By Svea Herbst-Bayliss and Helen Coster
NEW YORK (Reuters) - The co-head of the private equity firm that owns Dominion Voting Systems said the company's $787.5 million settlement with Fox Corp held Fox accountable for spreading lies even if it did not apologize or admit wrongdoing.
"We exposed the truth and we did create accountability for their actions," Staple Street Capital's co-founder and managing director Hootan Yaghoobzadeh told Reuters in an interview on Wednesday.
Staple Street and its investors are poised for a big windfall from the voting machine operator's settlement with the parent of Fox News, equivalent to 20 times the $38.3 million the New York-based private equity firm paid to acquire a 76.2% stake in Dominion in 2018.
Dominion accused Fox News of spreading lies that its ballot-counting machines facilitated fraud in the 2020 U.S. presidential election won by Joe Biden, a Democrat, against then-President Donald Trump, a Republican.
A judge ruled that Fox News had indeed broadcast false claims, but the two sides settled their dispute on the first day of the trial, before a jury got to decide whether Fox had defamed Dominion, which sought $1.6 billion in damages.
The settlement came with no apology or admission of wrongdoing on behalf of Fox, just an acknowledgement of the court's rulings finding some claims about Dominion to be false.
Yaghoobzadeh said that the exhibits in court filings that came to light through the legal discovery process showed that Fox was operating in a "despicable" manner. The exhibits came from a trove of internal communications in which Fox Chairman Rupert Murdoch and other Fox figures privately acknowledged that the vote-rigging claims made about Dominion on air were false.
Dominion and Staple Street achieved their goals by exposing the truth and Fox News' "offensive" actions and getting the media company to pay for them, Yaghoobzadeh said. "We don’t control Fox," he added.
In a statement following Tuesday's settlement, Fox said it was committed to the highest journalistic standards. In response to Reuters’ request on Wednesday for comment on Yaghoobzadeh’s description of its practices and the impact of the settlement, a Fox spokesperson repeated its earlier statement on the settlement.
RANGE OF INVESTMENTS
Staple Street was founded in 2009 by Yaghoobzadeh, a Cerberus Capital Management veteran, and Stephen Owens, a former Carlyle Group (NASDAQ:CG) Inc dealmaker. It invests in companies in a range of sectors, including financial services, healthcare and chemicals. It has about $900 million in assets under management.
Yaghoobzadeh said Staple Street invested in Dominion because it was convinced that Chief Executive John Poulos had a strong vision for the company and was a "phenomenal entrepreneur", ready to grow internationally and add market share.
Following the 2020 election, Fox News broadcast unsubstantiated claims from advisers and supporters of Trump that Dominion helped flip votes that were cast for Trump to Biden.
The fallout was immediate. Yaghoobzadeh, whose family had emigrated to the United States from Iran, said he received voicemails with death threats and that his worried parents showed up on his doorstep to urge him to flee the country for his safety. "We were afraid to leave the house," he said.
Yaghoobzadeh recalled being uncomfortable having to reassure Staple Street's investors that Dominion did not rig the presidential election.
"That's not a great way to start a meeting," he said, adding investors largely stuck by the firm and were supportive.
'CREATIVE' LEGAL ARRANGEMENT
Staple Street helped Dominion select lawyers and formulate a strategy to defend against the false claims. Dominion funded the litigation through its own resources, without Staple Street or a third party providing financial backing, Yaghoobzadeh said. He declined to say how much of the settlement would go towards legal fees.
"We had to be resourceful and creative and structure arrangements with the law firms that enabled us to do this," Yaghoobzadeh said, without elaborating.
Yaghoobzadeh also declined to comment on how much of the settlement would go to taxes or be paid to Dominion employees, who own minority stakes in the business. He also said he did not know what Staple Street's profit on the settlement would be, but added that the private equity firm had scored higher returns on at least one other investment.
"I haven't even calculated what our return is on this investment yet. But I don't think this is going to rank to be our best-returns investment," Yaghoobzadeh said.