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Business Partner Says Co-Founder of Tom Hicks' Private Equity Firm Screwed Him Over

John MuseJohn Muse is the 'M' of HM Capital Partners, the private equity firm he co-founded with former Texas Rangers owner Tom Hicks in 1989. It was for a while one of the most recognized leveraged buyout firms in the country before it all but collapsed when the tech bubble burst in the early 2000s. The firm has rebounded, sans Hicks, and Muse has done quite well for himself. Otherwise, he wouldn't inhabit the third priciest house in Dallas, a $30 million Highland Park mansion.

Just as you can't make an omelet without breaking a few eggs, you can't be insanely, disgustingly rich without pissing off some little people. People like David Pemberton, who claims that Muse and HM Capital swindled him and screwed him over on a trio of shopping center redevelopment deals.

According to the complaint, which was filed last month in Dallas County before being moved to federal court last week, Pemberton and Muse partnered on a venture in the fall of 2010 to purchase failing shopping centers, renovate them, then sell them at a profit. The eventual plan was to purchase $100 million in assets, but the partners started with a $20 million master loan from JP Morgan Chase, with which they purchased the Windhaven Shopping Center in Plano and Wyndham Plaza in Southlake.

The deals, according to the suit, didn't go down quite as the men had agreed. Muse played nice at first, inviting Pemberton over for dinner and flying him out "for a seemingly social visit, on his $25 million Bombardier jet to California, where Muse and the polo team he owns were playing."

All of this, Pemberton says, was meant to gain his trust and distract him from Muse's true objective of screwing Pemberton over while frequently behaving in a "smug rich-guy manner." Muse, in a county court filing, denies this.

The men had agreed to a 50/50 split, according to the complaint, with Muse providing financing for the partnership and Pemberton providing real estate expertise and doing the legwork. It wasn't until 2011, as the partners were nearing a deal on the Southlake property, that Pemberton began have doubts.

Muse, Pemberton discovered later, had secretly increased the master loan from $20 million to $30 million, ostensibly to do more deals with Pemberton but actually, the suit claims, to support a separate hotel finance deal. Muse also allegedly tried to coerce Pemberton into putting his own money into the Southlake deal, which Pemberton refused. This prompted Muse to push for Pemberton to agree to give up his 50-percent stake in the development for a 10-percent share of profits, which Pemberton did not want to do.

At this point, the suit claims, Muse gave Pemberton an ultimatum: "If you cross this line and do not go along with me, it will get ugly, and I will just take it away from you."

Pemberton continued to refuse, and Muse "who, like a 5-year-old child, does not like being told 'no,' became enraged," according to the suit. "He began shaking and sweating, his face was red, and he just kept repeating in a threatening and even deranged manner, 'David, look at my eyes. Look at my eyes.'"

If Pemberton had any doubts that Muse would do such a thing, he was quickly disabused. The suit mentions an early conversation that foreshadowed the trouble to come in which "Pemberton asked Muse whether he would be opposed to looking at deals in foreclosure that his friends at the Dallas Country Club had and had lost. Muse responded in a deadpan voice and said, 'David, I would foreclose on my own brother.'"

According to Pemberton, Muse planned to "starve him out." The original plan called for the properties to be rehabbed and flipped by the time the master loan expired on September 30 of this year. If the partners held onto the properties, however, it would allow Muse to get new financing on his own, obtain full ownership of the properties, and force Pemberton out of the deal.

"This is an ego exercise for him," Pemberton's lawsuit claims." Muse is like the fat house cat with a full bowl of food in the other room that kills the mouse to play with it."

Pemberton? "He needs the mouse to eat, in order to live."


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