MILAN — The impending divorce between “My Unorthodox Life’s” Julia Haart and Elite World Group owner Silvio Scaglia is becoming a public affair and gossip fodder, given the former Elite World CEO’s visibility and public persona.
Legal issues are emerging behind the split as Scaglia and Freedom Holding Inc., which owns the international model agency, have filed a complaint with the Supreme Court of the State of New York against Haart and a company she controls called Dynasty LLC.
A letter dated Feb. 10 is attached as an exhibit, signed by Elite World Group’s chairman Scaglia and deputy chairman Paolo Barbieri and addressed to Haart, in which they inform her of her dismissal as CEO “in the best interest of the organization.”
While admitting the pandemic contributed to Elite’s “severe financial stress,” the executives in the letter state they do not believe it was the main driver of “a huge deterioration of the company’s profitability, with the EBITDA [earnings before interest, taxes, depreciation and amortization] going from $6 million in 2018 to a loss of $6.1 million in 2019 (the first year of your tenure as CEO and before the pandemic crisis), a loss of $20.5 million in 2020 and a loss of $10.4 million in 2021.”
The losses were attributed to Haart’s office’s “huge increase in corporate costs and expenses […] which have completely wiped out the solid results produced by the traditional business, without producing any appreciable results.” A large portion of the costs “were representation and entertainment expenses almost entirely attributable to the CEO” and “never authorized by the board and well beyond budget.”
The letter alleges that despite the cost of almost $50 million, Haart’s main targets that led to her appointment were not met, including a digital expansion and securing external investments.
Digital revenues were nil in 2019, rose to $1.6 million in 2020 compared with a budget of $17.9 million and to $8.8 million in 2021 versus a $16.5 million budget, “never reaching the break-even, despite an exceptionally positive trend in digital marketing expenses fueled by the pandemic crisis,” states the letter. The digital division represented only 5 percent of the group’s revenues in 2021.
Also, it alleged that the E1972 fashion brand initiative launched by Haart “failed to produce any result at all,” while generating costs of around $5 million a year.
In addition, Scaglia and Barbieri noted that under Haart’s leadership, the Elite Model Look contest, a key element for brand awareness, has “completely lost its relevance” and “failed to produce a fresh pipeline of talents.”
The licensing business shrank from almost $3 million in revenues in 2018 to less than $500,000 in 2021.
The goal, wrote the two executives, is to proceed with an “immediate and severe cost-cutting” process, “while protecting the traditional model management business as well as their agencies and their staff around the world to rapidly restore the company’s financial stability.”
Freedom Holding and Scaglia also sued Haart for misappropriation of $850,000 out of the company’s bank account, the day after learning of her dismissal. Haart and Scaglia were allowed to only withdraw $250,000 from the Freedom Holding account. Scaglia is demanding that sum be returned.
Freedom Holding Inc. is a Delaware corporation and its sole director is Scaglia, who until 2019 was the company’s sole owner. In 2019 he transferred 50 percent of the shares to Haart, whom he married that year.