Successful producers rarely publicly discuss filing for bankruptcy. Hal Luftig — whose Kinky Boots had a lucrative six-year Broadway run — said last week that personal bankruptcy may be in the cards if a judge doesn’t approve his plan to reorganize one of his companies.
Hal Luftig Company filed for Chapter 11 bankruptcy protection in December, after an arbitrator ruled that Luftig and his company breached an agreement with a longtime investor, Reno, Nevada-based Warren Trepp.
In response to the $2.9 million damages award, Luftig Co. proposed paying Trepp $1 million over five years, or 36 cents on the dollar. The reorganization plan also includes a provision that Luftig — one of Broadway’s busiest producers — be individually released from all claims, notwithstanding a $550,000 cash contribution from his own pocket.
“If the release is not granted, I may have to be looking at a whole bunch of different options, including personal bankruptcy,” Luftig, 66, testified at the July 11 hearing in lower Manhattan.
Every Broadway season, producers dangle the prospect of profits and Tony Awards to raise hundreds of millions of dollars. This is a cautionary tale about a symbiotic producer-investor relationship behind several high-profile musicals — and how it went bust.
The four-year litigation primarily concerns Kinky Boots, from which Trepp already earned about $2.7 million prior to the arbitrator’s decision. Once the head high-yield bond trader at the now-defunct investment bank Drexel Burnham Lambert, Trepp was an early investor in the $13.5 million musical. He cashed out before it opened at the Al Hirschfeld Theatre, in April 2013.
Trepp opposes the Luftig Co. reorganization plan, particularly Luftig’s individual release. “Mr. Luftig is escaping millions of dollars in valid liabilities,” Trepp lawyer John A. Mueller argued in court.
Sheryl P. Giugliano, one of four lawyers who represented Luftig or his company in court, said that the Luftig Co. plan offers “meaningful recovery” for Trepp — and more than he’d get in a Luftig personal bankruptcy case.
In a filing, Giugliano called the 72-year-old Trepp “a vindictive, deep-pocketed judgment creditor laser-focused on destroying” Luftig’s company and career. Luftig said that Trepp told him: “‘I made you, I can destroy you.”
Trepp denied threatening Luftig. “But did I make him? 10,000 percent,” Trepp said in a series of telephone interviews with Broadway Journal. “Without my money, he’d be nowhere.”
Luftig is a member of the board of governors of the Broadway League trade association and briefly hosted a podcast about the business of Broadway. He declined interview requests but eventually agreed to answer written questions. Here Lies Love, a Luftig show that opens tonight at the Broadway Theatre, isn’t involved in the litigation or company bankruptcy.
“I am proud to have always conducted my business relationships with the greatest integrity,” Luftig said in an email forwarded by a spokesman. “This corporate reorganization is a response to a simple contractual dispute arising from a unique relationship with a former business partner that dates back to the earliest days of my producing career.”
“That is the joke of the century,” Trepp told Broadway Journal in response to Luftig’s statement, which first appeared in BroadwayWorld. “He has never been my business partner. Hal has always been an employee of mine since I paid him a consulting fee in the early 1990s.”
Technically an independent contractor, Luftig described himself in a 2012 email to Trepp as “one of the most cost conscience [sic] and frugal people who has ever worked for you.” (Most of the emails cited in this story were filed as evidence in court.)
Sitting alongside junk bond chief Michael Milken at Drexel’s x-shaped trading desk in Beverly Hills, Trepp earned as much as $25 million a year in the 1980s, according to the Securities and Exchange Commission. An SEC administrative judge wrote that Trepp committed trading violations but dismissed a proceeding against him because they occurred years earlier and he had since exited the industry. He resisted pressure from the SEC to admit wrongdoing and to testify against former colleagues, including Milken, who pleaded guilty to violating securities laws.
Luftig was an assistant copy editor at the Long Island newspaper Newsday. He transitioned into theater while earning a master’s degree in commercial theater management at Columbia University, in 1984. When he met Trepp, Luftig was working in the box office at the Orpheum Theatre in Manhattan’s East Village. Luftig said he produced a Christmas party for Trepp, at which Dionne Warwick performed.
