’s alleged financial transgressions, North is even less convinced of the deal’s merit. “From the standpoint of the security of the city, it certainly makes me nervous,” North says. “I am really concerned...because the city made a substantial investment in the Predators and stands to lose significantly if the Predators are not successful. Obviously if the financial situation of the Predators deteriorates, that deteriorates the city’s position.”

Preds spokesman Gerry Helper says that Del Biaggio’s legal and financial troubles won’t affect the day-to-day operations of the team. Never mind that Del Biaggio is the second-largest Preds investor.

The whole scenario raises questions about the man The Tennessean once dubbed a “hero” for saving the Preds deal. Could Boots have used some doctored documents to procure the money he used to get into the ownership group with hopes of sticking around long enough to enjoy the windfall that typically follows the sale of such a franchise? (Just ask former owner Craig Leipold whether a franchise that bled money from the start can pay off handsomely in the end. A decade ago, Leipold bought the team for $55 million and then proceeded to lose $70 million on it. But in the end, he sold the team for $193 million, making a capital gain of roughly $68 million.) Helper won’t answer questions about how Del Biaggio—or any other members of the ownership group, for that matter—came up with the money to buy the Preds. “Now that [the owners group] is a private company, that information is not made public,” he says.

And the local owners aren’t talking much either. Helper tells the Scene that Preds owner and chairman David Freeman won’t talk about fallout from Del Biaggio’s financial troubles. “I think he’s probably going to prefer not to [comment] for the time being just because we still don’t know what this is,” Helper says.

The whole mess seems to have taken the group by surprise. These savvy businessmen (with venture capitalists, investment bankers and plenty of healthcare company CEOs in the mix) are entangled with an accused fraud, and they don’t seem too keen on talking about it.

A source close to the Preds and the owners group, speaking on the condition of anonymity, says none of the owners knows what’s going on with Del Biaggio, perhaps because they never really knew the guy to begin with. Going into the deal, the local owners knew that “the financial wherewithal within his family was extensive” and that Del Biaggio was well known within the National Hockey League, the source says.

Herb Fritch, who holds the third-largest stake in the team, admits that he didn’t know much about Del Biaggio. And when asked if he thought Del Biaggio’s legal difficulty could affect the security of the group, Fritch simply answers a tentative, “I don’t think so…. If it’s isolated to him, I think we can get through it.”

Will the group make a swift attempt to buy out Del Biaggio? Is it even possible? The Preds organization and its owners won’t confirm any plans of a coup—or whether a buyout provision even exists.

A source close to the Preds says only that “there are always ways for people to leave deals, be bought out.”

Now that the Securities and Exchange Commission also appears to be looking into Del Biaggio’s financial dealings, and now that Cacchione has been suspended from Merriman, it seems that Del Biaggio’s “personal” problem could extend well beyond his own bank account—to the Preds and possibly the city.

On the outside, Del Biaggio is, well, loaded. The handsome 40-year-old is a San Jose socialite who graces the society page photos with a thirtysomething wife whose arm-candy styling conjures images of a Playboy centerfold—very blond, very tan, very California beautiful.

In the past, his gorgeous wife graced the fashion pages while clad in a $10,000 ball gown. And his local paper writes of his pricey estate, of his gold-tipped wrought-iron fence and of the lavish parties he’s held behind those arched gates, which are embellished with gilded Ds. Those shindigs have become a part of local lore.

Del Biaggio’s life of luxury goes on and on: tales of jet-setting with soccer star David Beckham and of how the financier treated the entire Preds team to a swanky dinner in San Jose the night before a game with the Sharks.

So it doesn’t add up. Del Biaggio is a guy who supposedly had enough dough to buy the Preds on his own for $190 million. Now it seems he can’t cover a $3 million loan.

According to the lawsuit, even Del Biaggio admits that he isn’t doing well. DGB claims that on May 15, Del Biaggio informed them that he couldn’t pay his loan because “he had very significant financial and other problems that precluded him” from doing so.

If the allegations aren’t true, Del Biaggio isn’t doing much to deny them. His attorney did not answer the Scene’s request for comment. Neither Del Biaggio nor his attorney has said much of anything since the news broke.

For now, even the hometown hero’s local fan club is atwitter with speculation of his financial demise. Close family friends have dubbed Del Biaggio’s actions as “hurtful” for the man’s well-heeled family. Even a former San Jose mayor, who’s been tight with three generations of well-to-do Del Biaggios, has said, “Sometimes good people can do bad things.”

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