A war of words is escalating between the British financier Brass Hat Media Avice (BHMA) and the beleaguered German media fund VIP Medienfonds 4 following the refusal of VIP's managing director Peter Riedel to honour a strategic co-investment partnership negotiated with BHMA by his predecessor Dirk Specht last September to manage VIP's funds.

This has led BHMA to sue VIP for a court declaration in Munich's Regional Court and VIP in turn applying to have the action dismissed.

Instead of collaborating with BHMA on identifying projects to present to investors, Riedel proposed his own slate of projects at a general shareholder assembly last December.

'Unsurprisingly, this has caused a conflict where the newly elected board of investors has refused to sign off investments into the projects proposed by Peter Riedel,' commented BHMA's CEO Lars Sylvest.

'It is sad to see that the Riedel management has taken the investors hostage. The Brass Hat deal would have brought additional expertise to VIP at no extra cost for the investors, but instead the Riedel management has chosen to expose the investors in a lawsuit only to retain the Brass Hat fees for its own entities,' Sylvest said.

In his defence, Riedel has countered in an official communique that he considered that the contracts for last year's deal with BHMA 'invalid and completely unacceptable as, in our view, the business of VIP Medienfonds 4 would thereby be undermined in its basic elements.'

'Should the contracts in fact become legally binding, this would result in a situation where the fund could no longer negotiate or carry out a single project alone,' Riedel argued, adding that, by concluding these contracts, the previous managing director Dirk Specht had 'misused his authorisation in a glaring way to the detriment of the investors.'

Specht, a former director at PriceWaterhouseCoopers and Arthur Andersen in Germany, became the new director of VIP in April 2006, restructured the beleagured fund whose founder Andreas Schmid was imprisoned and engaged Brass Hat in 2007 to manage the $200m funds remaining in the VIP coffers. A few weeks after signing the long-form agreement with Brass Hat, Schmid and his trustee chose to replace Specht with Riedel.

Riedel claims that the contracts would have required 'the prior consent of the board of investors and shareholders assembly. This however did not happen' and argued that BHMA and Specht 'attempted to declare the co-investment and cooperation agreement as normal agency contracts'.