“Luftig represented a fresh young talent who could help Trepp gain further entrée to the theater world,” one of the producer’s lawyers said in a court filing.
“He would broker deals for me to get into bed with the big Broadway producers,” said Trepp, who noted that theatrical blockbusters can out-earn hit movies at a fraction of the cost. “The potential upside was huge.”
Trepp said he paid Luftig more than $1 million in the 1990s to secure theatrical investments; the producer said he was paid less. In 2001, Luftig signed a contract to find investment and producing opportunities — particularly lead-producing — for Trepp’s FCP Entertainment Partners. According to a 2007 amendment filed in court, Luftig agreed to provide his “full time, exclusive services” to Trepp.
Luftig was paid a total of $210,000 in annual salary and office expenses. His compensation was cut by about 15 percent in 2009 and 2010, for reasons Trepp declined to explain.
Trepp was obligated to share producing income with Luftig on “approved projects” only after Trepp recouped the annual $210,000, plus $75,000. After that $285,000 annual threshold was reached, there was a sliding scale. Luftig eventually netted 45 percent of their producer fees, royalties and net profits; Trepp got 55 percent. Separately, Trepp and his investors on shows earned a portion of office charges and producer and executive producer fees.
Trepp and his investors accounted for $4.1 million of the $9.5 million capitalization of Thoroughly Modern Millie. The show launched Sutton Foster to Broadway stardom and won six Tonys in 2002, including Best Musical, but it took about a decade to repay investors.
Trepp and his investors went on to invest $2 million in Legally Blonde (2007), $413,000 in Catch Me If You Can (2011) and $130,000 in an Evita revival starring Elena Roger and Ricky Martin (2012). None were profitable on Broadway, although Evita generated substantial producer fees for Trepp. Tours of Evita and Legally Blonde did recoup their costs.
Luftig conceded in a 2015 email to Trepp “that for many years the income to [Trepp’s] FCP did not cover its expenditures for my salary and office.” Trepp told Broadway Journal that their producing partnership was “a disaster as a business deal” and said he believed he also lost money overall in his theater investing, which included stakes in dozens of productions — hits and flops.
Producer Daryl Roth embarked on Kinky Boots after seeing the movie of the same name at the 2006 Sundance Film Festival. She later told BroadwayWorld that she approached Luftig in part because he had relationships with director and choreographer Jerry Mitchell and book writer Harvey Fierstein, whom she deemed well-suited for the musical, about a money-losing shoe factory successfully repurposed to produce thigh-high boots for drag queens. (Roth declined to comment for this story.)
From 2009 to 2011, Trepp led a $335,000 investment in the development of the show. Soon after, “Trepp expressed general dissatisfaction with the return on investments in theatrical productions and skepticism regarding how Kinky Boots would perform,” Luftig said in a filing.
“I never expressed concern about the show,” Trepp countered. He pulled the money before the musical opened, he said, after Luftig assured him that Kinky Boots was fully funded, even without the Trepp-led investment.
Luftig insists Trepp left him “in the lurch” by cashing out and not investing more. Luftig was “counting on Trepp and his circle of investors to furnish several million dollars of the necessary production funds,” Luftig’s lawyers said in a filing — even though the size of the Trepp investments had declined with each show Luftig produced. Luftig said in an email to Broadway Journal that he’d been hopeful Trepp would take a big stake in Kinky Boots because “we could have a real hit on our hands.”
At the Tonys, Kinky Boots upset the acclaimed West End import Matilda for Best Musical. Luftig thanked Trepp onstage at Radio City Music Hall, as he had done a decade earlier when Millie won.
Luftig argued in the arbitration that Kinky Boots ceased to be an “approved project” benefiting Trepp once he disinvested. Luftig nonetheless treated it as an approved project “out of a misguided sense of loyalty and friendship, and in hopes of smoothing things over with the mercurial Trepp,” he said. Trepp claimed the decision to invest or not — or to invest or disinvest — “has no bearing” on whether he was eligible to earn producer income, so long as he was involved in the project, citing the language of the 2007 agreement.
