Damon Dash: Down, Out, and Soon To Be Divorced….

Rachel Roy, the fashion designer wife of Roc-A-Fella co-founder Damon Dash, has filed for divorce from the former rap mogul.

The breakup is just the latest in a string of financial failures for Dash, who owes $2 million in state taxes, and a bank has started foreclosure proceedings on his two Tribeca condos.

Dame and Rachel wed in Mexico in January 2005. They have two daughters.

Read More About The Split Here

The famous falling out between former Roc-A-Fella bosses Jay-Z and Dame Dash was sparked by the men’s love for late R&B beauty Aaliyah, according to producer/director Choke No Joke.

Choke No Joke insists the now bitter relationship between Jay-Z and Dash extended beyond a series of business disagreements that led to the division of The Roc in 2004.

The director claims both Aaliyah first dated Jay-Z and the “Can I Get A….” rapper became unhappy when Dame started publicly dating the singer in late 2000.

Aaliyah and Dame were still seeing each other at the time of her death in a plane crash in 2001.

“Both Jay and Dame was involved with a certain R&B singer, who I’m not gonna say her name out of respect ’cause she ain’t around to defend herself, but I believe that was a part of the initial friction,” Choke tells Hip Hop Weekly.

“I was seeing Jay with her back around 2000, then Dame was with her after. All you have to do is look at the movie they did, Death of a Dynasty. In the movie they were fighting over a model. In real life she was a model, but singing is what she was known for first.”

A bank wants his Tribeca condos, the city is seizing his SUV and his lawyer dropped him for not paying his legal bills.

Former Roc-A-Fella boss Damon Dash is bankrupt, according to a hot new scoop from the New York Daily News.

Catch The Complete Story on Dash’s Cash Flow Problems Here

DAMON DASH is being sued for “turning a woman into a schizophrenic.” Twenty-four year old Jamie Roberts, of Atlanta, Georgia, claims she was diagnosed with schizophrenia and bipolarity when he exposed himself to her during a meeting in 2004.

She claims she met Dash – who was using the name Jeremy MCIntyre – in a club in Miami, Florida, in March 2004. They left the club and went on to a nearby marina, where he allegedly flashed “his genital area” in an “offensive manner” and tried to coerce her into giving him oral sex, according to legal papers filed in New York’s Manhattan Supreme Court.

Jamie says that nine months after the meeting, she “began to hear (the) defendant’s voice in her ear, giving her certain directions to follow.” She is seeking $30,000 in compensation and punitive damages.

Damon Dash owes the state of New York over $2 million in back taxes. According to the New York Post, the former CEO and co-founder of Roc-A-Fella Records is with an estimated $50 million fortune but has come up short on his tax payments

Dame Dash and his wife, designer Rachel Roy, got into a public spot at the hip-hop mogul’s New York City nightclub Socialista on Wednesday night.

“They got into a screaming match,” said a witness. “He was in an altered state,” said our spy. “Rachel was curled up on a couch with another guy, and when he saw her he flipped and stormed out.”

According to rep for Dame: “There’s no trouble.”

Damon Dash, the self-proclaimed “Ultimate Hustler” is tapping into the social networking craze, a la Myspace.com, Blackplanet.com, and others, to create an “urban Myspace” called BlockSavvy.

According to CNN:

Dash’s new Web venture is BlockSavvy, a site aimed at what he dubs the “urban-lifestyle demographic.” When I ask what motivated this endeavor, Dash answers bluntly, “Money.” When I ask him to elaborate, he turns to Burke, who explains, “After MySpace sold for $580 million, we said, damn, we gotta get us some of that.”

The rumor mill has spent the past couple of weeks churning out tidbits about Jay-Z’s status at Def Jam. Snitching sources have dished on everything from Jay’s riff with L.A Reid to his plans to swipe Beyonce from Sony and create his own label. Now sources are dishing that L.A is looking to replace Jay with his old friend Dame Dash.

Dame Dash has filed a $3.5 million lawsuit against his accountant Barry Klarberg, accusing him of bungling years’ worth of tax returns.

Klarberg – whose celebrity clients also include singer Justin Timberlake and Rangers great Mark Messier – allegedly botched Dash’s New York and New Jersey income tax returns for 2000, 2001 and 2002.

Other alleged offenses by Klarberg include miscalculating how much Dash owed in 2005 and not telling him how much he made from the sale of one of his companies. In recent years, Dash has pawned off his Roc-A-Fella Records label and Rocawear clothing line. Klarberg, who wrote “Winning Tax Strategies and Planning for Athletes and Entertainers,” is a financial adviser to more than 600 jocks, actors and wealthy families.

“It is possible for some entertainers and athletes to be living high on the hog one day and down with the hogs the next,” Klarberg once said.