Follieri venture turns sour

At first glance, the business plan hatched by Raffaello Follieri and his father, Pasquale, would make lemonade from lemons.

The Italian father and son founded the Follieri Group in 2003 to purchase underused Catholic Church properties in the United States.

Follieri told the National Catholic Reporter that two trends sparked the company’s interest in church-owned real estate. American dioceses, in financial crisis because of the widespread sex abuse scandals, were forced to sell holdings to pay lawsuit settlements. And the church’s shifting demographics, with Catholics moving out of the cities, left many empty churches and schools in urban areas.

According to the company’s web site, the Follieri Group intended to renovate the sites as low- and middle-income housing, community centers, places of worship, offices and retail spaces. The Follieris also formed a foundation to help surrounding communities and third-world countries.

The plan drew support from heavy hitters. The Wall Street Journal reports today that Bill Clinton’s personal aide, Douglas Band, helped Raffaello Follieri find investors. Yucaipa Companies, a California firm where Clinton has been an adviser, agreed to put as much as $100 million into the venture.

However, things have gone terribly sour. Ron Burkle, Yucaipa managing partner and a friend of Clinton, has sued Follieri in Delaware state court, claiming misappropriation of $1.3 million. The lawsuit accuses Follieri of using the money to enjoy a lavish lifestyle that included an expensive penthouse and a private chef.

Follieri denies the allegations. The Journal reports that he’s now looking for new investors.

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