An early investor in Bellator MMA is suing Viacom in Los Angeles Superior Court claiming that the company has diverted revenue from the organization while leaving investors in the dark about its finances. The Hollywood Reporter provided details of the lawsuit.
Koloni Reklam, Sanyi, Tcaret LTD/STDI (“Koloni”), a Turkish company, invested $1 million in Bellator in March 2009 according to the lawsuit. At the time, the company was owned by Bjorn Rebney.
In December 2010, Viacom purchased a 50% stake in Bellator. It made an additional purchase of a controlling interest in Bellator in December 2011. It also made further purchases in January 2013, April 2014 and June 2015 per the Complaint. Based on its purchases it amassed a 97% interest in Bellator. Viacom, the plaintiff in the lawsuit and two others not named in the lawsuit comprise the ownership of Bellator. Viacom owns a 97% controlling interest while Koloni has a 1 percent interest.
An Operating Agreement manages the structure of ownership. Koloni claims that Bellator “acted in a manner contrary to the Operating Agreement by causing Bellator to breach provisions of the Operating Agreement to Viacom’s benefit and at the expense of the remaining members.”
Specifically in the Operating Agreement, Koloni claims that Viacom was to provide unaudited financial information to its members which included “unaudited balance sheets, unaudited income statement, cash flow statements, and changes in the Members’ equity.” This information was to be supplied to Koloni on a “monthly, quarterly, and year-end basis.” Koloni claims that prior to May 2015, they had not been provided a report in a year and before that there was a 15 month gap in statements.
The Complaint claims that in May 2015 Viacom “hastily provided financial statements that only highlight Viacom’s failure to pursue all profits Bellator would be entitled to if Viacom had been acting in Bellator’s interests rather than its own.”
In addition, Koloni claims that Viacom diverted sponsorship revenue from Bellator to its own interests and subsidiaries. Essentially, Viacom is using its subsidiary to breach a licensing agreement which would divert revenue tied to Bellator in-show sponsorship integrations. Per the terms of the licensing agreement Bellator should receive 50% of “net sponsorship revenue” received from ads that “integrate multiple methods of promotion, such as televised commercial break advertisements combined with in-show logo placement on cage mats” according to the Complaint. Koloni claims that ad revenue for in-show sponsors “run tens to hundreds of millions of dollars” and that Viacom has obscured the terms of these ad contracts so as to divert money owed to Bellator to its other affiliates.
It also requested Spike TV to reduce the number of Bellator-produced events.
The causes of action includes breach of contract, breach of fiduciary duty, breach of the covenant of good faith and fair dealing, unjust enrichment, judicial dissolution and equitable relief for LLC member oppression.
The plaintiffs are seeking a jury trial and request monetary damages which include an accounting of finances. As indicated in the cause of action, one of the requests is for a judicial dissolution of Bellator and/or the request that Koloni is paid out his share of the company. At this point, dissolving Bellator seems like a far-flung claim.
A copy of the lawsuit is provided by THR’s Eriq Gardner
Payout Perspective:
The lawsuit boils down to Koloni believing that it is not receiving as much as it should be from its investment in the company. The claim that it has not received updates and there were gaps in reporting from Viacom regarding Bellator’s finances seems to highlight its lawsuit. Notably, Rampage Jackson’s attorneys are likely interested in this lawsuit for the financial information that might be obtained through the discovery process of the lawsuit. Also of note is the indication that Koloni received financial information in May 2015. A couple months earlier, Jackson filed a lawsuit against Bellator claiming that he had not received information from the company. Certainly Viacom will deny these allegations in defending the lawsuit. MMA Payout will keep you posted.
I believe it. It makes perfect sense that Viacom is running Bellator in a way that maximizes profits for Viacom, not Bellator. If you’re an investor in Bellator, you’re probably pissed.
When they started signing fighters with non Bellator deals and promises of TNA contracts and movies, Etc. You know things where not on the up and up. That makes guys like Rampage a Viacom asset while using Bellator and their cage to built an asset that doesn’t even wholelly belong to Bellator. The confusion who who is responsible might be why Jacksons terms where never met in a timely manner or at all.
@Diego I wonder who the other two investors are since they were not named in the lawsuit.
@BS I believe this is completely plausible that those “mixed” deals with TNA and other opportunities on Spike TV.
Jason… as to the other two investors…..just a guess, but I would think that maybe Danaher(the guy from plainfield asset mgmt) and Bjorn probably kept 1% interests in the company possibly…so it would be 97% viacom 1% Turkish dudes 1% Bjorn 1% Danaher….