The story of Storyopolis, a children's bookstore and movie company, began once upon a time in 1994 with a new partnership and high hopes. Billionaire

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Paul Allen's Tinsel Town Nightmare

A federal court case exposes some of the most private parts of the billionaire media mogul's hush-hush (and lavish) lifestyle. Is it the price for being a player in Tinsel Town?

The story of Storyopolis, a children's bookstore and movie company, began once upon a time in 1994 with a new partnership and high hopes. Billionaire businessman Paul Allen and Hollywood deal-maker Abbie Phillips were in sync—he with the money, she with the connections. Together they would produce sophisticated animated films for kiddies and profit for themselves.

But within a few years the once-happy saga took an unexpected plot twist marked by name-calling, dissolution, and lawyers at 10 paces. By last year, the fairy-tale business venture had became a corporate parable: Careful, it's a Jungle Book out there.

Today the bitter final chapter is unfolding in adult-rated court documents, revealing accusations of lying, stealing, sex, and power moves—typified by this remarkable legal exchange last September in Seattle:

A group is gathered on the 27th floor of the 1201 Third Avenue Building. It is late afternoon. Sworn testimony is being taken for a court deposition. Among those standing and seated around the conference room is a small-time California attorney named David Yardley. He is questioning Jo Allen Patton, a top executive for Vulcan Northwest Inc., Paul Allen's mega-corporation. Yardley is asking Patton about her boss and brother, the third-richest man in America. It's a question not thought to be on record anywhere else.

"Do you," the attorney says, "have any belief that your brother has been or is celibate?"

The momentary silence is broken by the voice of Nancy Abell, Allen and Patton's defense attorney. "Objection!" says Abell. "That is a completely outrageous question! It's an unwarranted invasion of personal privacy and I instruct the witness not to answer the question. That's outrageous!"

What? asks Yardley. "In a sexual harassment case you are going to instruct the witness not to answer if her brother is celibate or has any knowledge of it?"

There's a pause as the room bears the weight of the moment. All that's at stake here is the reputation of one of the world's more enigmatic and most wealthy individuals. Or rather, what that reputation truly is.

By most accounts, Allen is no Gordon Gecko, the fictitious tyrant in the movie Wall Street. For the boyish 45-year-old, greed seems good only if some of those profits go to others. The Mercer Island tycoon backs worthy civic causes, makes sizable charity donations (giving $500,000 just last week to aid Kosovo refugees), and is a known tree-hugger. He often has his 76-year-old mother or 41-year-old sister in tow, and while he's had a girlfriend or two, he appears content with lifelong bachelorhood. He has so far outfought Hodgkin's disease and associates say he's happiest among friends and family in low-profile social settings, although he's reportedly tickled that his walled-off hideaway in Beverly Hills has made the latest edition of Hollywood's Movie Star Homes & Hangouts map.

Still, behind that bespectacled exterior there schemes a man of great influence, more inaccessible than shy, politically brokering a half-billion-dollar Seattle stadium deal after voters rejected it, running summer campers off a San Juan island peninsula to build another of his six homes, and erecting a controversial Seattle Center museum, originally in honor of Jimi Hendrix, that critics say visually rivals a onetime eyesore up the street, the Queen Anne Blob. His corporate checkbook is both intimidating and legendary: One day he cashes in $385.2 million in stock, another day he forks over $7.3 billion for two cable TV companies. In between he deals for a dozen Internet and software companies, buys and sells professional athletes, constructs skyscraping villages, then jets to Europe, parties at his French villa, and cruises with lovely women on his 199-foot yacht in the Mediterranean.

You have to think that, despite the mild-mannered persona, Paul Allen's testosterone must sometimes gush like quicksilver.

At least that's the belief of Malibu attorney Yardley and his client Phillips. She is suing Allen for breach of contract and, more importantly, sexual battery. According to Phillips, Allen sexually attacked her in 1996 at his $68 million Mercer Island estate. A year later, she says, he fired her from their West Hollywood multimedia company, Storyopolis, in retaliation for resisting sexual advances.

Movie director Peter Gilbert says Phillips told him about the incident within 48 hours. But Allen strongly denies any assault and says Phillips was fired for misuse of funds.

Which brings us back to the memorable exchange last September afternoon.

Yardley has shrugged off the celibacy question and changed direction. He's in a position to ask some extraordinary personal questions and doesn't miss a one.

"As you sit here today," he says to Patton, "do you believe that your brother had sexual relations with Megan Taylor?"

"Objection!" Abell interrupts again. Taylor is Allen's ex-girlfriend, who was also fired from her manager's job at Storyopolis, and who was replaced by Phillips. What Allen and Taylor did in private years ago was no one's business, says Abell.

Yardley adjusts his question again. "Do you believe," he asks Patton, "they slept together?"

"Objection!" says Abell. "It's an invasion of privacy."

