LAS VEGAS, NV—A scheduled evidentiary hearing in Consipio v. Private Media Group took place last Friday in a Clark County federal court, during which several witnesses testified in a case that pits just-fired Private chief executive Ilan Bunimovitz against Berth Milton, the man who replaced him, and other officers of Private’s (PRVT) board of directors. According to a source close to the case, the hearing was continued to Sept. 20, during which more witnesses will testify.
A temporary restraining order issued by a Nevada judge Aug. 13 remains in effect while the hearings are under way. The plaintiffs—Consipio, Tisbury Services and Bunimovitz—had alleged that Milton, “assisted by a majority of the Board of Directors of PRVT, has mismanaged PRVT’s assets, committed malfeasance, engaged in flagrant self-dealing and violated his fiduciary duties to PRVT and its shareholders,” and were seeking, and won, a preliminary injunction to prevent Private and its subsidiaries from issuing any additional shares of stock, incurring any debt outside of the normal functioning of the business, moving or transferring any funds from or into banks, paying any bonuses to officers of the company, or undertaking any abnormal transactions.
According to court documents, Consipio controls 5.6 million shares, or 27.05 percent, of Private common stock, Bunimovitz owns 1,875,951 shares, or 9.06 percent, and Tisbury 2,779,985 shares, or 13.43 percent. Together, the plaintiffs claim that they hold the voting rights to 49.45 percent of Private common stock. In addition, Consipio claims that it holds $5.5 million in principle debt, and that Private is currently in default on the loan.
Among a bevy of allegations, the plaintiff's 18-page ex parte motion—which, in addition to seeking a restraining order and TRO, also sought the appointment of a receiver—says that over the past several years, Milton has used PRVT as his private bank, that he has caused the company to make several unsecured loans to him and his entities that serve no benefit to the company, and that the loans, which are currently in excess of $10 million, were not approved by the Board. The motion also claims that Milton has no intention of ever paying that money back.
Plaintiffs additionally allege that Milton has failed to file numerous SEC forms required by law, obstructed some members of the Board from investigating his financial dealings with the company, defaulted on contractual obligations, and in 2009 managed to get the company to pay him a salary of $600,000, which the Board finally concluded was excessive in March 2010 and reduced to $432,000 without forcing him to repay the difference.
Since December of 2009, the motion also alleges, Bunimotitz, in his capacity as CEO, consistently raised questions with the Board “about Milton’s actions and how they might constitute violations of the federal securities law, fiduciary duties and other legal requirements.”
His issues with Milton came to a head in June of this year, when his attorney sent a letter to the Board outlining his concerns. “In retaliation,” the complaint says, “Milton delivered a letter to Bunimovitz purporting to terminate him as PRVT CEO ‘for cause.’ On the same day, Milton caused a press release to be issued saying that he was taking over as CEO.”
According to sources, Milton is challenging the allegations of wrongdoing despite the fact that the Nevada judge, in issuing the TRO, said that the plaintiffs “have established that there is a reasonable probability of success on the merits of their claims.”
An Aug. 24 Private Media Group press release on Q2 results did not contain any mention of the lawsuit or the TRO.
The Notice of Hearing and accompanying documents can be read here.
The Temporary Restraining Order can be read here.
