INVESTIGATION: Development Team of Proposed Pawtucket Soccer Stadium Have Complex Histories
Saturday, December 07, 2019
Rhode Island was introduced to Brett Johnson of Fortuitous Partners this week — complete with videos and renderings for a proposed $400 million project. Johnson and his partners in Fortuitous are proposing a mix of sports, retail, office and residential — a project promised to transform Pawtucket and the region.
A project that if it comes to fruition, the developers will receive public investment that is expected to be approximately 20% of project costs -- in the range of $70 to $90 million total, with an anticipated $60-$80 million of that total to be derived from state revenue.
A GoLocal investigation has found that one of the partners in Fortuitous, not Johnson — but a man named Berke Bakay — was the head of a major restaurant chain that was forced into bankruptcy in 2019 shortly after he led the company as the top corporate executive and as a leader of the board.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTJohnson also has had a high profile business background. Brett Johnson and his brother Grant Johnson are partners today in a firm called Benevolent Capital.
They used to run a firm called Benevolent Capital Partners and another company with a similar name that Brett Johnson said he was not involved in. That firm, Benevolent Partners, LP, according to Brett Johnson was solely controlled by his brother Grant and it was ordered by courts in California and Connecticut to pay millions for “intentional misrepresentation” and breach of contract.
Who is Who and What Are Their Records
Johnson, the point man for the Pawtucket project is involved with a multitude of corporations and limited liability corps, but his two main ventures presently are Fortuitous and Benevolent Capital. In both, he has partners, histories, and complexities that Rhode Islanders may be interested to learn about.
For Rhode Islanders, who have often realized the disappointment of promises of grand success like 38 Studios, General Electric, and Johnson and Johnson, GoLocal sought to examine the background of these investors promising a record $400 million investment into Pawtucket.
Pawtucket is a city that has seen the loss of the Gamm Theatre, the closure of Memorial Hospital, the pending departure of the PawSox, and the threat of losing one of Rhode Island’s only Fortune 500 companies - Hasbro - to Providence or beyond.
Much of the Fortuitous play in Pawtucket is to leverage the tax advantages created in the so-called "opportunity zones" established in the tax changes of 2017 by President Donald Trump.
The opportunity zone program offers wealthy investors unmatched tax savings for investing in "low income" areas.
But, the program which is only at its infancy has been receiving criticism by Democratic members of Congress and has been the subject by investigative series at both the New York Times and ProPublica — the non-profit investigative news organization.
The New York Times editorial board writes, “Of all the ways President Trump’s 2017 tax cut has enriched the wealthy at the expense of the public interest, perhaps the most outrageous is the black comedy of ‘opportunity zones.’”
Fortuitous — Who is Berke Bakay?
Rhode Islanders have not met Johnson’s partner in Fortuitous - Berke Bakay.
Initial questions from GoLocal about Bakay’s track business record first sparked claims from Johnson’s public relations team that Bakay is not on the Rhode Island project and that he is not involved in sports. "Bakay’s not in the sports space and isn’t involved in the project," wrote Brett Johnson's public relations spokesperson David Preston in an email to GoLocal.
When GoLocal pointed out that Bakey is the co-chairman of the Phoenix Rising soccer team and a top-tier equity partner in Fortuitous both in partnership with Johnson, the narrative changed that Bakay would not be directly involved in the Pawtucket project.
Bakay is inextricably tied to Johnson via their co-chairmanship roles in the phoenix soccer team — Phoenix Rising — and well as Fortuitous.
In a podcast recorded in April this year, Johnson outlined that Bakay is one of the original founders of Fortuitous. “I reached out to a couple of my core partners in Phoenix Rising in Berke Bakay, my co-chair of Phoenix Rising…”
And in a phone interview on Thursday, Johnson confirmed that Bakay is a partner in Fortuitous.
Just prior to his role in Fortuitous, Bakay headed Kona Grill, the 45 restaurant chain that was publicly traded on NASDAQ. Bakay's tenure at Kona Grill is absent from his bio on LinkedIn.
The restaurant chain was marketed as "featuring a global menu of contemporary American favorites, award-winning sushi, and specialty cocktails in an upscale casual atmosphere."
By August of 2018 Kona Grill announced that its Board of Directors appointed Jim Kuhn to succeed Bakay as President and Chief Executive Officer. Bakay was appointed as Executive Chairman of the Board of Directors and would "remain with the Company in a strategic role.”
“Leading Kona Grill over the past six years has been a tremendous honor. We’ve doubled the number of restaurants, started franchising internationally and domestically and have positioned ourselves as a truly unique brand serving global cuisine in a contemporary ambiance,” said Bakay at the time of the leadership change.
Within months, the company was filing for bankruptcy and the company was purchased out of bankruptcy for pennies on the dollar. While the company was in distress, one business tracking database says that Bakay still collected nearly $500,000 in compensation in his last year at the top executive. Bakay has refused to reply to repeated press calls.
In Bakay’s final year as president and CEO the stock fells from a 12-month high of $13 per share to $2.50 — an 80 percent loss in stock value.
Brett Johnson defends Bakay’s performance at Kona. “Berke Bakay is not involved in the Pawtucket proposal. Berke does, however, have a lengthy record of business success. He also played a central role in the success of Phoenix Rising. As you know, Berke was neither President/ CEO nor on the board of directors when Kona filed for chapter 11 reorganization. In fact, between his end date as CEO and the chapter 11 filing no less than five people served as CEO,” said Johnson in an email to GoLocal.