OK, says the persistent Yardley, regrouping. "But you do believe that [Taylor] has stayed overnight at his estate on more than one occasion, correct?"

"Yes," Patton says finally. "There are many guest houses at the estate [but] I don't know specifically where she stayed."

Not much of an answer. But Yardley knew the threat was in merely asking the question.

GECKO MIGHT LOVE the power playing. Low-key Paul Allen, though, today may wonder what he was thinking when he decided to bankroll Storyopolis for up to $1.25 million, optioning children's books for big and little screen productions and sticking his foot in Hollywood's door. The following year, 1995, he also invested $500 million in DreamWorks SKG, the Steven Spielberg/ Jeffrey Katzenberg/David Geffen all-digital studio (whose major success has been the acclaimed Saving Private Ryan). He also created Clear Blue Sky productions of Bellevue, headed up by sister Jo to develop independent films such as John Sayles' Men with Guns.

Around all that, he has since created an expansive cable TV empire, one of his latest purchases being Los Angeles based Falcon Communications for $3.6 billion, making him LA's third-largest cable franchiser. The owner of two pro sports teams through Bellevue-based Vulcan Northwest, Allen also bought up interests in USA Networks and satellite provider United States Satellite Broadcasting. Besides dozens of Internet and software holdings, Allen's bulging portfolio has made the Microsoft cofounder a sports and entertainment mogul of Turner/Murdoch—if not Citizen Kane—dimensions.

But aside from profitability, Hollywood was supposed to be fun. As his LA power base, Allen bought the white-stucco and red-tiled onetime Rock Hudson mansion on Beverlycrest—down the way from Bette Middler, up the hill from James Coburn—with a wide-angle view of the smoggy LA basin. He counts a number of celebs—athletes such as tennis star Monica Seles and musicians such as singer Peter Gabriel—as close friends and is the man who launched the star-gossip Web site Mr. Showbiz.

Yet Allen's initial LA foray five years ago has turned literally into a federal case, with his former trusted partner Phillips seeking perhaps millions (she won't say how much) in damages as she threatens to reveal the elusive billionaire's bedroom proclivities. The claim puts Allen's most private and intimate self on public display, subject to Monicagate-era gossip and speculation—providing Phillips legal leverage whether her charge is true or false.

Not unexpectedly, this messy case has gotten messier: Having put a number of Allen's friends and employees through the deposition mill with questions about Allen's sexual "normalcy," Phillips' attorney Yardley wants to question, among others, Allen's elderly mom on her son's bedding history, a legal move Allen has fiercely resisted. He's not seeking special treatment because he's rich and famous, one of his attorneys contends, but is trying to prevent "tactics which are abusive and designed to embarrass and annoy him merely because of his prominence and success."

Phillips' accusations haven't exactly caused Allen to sprout white hair and sink into Howard-Hughesian hibernation; lately he could be seen regularly front row center watching his Portland Trailblazers in the NBA playoffs. But Allen is known for protecting his private life as carefully as he does his business secrets—shunning friends and firing top aides who are loose-lipped about either (one aide says she was fired just for talking shop with Allen's former girlfriend Taylor). Associates say Allen was stung when Phillips filed the suit a year ago, briefly creating the headline impression that he was a dirty middle-aged man. The case has since been mostly forgotten in a town with more than enough libido and innuendo to fill the daily columns. But still to be answered are several consequential questions, among them:

Did Allen fire Phillips for rejecting his bedroom advances and cover it up with a claim she stole money from him? Or is Phillips digging into the lower layers of Allen's personal life in a mean-spirited legal extortion attempt? Should this case make us wonder if we have the correct impression of Seattle's bashful global billionaire? Or were the "attacks" misinterpreted examples of his reputed social awkwardness?

There lately has been a pause in the case's flurry of briefs, motions, and depositions that fill a stack of court volumes in Los Angeles, giving rise to rumors of a settlement. But no one involved will comment on the status of the 14-month-old case being heard in LA's US District Court. That includes the phalanx of attorneys from three separate law firms hired by Allen—among them Hollywood legend Bert Fields, whose most recent victory was a $250 million-plus verdict for DreamWorks' Katzenberg in his studio severance-pay battle with Disney, but who won't talk about Allen for the record.

Likewise, Phillips' one-man legal team, Yardley, wouldn't return numerous calls. (In practice since 1979, Yardley specializes in civil law, one of his higher-profile cases being a 1991 lawsuit against LA biotech firm Amgen Inc., filed on behalf of a former employee accusing company execs of insider trading. A spokesperson for the California State Bar in San Francisco says Yardley was disciplined in 1996 for being convicted in LA Municipal Court of "aiding and abetting speeding," a minor traffic-code violation for which the bar gave him, the spokesperson said, "a slap on the wrist." None of the other attorneys mentioned in this story have records of disciplinary actions, the bar spokesperson says.)