Trepp’s position found unlikely support from Luftig himself. In a 2011 email to Jālé Trepp, Trepp’s wife, Luftig wrote: “Warren can invest as much as he likes, but actually can put in zero and still get all the same stuff…same with Kinky Boots…he will get billing, Tony Awards (if we win) royalties, office fees, producer fees, etc. while not having to invest any funds…”
In October 2014, a year after Kinky Boots said it had recouped its capitalization and become Luftig’s first blockbuster, the producer terminated his agreement with Trepp. Luftig said the decision was mutual.
An arbitrator, Bob Donnelly, cited Luftig’s emails in finding that the producer and his production company breached the contract and failed to pay all the Kinky Boots proceeds Trepp was due. Donnelly awarded Trepp $2.6 million, plus a portion of future income from Kinky Boots, which came to $2.9 million total, on top of the $2.7 million Trepp had already received from the show.
Luftig said that he had relied on his lawyer’s interpretation of which Kinky Boots productions Trepp was entitled to earn income from once their agreement was over. “I only wanted to be fair,” Luftig wrote to Broadway Journal. “I thought things were. I assumed Warren did too, because I had been straightforward about my understanding, and he never complained for years. Then out of the blue he sued.”
Not entirely out of the blue. Jālé Trepp, who enjoyed a friendship with Luftig, periodically asked the producer why he received more publicity and credits than her husband did. In a 2011 email, she noted that Luftig had several Tony statuettes while Trepp had none.
“Back when Millie won, neither you or Warren mentioned that you wanted an actual Tony so I never requested one” Luftig wrote to her in a solicitous email. “Warren is absolutely given credit as producer” on Millie and other Luftig shows, he wrote.
In fact, Trepp wasn’t given a producer credit on Millie. A Luftig spokesman said that under the 2001 contract, “Hal got producer credit,” whereas as of 2007, both Luftig and Trepp were listed as producers.
In June 2019, Jãlé Trepp returned to the theme: “‘Warren is having trouble understanding who you believed worked for whom,” she wrote. Citing the Trepps’ “abuse and condescending sense of entitlement” in a filing, Luftig instructed the couple to direct any further questions to his attorney.
On July 22, 2019, a story appeared on the celebrity site The Blast under the headline, ‘Kinky Boots’ Producer Sued for $10 Million for Allegedly Screwing Over Business Partner. A day later, Trepp, no stranger to litigation, filed a suit against Luftig and his company in Los Angeles Superior Court.
Luftig later accused Trepp of defaming him. The arbitrator found that Trepp’s lawsuit violated a mandatory mediation and arbitration clause in their agreement, but there wasn’t sufficient evidence that the information in The Blast came from Trepp rather than a filing. Trepp said he didn’t contact the outlet.
The arbitrator denied most of Trepp’s claims against Luftig. Giugliano, the Luftig Co. lawyer, called their dispute an accounting issue. “There was no fraud,” she said.
The July 11 bankruptcy court hearing focused on the release of Luftig from individual liability as well as Luftig’s cash contribution. Luftig said in a filing that the sum is substantial “in terms of what I can afford to pay.”
The reorganization would also be funded by Luftig Co. “legacy productions,” including a planned 2024 London engagement of Plaza Suite with Sarah Jessica Parker and Matthew Broderick, following a hit Broadway revival in 2022; and Midnight in the Garden of Good and Evil, the Jason Robert Brown and Taylor Mac musical-in-development based on John Berendt’s 1994 bestseller. It had a buzzy reading in May, with another presentation planned for August.
If Judge John P. Mastando III doesn’t confirm the plan, Luftig has less draconian options than personal bankruptcy. He can appeal the bankruptcy court decision. And he’s already filed an appeal of the Federal court judgement confirming the arbitration award, which he said “we’re confident I will win.”
Nonetheless, he expressed concern about collection efforts. “If my personal bank accounts are frozen, my wages are garnished, and subpoenas are served upon my business partners,” Luftig said in a recent filing, “my reputation in the industry as a trustworthy and reliable fundraiser will be ruined after decades of success.”
