Financier Linked to Burkle And Clinton Is Charged
By JOHN R. EMSHWILLER
June 25, 2008; Page A1

Federal prosecutors charged Raffaello Follieri, an Italian entrepreneur and former business partner of California billionaire Ron Burkle, with funding a lavish lifestyle by using money from a real-estate venture that was supposed to capitalize on his alleged Vatican ties to redevelop surplus Catholic Church properties.



Ray Tamarra/Getty Images
Raffaello Follieri at a charity event in New York City last November.

The charges mark a startling fall for a charming 29-year-old Italian who not long ago appeared to be on a swift ascent at the intersection of U.S. business, politics and entertainment.

Mr. Follieri made a splash after arriving in New York in 2003 with a plan to buy U.S. church properties at favorable prices, aided by what he billed as his Vatican connections. He became friendly with Douglas Band, the top aide to former President Bill Clinton, and Mr. Band helped connect him to powerful Clinton associates. One was Mr. Burkle, whose Yucaipa Cos. linked up with Mr. Follieri in a real-estate venture. (Mr. Follieri's ties to Messrs. Band, Burkle and Clinton were explored in Wall Street Journal articles last year.)

Along the way, Mr. Follieri became a tabloid-press fixture by dating Hollywood actress Anne Hathaway.

A criminal complaint filed by the U.S. attorney in Manhattan Tuesday charged Mr. Follieri with fraud, conspiracy and money laundering. It alleged that he stole hundreds of thousands of dollars of investor money to pay for a $37,000-a-month New York apartment; private-jet travel; fine restaurants and clothes; medical costs, and even a dog-walking service for his pet. A spokeswoman for the U.S. attorney said the probe is continuing.

Bail was set at $21 million after prosecutors asked that Mr. Follieri, chairman and chief executive of Follieri Group LLC in New York, be detained pending trial. His lawyer, Flora Edwards, said, "He intends to be here and have his day in court." She said it was too early to respond to the specific allegations.

The criminal complaint closely mirrors a civil suit Mr. Burkle's Yucaipa filed against Mr. Follieri a year ago. That suit, in Delaware state court, alleged that Mr. Follieri took at least $1.3 million of investor funds and used the money for personal purposes. Mr. Follieri consistently denied any wrongdoing. The parties recently settled the civil case on undisclosed terms, and Mr. Follieri has begun spending time again with Mr. Burkle, say people familiar with the matter.

While Yucaipa is clearly the principal alleged victim in the criminal complaint, it didn't mention either the firm or Mr. Burkle by name. Instead, it repeatedly referred to "the Principal Investor." A Yucaipa spokesman declined to comment.

At his court appearance Tuesday, Mr. Follieri, dressed in jeans, a white-collared shirt and a blue pullover, reacted strongly at times to the allegations. He shook his head, looked to friends in the courtroom and pulled his attorney closer to dispute points made by prosecutors. Prosecutor Reed Brodsky said the government had information indicating that Mr. Follieri had an overseas account containing €10 million.

Mr. Follieri obtained investor money by vastly overstating his ability to get favorable deals on the church properties through the Vatican, the 12-count criminal complaint alleged. It said Mr. Follieri at one point claimed to be "chief financial officer" of the Vatican, a position that doesn't exist.

He wooed investors by claiming he met with the Pope whenever in Rome, the complaint said, and told them his Manhattan high-rise apartment, with spectacular views of the city skyline, was needed to host visiting Vatican officials.

The complaint raises the question of how the young Italian managed to get so close to such prominent figures as Messrs. Burkle and Clinton. The ex-president had dined with Mr. Follieri in Rome and honored him at a fund-raiser for his philanthropic Clinton Global Initiative. Through Mr. Clinton and his aides, Mr. Follieri was able to connect with several wealthy individuals, including Mr. Burkle, whose Yucaipa operation invested tens of millions of dollars in its real-estate joint venture with Mr. Follieri.

In 2006, Mr. Follieri entertained Sen. John McCain on a yacht leased by Mr. Follieri and moored off the coast of Montenegro. A spokeswoman for the presumptive Republican presidential nominee has said nothing came of the social encounter, adding that the two had met at a dinner party earlier on shore.

In another instance, Mr. Follieri spent an afternoon in the Sea of Cortez on the yacht of Carlos Slim of Mexico, one of the world's richest people, trying unsuccessfully to interest him in investing.

Mr. Follieri forged the tightest ties with Mr. Band, socializing regularly with him. The Clinton aide helped arrange contact with other potential backers besides Mr. Burkle. After a Toronto investor agreed to invest several million dollars, Mr. Follieri sent $400,000 to Mr. Band.

Mr. Band has said in the past that he gave up this money to others. On Tuesday, a spokesman for him and for Mr. Clinton had no immediate comment on the Follieri matter beyond saying the two men hadn't been contacted by federal authorities.

Catholic Votes

Mr. Follieri at one point offered to use his church ties to help Sen. Hillary Clinton win Catholic votes in her bid for the Democratic nomination. A spokesman for Mr. Clinton last year confirmed that such an offer had been made to Mr. Band but said the aide didn't act on it.

According to the criminal complaint, Mr. Follieri went to great lengths to promote the idea that he was a trusted Vatican associate, keeping in his office robes normally worn by senior clergymen. On one occasion, the complaint said, Mr. Follieri asked a priest traveling with him to put on the robe of a more senior clergyman to foster the impression of close ties to the Vatican.



Raffaello Follieri became a tabloid fixture when he began dating actress Anne Hathaway.

The complaint also said Mr. Follieri enlisted a Vatican employee and a reporter for an Italian news publication to bolster his image as a Vatican insider. Mr. Follieri, according to the complaint, caused more than $350,000 "to be wired to the Vatican"; it didn't elaborate.

Mr. Follieri did have some high-level church connections. A nephew of a longtime Vatican secretary of state, Cardinal Angelo Sodano, was a business associate of Mr. Follieri. Mr. Follieri's Rome dinner with Mr. Clinton in 2005 came after a visit to the Vatican, where the former president met with Cardinal Sodano, now retired as secretary of state.

Among Mr. Follieri's alleged expenses was $30,000 for a "house call" by his physician. The complaint alleged that at one point Mr. Follieri threatened a representative of "the Principal Investor" by "in sum and substance" saying that "the representative should see what happened to the last guy who crossed" Mr. Follieri.

As controversy began to mount last year about Mr. Follieri's dealings, associates such as Mr. Band, the Clinton aide, began to distance themselves, say people familiar with the matter.

However, with the conclusion of the Yucaipa litigation, Mr. Follieri moved to re-ignite his real-estate activities and had worked out a funding arrangement with Plainfield Asset Management LLC of Greenwich, Conn. On Tuesday, Plainfield general counsel Thomas Fritsch said his firm "had been exploring doing business with Mr. Follieri." He added that "no properties have been purchased, and it looks like none will be at this point."

Mr. Follieri's relationship with Ms. Hathaway recently ended, according to press reports. For a time, she sat on the board of the Follieri Foundation, a charitable group connected to his business operation, Follieri Group. Ms. Hathaway wasn't named either in last year's Yucaipa civil suit or in the criminal complaint. Her spokesman declined to comment.

As recently as Monday, Mr. Follieri had been talking to people about his plans to revive his real-estate development efforts and was looking forward to a trip later this week to Europe to celebrate his 30th birthday. According to one invitee, he was planning a party on the island of Capri.

--Chad Bray contributed to this article.

Write to John R. Emshwiller at john.emshwiller@wsj.com

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