Phillips, reached at her Studio City home in LA, says politely but tersely, "I can't comment," on whether an agreement might have been reached or even if her correct age is 40-something. But according to interviews and court documents Seattle Weekly recently reviewed in Los Angeles, Phillips is portraying the $23 billion corporate chieftain as a sexual molester and intends to prove it—which she first must do in order to make a case for job retaliation.

THE MOTHER OF TWO children and married to an LA psychiatrist, Phillips says she's traveled with Allen to Fiji and Hong Kong in the past and figures they were friends as well as business partners, introduced by mutual acquaintances in Hollywood. In the first-ever personal lawsuit filed against Allen, she claims that during a visit to Allen's Mercer Island compound May 24 and 25, 1996, the billionaire held her down and fondled her breast while they were in his bedroom ("Paul often sees visitors in his expansive bedroom," Phillips says). She squirmed away and allegedly told Allen, "You don't want to go there." The next morning, she alleges, he let himself into the guest room where she slept and, wearing a robe, climbed into bed, "attempting to have sexual relations with her." She ran into the bathroom and locked the door, says Phillips, ending the incident. She was reluctant to call police, her attorney says, because Allen was both boss and partner.

Because she resisted, claims Phillips, Allen and his sister retaliated by making her life difficult and ultimately firing her as honcho of their Hollywood new media partnership. Phillips' job was to wheel and deal through her celebrity contacts at Storyopolis, whose operations include a children's bookstore, art gallery, and educational toys sales shop. Allen provided the money and Phillips was to provide creative ideas and concepts to help incorporate movie and TV productions into Allen's interactive media empire. Storyopolis, under new management appointed by Allen and Patton, currently is producing a number of animated films, including a movie version of Vashon Island resident and Pulitzer-winning cartoonist Berkeley Breathed's Christmas book Red Ranger Came Calling, about a boy's bittersweet encounter with a retired Santa Claus. Some of Hollywood's top names drop by the Robertson Boulevard store to read and promote children's books, including actors Jennifer Tilly, Anthony Edwards, Ellen Barkin, and Robin Williams, and director Tim Burton.

On April 2, 1997, a year after the bedroom incident, Phillips claims she was forced to resign "gang-style . . . under duress and threats" by Patton and two other Allen corporate officials who confronted her at the LA office, asserting she had misused funds. Phillips claims the threesome told her either to quit or she and other employees would not be paid. In her lawsuit, Phillips claims she was slandered by the fund-misuse accusation and contends the alleged sexual incident affected her 23-year marriage as well, rendering her "unable to perform the necessary duties as a wife."

Phillips contends Allen has "a disturbing pattern" of harassing and firing married female employees and cites four such women in her lawsuit, including her. His money and power have had a chilling effect on the women and other potential witnesses, she adds, except for one: director Peter Gilbert.

Maker of the critically applauded but Oscar-snubbed basketball documentary Hoop Dreams (a film about two inner-city kids, one coincidentally named William Gates, seeking dream careers in the NBA), Gilbert was introduced to Allen by Phillips. He had dinner with them the night of May 24, 1996, hours before the "sexual batteries," as Phillips characterizes events. Gilbert says in a court affidavit that Phillips told her of the alleged attacks within a day or so. According to Phillips' attorney, Gilbert was upset and got into a shouting match with Allen and his sister over treatment of Phillips.

In a sworn statement, Gilbert said he has a lot to lose defending Phillips against Allen. He noted he has a producing contract with DreamWorks, where Allen is the largest stockholder (his investment today totals $660 million). By speaking out, his DreamWorks contract could be in jeopardy, Gilbert says.

PHILLIPS ATTEMPTS TO portray another side of Paul Allen, the Seattle Seahawks franchise owner; she suggests he's been following in the footsteps of his predecessor, Ken Behring, in more ways than one. (Behring, who sold the franchise to Allen in 1997, settled several sex harassment claims in recent years, including one by Patricia Parker, his former California chief financial officer, who claimed she was at risk of attack whenever she simply bent over in front of her boss.) And like Behring—who temporarily relocated the Seahawks to LA when he couldn't get a new stadium here—the powerful Allen strikes back when he doesn't get his way, Phillips believes.

Allen, in a statement last year, emphatically denied all of Phillips' claims and said his partner resigned after being confronted by evidence of misappropriated business funds. Allen spokesperson Nichole Christie recently reaffirmed that denial, saying Allen has "no further comment" and "believe[s] that the lawsuit is without merit."

According to court files, Allen thinks Phillips wrongly spent $29,623 of Storyopolis money on personal expenses in recent years and used company funds to pay her personal legal fees. She was involved in a legal fight against her onetime Hollywood business partner, Lois Sarkisian, who claimed Phillips owed her $100,000 for several pieces of art. Allen has filed a counterclaim against Phillips for what he says is $12,989 she still owes him.

