‘Consipio v Private’: Unfinished Business, Missing Shares

LAS VEGAS/NEW YORK—The two-state, multi-litigant legal conflict between the current management of Barcelona-based Private Media Group and a group of debt holders, shareholders and a former CEO who wants his job back has entered what might be called the ‘smoke and mirrors’ phase of the litigation.

Throughout December and into the New Year, the parties continued to attack and parry within the confines of the courts and, to a lesser extent, outside those confines, with no clear end yet in sight. While it appeared as though the disposition of the Private Board for 2011—and, as a consequence, the company’s management team—would be decided by year’s end, it was not to be. A vote taken at the annual Private shareholder meeting inNovember was supposed to decide the makeup of the company’s new six-member Board of Directors, but Nevada state judge Elizabeth Gonzalez in January refused to certify the inspector of elections final report, which was delivered to Private Dec. 16.

According to an 8K SEC filed Jan. 10 by Private, the final report “became subject to the review and approval of Elizabeth Gonzalez, Presiding Judge, pursuant to an Order entered by Judge Gonzalez in December 2010, in the previously reported proceeding originally filed by Consipio Holding BV, Ilan Bunimovitz and Tisbury Services Inc against Private Media Group, Inc. and others in Nevada County Court, Clark County, Nevada (Case No.A-10-622802-B) in August 2010. … Under the Court’s December 2010 Order the Inspector’s Final Report was subject to review by the Court, and could not be deemed final and effective by the Company until approved by the Court.” Barcelona-based Private is incorporated in Nevada and is subject to its laws.

The reasons why Judge Gonzalez did not certify the final results have not been explicated in court documents or minutes provided by the court, but one possible explanation is the outstanding disposition of 3,950,000 shares of Private stock that have yet to be delivered to Consipio as partial collateral for a $4 million note executed between Private and Consipio in Dec. 2001. The entire number of shares set aside as collateral on the note was 5.6 million, as has been noted in the Nevada lawsuit and also the Consipio v. Private lawsuit currently underway in New York State Supreme Court (Case # 650462-2010E).

1.65 million shares of common Private stock that had been delivered to Consipio by Slingsby Enterprises Ltd., a Gibraltar corporation allegedly operated by Private CEO Berth Milton, were counted in the November shareholder vote, but the remaining 3.95 million shares, which Consipio contends it should also have been allowed to vote, were not counted because they have not yet been transferred into Consipio’s possession.

That alleged act of refusal by Slingsby to transfer ownership of the remaining shares is one of the main remaining points of contention in the New York lawsuit, and could also be the reason why Nevada’s Judge Gonzalez refuses to certify the election results. If Consipio had been allowed to vote those shares, the result of the election, which according to the inspector currently favors the Private slate of board directors, could swing the result in favor of the slate put forward by those who want to see new management at Private.

In a seconded amended complaint filed Dec. 22 in New York by the plaintiff, Consipio demanded the legal transfer of the remaining shares, and held not only Slingsby but also Berth Milton personally responsible for the failure to do so within the agreed upon time. In earlier motions, Private had argued that the statute of limitations had elapsed in the case, and Slingsby could no longer be a party in the case, but the court ruled that both parties had agreed to extend the agreement, and allowed Consipio the opportunity to file the second amended complaint. Private must respond to the complaint within 30 days after receipt of the summons and complaint.

A mandatory Rule 16 conference has been scheduled in the Nevada case for 9 a.m. on Jan. 28, during which a discussion of the “missing” shares may be on the agenda. If so, it is further feasible that Gonzalez will order a period of discovery in order for the court to attempt to determine the whereabouts of the 3.95 million shares.

In the meantime the current board of directors—Berth Milton, Bo Rodebrant, Peter Dixinger, Jan Jensen, Eric Johnson and Ilan Bunimovitz—remains in place until the court approves the final report or the 2011 annual meeting of Private Media Group shareholders is convened.

“There are no assurances that the Inspector’s Final Report will ever be approved by the Court, either as delivered by the Inspector of Elections or otherwise,” said Private, ominously, in its Jan. 10 8K SEC filing.

One can only presume that the plaintiffs in both the New York and Nevada cases are more optimistically inclined regarding the prospect of finding and then being allowed to vote the shares Consipio is demanding to be transferred into its possession.

Queries have been sent to the various parties, with no reply as yet forthcoming.

The second amended complaint in New York’s Consipio v. Private can be read here.