Stan Lee Media CEO Accused Of Shareholder Fraud
In an about face to his January 2001 sworn declaration, former Stan Lee Media vice president Stephen Gordon issued a Further Declaration in a Los Angeles Superior Court action which retracted and corrected previous allegations made by Gordon against Stan Lee Media co-founder Peter Paul, as well as detailed a series of new accusations of fraud and libel against Stan Lee Media CEO Ken Williams. Gordons new declaration effectively reverses his previously sworn statements made about Paul in a lawsuit filed against Paul and Gordon by their former attorneys in an attempt to collect legal fees. Gordons previous declaration alleged that Paul was being personally investigated by the SEC, was hiding assets and had fled the country. Gordons new declaration retracts and corrects those allegations, while including new allegations that Williams, the former president of Sony Digital Studios, was involved in a plan to "personally destroy" co-founder Paul and to bankrupt Stan Lee Media in order for him to acquire Stan Lee Media assets free of existing shareholders and creditors. Gordon's filing comes on the heels on an announcement by Austin-based venture capital firm Interfase Capital, LP, that it was providing debtor in possession financing for Williams' operations during reorganization of Stan Lee Media, which filed for Chapter 11 bankruptcy protection in February, 2001 [AWN News 2/20/01]. In a report published by DIGITAL COAST DAILY, Paul was reached in Argentina, where, rather than hiding from authorities, he says, he is working on a new business. According to the report, Paul claimed that the management team brought on to run Stan Lee Media last year failed to perform adequately, including that CEO Ken Williams never even completed a business plan and failed to generate revenue. "The management that I hired with Stan to run the company in my opinion failed to perform the functions adequately," commented Paul. "In six months, no business plan was ever completed and no cash flow developed." Paul also said that in order to raise desperately needed capital for Stan Lee Media, Williams engaged in "death-spiral" financings, in which an investors share of the company increases if the value of the stock falls below a certain price. Paul claimed that the firm that provided bridge financing in early December was guaranteed a minimum share price of $1. "Lo and behold," Paul claimed, "immediately after that the stock got shorted. It's a very strange coincidence that the stock declined to the point where the obligor was no longer required to put any more money in, and most likely made money by shorting the stock." Pauls assertions about the management teams supposed shortcomings, as well as the death-spiral financing, were also made to AWN during a previous conversation. Asked for his response to Gordons and Pauls allegations by DIGITAL COAST DAILY, CEO Williams reportedly declined to answer many of the specific claims, saying he didn't want to "litigate in the press." He did respond to the assertion that he is trying to take over the company, calling it an "absurd idea." Williams was quoted as saying, "I have no intention of doing so and there's no basis in fact whatsoever. I've made it clear in all of my discussions that the recapitalization is in no way contingent on my continuing involvement. I'm trying to resolve a difficult situation for creditors and investors in a way that maximizes shareholder value." Williams stated that he did in fact write a business plan, however, and said that he was in the process of revising it in order to raise more funds due to poor positioning by Paul at the company's founding. "We really were at the height of the dot-com meltdown in the fall," Williams explained. "Peter's earlier positioning of us as a dot-com play left us in trouble, even though we were developing a much broader media strategy under my leadership." In addition to plans of joining one or more of several shareholder lawsuits being filed, Paul is also suing THE INDUSTRY STANDARD for alleged libel in its claims that Paul was convicted of selling heroin and was disbarred as an attorney. THE STANDARD later ran a correction and apologized.