Allen notes that Phillips took a year to file suit after her departure and almost two years after the alleged sex incident; in the meantime, she had worked and traveled with Allen and others on overseas trips. Allen attorney Abell, an employment law specialist, says Phillips and her husband Allan Phillips have "high debt" and that Allan recently lost a legal fight in which he claimed entitlement to his late aunt's $800,000 trust. Norm Levine, another Allen attorney and member of Bert Fields' law firm, says Phillips' sex allegations are "to say the least, unusual." Mocking her oft-used description of herself in legal papers, Levine points out that the "married mother of two" was willingly alone with Allen around 3am in his bedroom that Saturday in question, but that Allen nonetheless denies attacking her.

IF THEIR ATTORNEYS ARE any measure, Phillips and Allen have become bitter enemies. The outgunned Yardley snidely refers to Allen's counsel as "his three defense firms and battalions of lawyers," while Abell says that "in 18 and a half years of practicing law I have never seen the dilatory behavior and lack of responsive behavior that" Yardley has demonstrated. (Magistrate Rosalyn Chapman, in an aside to one of her orders, commanded the feuding parties to "strive to be cooperative, practical, and sensible.") Abell and her cocounsels are regularly roused by Yardley's accusations, such as his claim of having "uncovered a pattern [by Allen] of developing crushes, lavishing gifts and vacations on, and then firing married female employees."

Yardley's legal strategy has a pattern as well—to exhaustively grill current and former Allen female employees and family members in hopes of dredging up others who might claim harassment. Having already questioned Allen's sister, Yardley petitioned the court to take statements from Allen's mother Faye, claiming she could testify about discussions she had with Paul about "her son's difficult relationships with women, and his sister's role in extricating him from these relationships." Magistrate Chapman gave the go-ahead several months ago to questioning Faye Allen, but there is no indication that that deposition—as well as a deposition of Paul Allen—has taken place. (An LA court official speculates the ruling may have triggered settlement talks to avoid putting Faye Allen through the drill.)

The extent of Phillips' underside probing is typified by the deposition of Allen friend and company spokesperson Susan Pierson, who was questioned for six hours about such topics as the 1983 natural death of Allen's father Kenneth and repeatedly about the women in Allen's life—"none of whom," Pierson said, "ever alleged any misconduct."

That message is being repeated by others. Based on the available public record, Allen is portrayed by friends and associates as demanding in business but not in sex.

"During the period that you were employed by Mr. Allen," attorney Yardley asked Allen's former executive assistant Pia Vanhanen during a recent deposition, "did he ever kiss you?"

"No," said Vanhanen, whose marriage to a man in Finland was on the rocks at the time.

"Not even on the cheek?"

"I don't remember that."

"Not on the hand?"

"No."

"Did he ever attempt to kiss you?"

"No."

"Did you ever kiss him?"

"No." But she did give him a hug or two.

Though she was fired by Allen in 1995 over an apparent breach of confidentiality, she said, "he was a good person." She traveled, often with Allen's usual entourage of friends and family, to Amsterdam where his new yacht was being built, and she overnighted with him in France. Allen sometimes bought her gifts and took her regularly along with the group to watch his Trailblazers play, she said; they also have cruised on his boat in the Mediterranean, watched movies at his estate, and slept aboard his private jet on 20-hour flights. She'd been a privileged insider and friend of Allen's family and his female companion Taylor.

But as for Allen, "We were friends. That's all I thought," Vanhanen said. Allen never propositioned her, she noted—having answered in the negative 13 times to Yardley's questions of whether Allen had romantic notions about her. Besides, she said, his sister was often around anyway.

"Do you think her role is to keep women away from Paul?" Yardley asked about Jo Allen Patton.

"I wouldn't say that," Vanhanen responded.

"Did Megan Taylor ever talk to you about [Paul and Jo's] relationship as brother and sister?"

"I'm sure she must have . . ."

"Didn't she tell you that she thought they had a weird relationship?"

"I can't remember that. It's possible, though, for Megan . . ."

"When you were employed by him, did you wonder why he didn't have a girlfriend?"

"No."

"He was an eligible bachelor, wasn't he?"

"Yes, he was . . ."

Vanhanen was growing weary, but her answer to one of the final questions may have helped put the Storyopolis story in perspective.

"Did you think [Allen] was a normal kind of guy?" Yardley asked.

"I don't think," said Vanhanen, "I would ever categorize any people as normal."

It's unclear what, exactly, the privacy-hoarding Allen thinks about such probing. But the case suggests that, even though he has had a long love affair with movies and today has his own in-home theater complete with snack bar, as well as his own public movie theater (the $3.5 million renovated Cinerama in Seattle), Allen is anything but ready for his Hollywood closeup.

 
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