Billionaire Ira Rennert funneled more than $100 million from Magnesium Corp. of America to line his own pockets and build a $250 million mansion, a jury has found, ordering him and his investment firm to pay the company’s bankruptcy estate more than $118 million in damages.
Rennert controlled MagCorp until its bankruptcy filing in 2001. After a three-week trial, a Manhattan jury rejected Rennert’s defense that the company failed because of the early 2000s recession and a drop in magnesium prices, and not because he siphoned off about $120 million in dividends.
The jury’s award includes $16 million personally against Rennert and $102 million against his Renco Group. Lawyers for MagCorp’s bankruptcy trustee are seeking interest that could increase the award to nearly $700 million for MagCorp creditors, Reuters reported.
Rennert’s 64,389-square-foot Sagaponack, N.Y., mansion is the largest home in the United States, featuring 29 bedrooms, 39 bathrooms, two bowling lanes, a 164-seat movie theater, and a 200-car garage.
“At the end of the day, they understood the evidence and returned a just verdict,” Scot Stirling, a lawyer for the trustee, said of the jurors.
But Renco said in a statement that the jury “was swayed by a passionate, but wholly unsupported, argument,” the company said in a statement. “Renco and the management of MagCorp always acted properly and did not engage in the acts of which the trustee wrongly accused them.”
Renco bought MagCorp, one of the world’s largest magnesium producers, in 1989 for $44 million. The trustee contended that MagCorp was coming off years of financial struggles and environmental violations at its Rowley, Utah, mine but Renco did nothing to fix those problems.
Rennert, who lives quietly in his Italianate compound, testified that “there is no relationship between the dividends [from MagCorp] and the property in Sagaponack.” His lawyers argued that making him pay damages would be tantamount to giving a “windfall” to MagCorp’s current creditors.
Those “vulture” investors aren’t the original bondholders and bought MagCorp debt at 2 cents on the dollar, attorney Tai Hyun Park said in closing arguments.