“Berke’s tenure at the helm of a company in the very competitive restaurant business included multiple years where Kona was one of the best performers for both Same Store Sales growth and Stock performance. It is on this foundation, built by Berke, that Kona quickly and successfully emerged from bankruptcy this year. Any entrepreneur knows that businesses sometimes suffer setbacks. In Berke’s case, however, his many successes far outweigh any setbacks,” Johnson added.
Benevolent Capital Partners, Benevolent Partners, LP, and Benevolent Capital
As stated, Brett Johnson has interests in a range of businesses. He has been partners with his brother Grant Johnson in at least two companies utilizing the name 'Benevolent.' One company was Benevolent Capital Partners and another is called Benevolent Capital, but he denies any involvement in Benevolent Partners, LP.
On June 22, 2008, the Hollywood Reporter published an article that movie producer Robert Cory was awarded by a California jury $5 million against financiers Benevolent Partners. But, that ultimate payout ended being much higher.
According to the Hollywood reporter:
A jury has awarded "Jumanji" producer Robert Cort $5 million in a lawsuit he brought against financiers Benevolent Partners.
Cort sued the hedge fund over a 20-year agreement to finance films for $4.85 million. The producer claimed that when he developed a slate of more than 30 projects, he was told by Benevolent — a $20 million hedge fund led by Grant Johnson — that it was out of money and would not provide the remaining financing.
Claiming breach of contract and fraud, Cort sought $900,000 in costs plus punitive damages. The three-week trial in Los Angeles Superior Court resulted in the jury awarding Cort $3.25 million in compensatory and a $1.75 million in punitive damages against Johnson, who was personally found liable for fraud. Cort has produced more than 50 feature films, including "Runaway Bride."
Cort had to file suit in Connecticut to force payment from Brett Johnson’s brother and Benevolent Partners, LP.
Brett Johnson says in a statement to GoLocal that, the California judgment against his brother and one of the company’s named Benevolent, is not tied to him.
“Your question conflates a number of different entities named “benevolent” that are not necessarily related. ‘Benevolent’ is a corporate name that both my brother and I have used often for many years to create a number of different companies. Sometimes we formed these companies together, sometimes as individuals without the other involved. Benevolent Partners, LP is an example of a company that I was not involved with in any way. Further, the company has no relationship to the Pawtucket proposal,” said Brett Johnson.
The Connecticut Court cited that California case exposed how Benevolent Partners LP and Grant Johnson were inextricably linked, “the California jury previously determined in the underlying action that the defendant debtor, Grant Johnson, is the alter ego of the defendant, Benevolent Partners, LP. In addition to the assets of the defendant debtors, the plaintiff creditors are seeking to reach assets of other corporate entities with which the defendant debtor has, or at a point relevant to these proceedings has had, a relationship. This court takes judicial notice of the fact that the California court has pierced the corporate veil and found that Grant Johnson is the alter ego of Benevolent Partners, LP. In order to apply the jury's determination in this case to the subject proceedings, therefore, a brief recitation of the law pertaining to piercing the corporate veil is useful.”
Grant Johnson claimed that he spent his entire $1.5 million income and according to the court records, “They [the defendant Cort] also question that the assets of the defendant debtor's company [Benevolent] he managed decreased from allegedly twenty million dollars to zero and that it went out of business without explanation or filing for corporate dissolution.”
In addition, the courts cited, “According to the defendant debtor's individual 2007 federal income tax return, he reported taxable income of over one and a half million dollars. The defendant debtor testified obliquely that nothing remained of his 2007 reported taxable income of $1,581,000.00 due to his 'lifestyle.' He has not been gainfully employed since the judgment was rendered against him and Benevolent Partners, LP in the California lawsuit in 2008. Notwithstanding his lack of employment, he maintains an American Express black card for which his monthly charges of $7,000–$10,000 are paid by family members, is a member of the Core Club which requires a $25,000 initiation fee and substantial membership charges and resides at either of two residences described above without any apparent living expenses. The plaintiff creditors question the fact that the debtor has maintained an expensive lifestyle despite not being employed since the judgment against him over five years ago. They also question that the assets of the defendant debtor's company he managed decreased from allegedly twenty million dollars to zero and that it went out of business without explanation or filing for corporate dissolution.”
“During the course of the recent proceedings, the defendant debtor has provided some financial records. However, these records are either so incomplete or severely redacted as to lack meaning. They do not under any application of the law of this state qualify as compliance with post-judgment discovery or the subpoena issued in this case. What was established was that the defendant debtor reported income of over 1.5 million dollars in 2007, but virtually none since then. Further, it has been shown that he held, and in some cases, continues to hold limited partnership interests in closely held partnerships along with family members, some of whom he acknowledges are paying his substantial living expenses, credit card bills and Core Club membership dues."
Johnson denies there is any relationship between Benevolent and Fortuitous and Rising Sun, but both appear on the portfolio page of Benevolent
Relationship Between Benevolent, Fortuitous, Phoenix Rising and Rhode Island Project
The complexity of the numerous corporate entities tied to Brett Johnson and his brother make it difficult to unwind the performance of their different businesses. Brett Johnson did have a positive exit from a called Targus which makes and markets "laptop bags to tablet cases to peripherals and universal docking stations."
Brett Johnson was explicit in the phone interview on Thursday that there was no financial relationship between Benevolent and Fortuitous or Benevolent and Phoenix Rising, but both Fortuitous and Phoenix Rising appear on Benevolent’s website on the “portfolio” page.
Johnson said he treats Benevolent now as a “family office” — a description of the personal investment funds of high net worth individuals and families.
According to both Stefan Pryor of Commerce RI and Johnson, the state and Fortuitous have 120 days to finalize the $400 million project.
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